Judge allows millions of pounds of backed-up Alaska seafood to move to eastern US in battle over Jones Act loophole

Companies that haul fish from Alaska to the Eastern U.S. can resume shipping what they say is an estimated 26 million pounds of frozen fish that has been stranded in Canada in a battle over a federal maritime shipping law known as the Jones Act, a federal judge ruled on Sunday.

The decision is a temporary victory for Kloosterboer International Forwarding and Alaska Reefer Management. The companies last month sued U.S. Customs and Border Protection, asserting that the agency has wrongfully issued more than $350 million in penalty notices to Kloosterboer and other companies in the transport chain.

The federal government claims the companies since 2012 have secretly used a specially built, 100-foot rail track at the port of Bayside in New Brunswick, near the border with Maine, in an illegal attempt to take advantage of an exemption in the act.

Customs and Border Protection cannot issue new penalties for seafood moved through the Bayside rail line until the case is resolved, U.S. District Court Judge Sharon Gleason in Anchorage said in the 24-page decision.

Not allowing the seafood distribution would close factories, hurt jobs and disrupt the supply chain for the U.S. Department of Agriculture food bank and school lunch programs, Gleason said in the order.

The seafood, mostly pollock, is caught by fishermen working from Dutch Harbor in Alaska’s Aleutian Islands. It reaches stores and restaurants on the East Coast.

“We were forced to halt shipping over 50 days ago,” said Jennifer Adamski, Kloosterboer’s director of logistics and operations, in a prepared statement. “As a result, 26 million pounds of Alaska produced seafood products remain in the Bayside cold storage, unable to reach U.S. seafood manufacturers at a time when the supply chain is severely strained.”

The companies say they have recently taken steps that Gleason required in an earlier round in the case, including filing a petition seeking administrative remedies with Customs and Border Protection, Gleason’s decision said.

The two seafood shipping companies provide transportation and logistics services as part of the American Seafoods Group family.

The Jones Act requires that vessels carrying goods between two U.S. points be American-made and American-flagged. The companies use foreign-flagged ships. But they say they meet a Jones Act exemption because the seafood travels briefly by rail in Canada.

The U.S. Department of Justice asserts that before 2012, the companies legally used the New Brunswick Southern Railway to transport their seafood in Canada, a journey of more than 30 miles along an established railway that moved the seafood from one point to another.

But in 2012, the companies began using the 100-foot mini-track that goes nowhere, which the Justice Department argues is unlawful. The companies briefly roll the seafood-filled trucks on the track in an effort to save money and find a loophole in the Jones Act, the agency asserts.

Kloosterboer and Alaska Reefer argue that the short track is a registered Canadian rail line and a legal part of the shipping route between Alaska and the East Coast.