Alaska seafood shippers who objected to $350 million in federal fines lose a round in court

A federal judge on Tuesday sided against Alaska seafood shippers who say they and other companies have wrongly been hit with more $350 million in penalty notices from the U.S. Customs and Border Protection for alleged violations of the Jones Act.

U.S. District Court Judge Sharon Gleason in Anchorage denied a request by Kloosterboer International Forwarding and Alaska Reefer Management to stop the federal government from imposing further penalties as the case proceeds, according to her 25-page order.

The two companies, part of the American Seafoods Group family, are part of a supply chain that moves seafood from Dutch Harbor in Western Alaska to the Eastern U.S., passing through the port of Bayside in Canada near the border with Maine. They say the notices, issued this summer, threaten the movement of the seafood and jobs in Alaska and the Lower 48.

The companies sued the federal government in early September, asserting that they faced excessive fines and were meeting the requirements of the Jones Act, which requires that vessels carrying goods between two U.S. points be American-made and American-flagged. The companies use foreign-flagged vessels but say they meet an exemption under the act because the seafood travels briefly by rail in Canada.

The companies want a trial by jury and a ruling that says they comply with the Jones Act and that the fines are excessive, among other items. Kloosterboer has received $25 million in penalty notices.

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In the case, the U.S. Department of Justice argues that the two companies in 2012 began secretly using a specially built rail track in Canada that’s only 100 feet long, in an effort to evade the requirements of the Jones Act.

Gleason said that the companies are improperly relying on a rate tariff filed with the Surface Transportation Board in 2006, when they used a different and much longer railway in Canada to transport their product before it was shipped into the U.S.

Gleason said in the decision that the companies also failed to seek a “ruling letter” from Customs and Border Protection when they switched to the short rail line in 2012.

She said the companies can renew their request to halt additional fines if they show they’ve properly filed a rate tariff for the newer route, and show that they’re “diligently pursuing available administrative remedies” to resolve their concerns.

Officials with the companies and Customs and Border Protection could not immediately be reached late Tuesday for comment.