Alaska District Court Allows Amicus Filing in Fight Over Injunction Relating to Jones Act Penalties Case

The U.S. District Court for the District of Alaska allowed logistics company Lineage Logistics Holding to file a second amicus brief in a case over Jones Act penalties in light of the U.S.'s motion to dissolve the injunction that bars CBP from issuing new Jones Act penalties. Lineage Logistics filed the brief to back plaintiffs Kloosterboer International Forwarding (KIF) and Alaska Reefer Management (ARM) in opposing the move, arguing that the grounds for the injunction remain in place in that the government has yet to comply with the law to provide adequate notice and comment related to its treatment of the Bayside Canadian Rail line for the purposes of granting an exception to the Jones Act (Kloosterboer International Forwarding v. United States, D. Alaska # 3:21-00198).

A few weeks prior, the district court ruled that shipments from KIF and ARM do not qualify for the Third Proviso of the Jones Act since they don't engage in transportation over a Canadian rail line (see 2206020069). However, the court did void the $25 million penalty notices since CBP failed to provide adequate notice to revoke treatment established for the companies.

KIF and ARM ship seafood from Alaska to the eastern U.S. via the Bayside, New Brunswick, Canada, port. CBP said this violates the Jones Act -- the law that says that shipping between U.S. ports must be conducted by U.S.-flagged, -made and -owned ships. The companies shipped seafood from a U.S. port in Alaska to the East Coast on a Canada-flagged ship.

KIF and ARM argue that their shipments qualify for the Third Proviso exception of the Jones Act, which says that the act doesn't apply to the transportation of merchandise between points in the U.S. "over through routes in part over Canadian rail lines and connecting water facilities if the routes are recognized by the Surface Transportation Board (STB) and rate tariffs for the routes have been filed with the Board." What the companies took this to mean is that if the goods get on a Canadian rail line at some point in their journey, they're permitted under the Jones Act.

The companies sought to fulfill the requirements of this exception by putting their fish shipments on a train in Canada, the BCR, sending them to a destination 100 feet away and bringing the train right back. From there, the shipments finished their journey to Maine (see 2109170048). The court ruled that the BCR does not comply with the Third Proviso since no transportation occurs over the route. The U.S. then filed a motion to immediately lift the injunction that stops CBP from issuing Jones Act penalties over the use of the BCR.

The plaintiffs argued that lifting the injunction would "contravene the fundamental purpose of the constitutional tolling doctrine upon which the Court's injunction is grounded" and that the court's order does not stand as a "final, non-appealable judgment of the case" and that any final judgment will not come until after the trial ordered by the court and the resolution of any appeals. Further, the U.S. failed to meet its burden of establishing that a material or significant change in the facts or law have occured since the issuance of the injunction requiring dissolving the motion, the plaintiffs said.

"Defendants’ Motion is based on the mistaken assumption that CBP has the right automatically to resume issuing penalty notices for future use of the Bayside Route and is under no obligation, before issuance of any such new penalties, to modify or revoke -- and provide notice to the public and an opportunity to comment -- its long-held standards interpreting the Third Proviso’s 'Canadian rail lines' requirement," the brief said.

Lineage Logistics backed the plaintiffs' positions, telling the court that the government has the matter "backward." The U.S. says it is not really required to release a notice of its intention to change the treatment of the rail line. The amicus says not so. "There are trucking companies, freight forwarders, ocean going vessel operators, importers, and other third parties that participate in the Plaintiffs’ commerce but cannot be presumed to be following this case," the brief said. "Some may have received penalty notices from CBP, but those penalty notices provided no information about why CBP departed from the Sunmar ruling and what has changed -- and thus what would be needed to come into compliance. Some may not have received penalty notices and might not even be aware of the dispute." As such, CBP has many steps to take before the injunction can be lifted, the brief said.