Two U.S. companies will pay $9.5 million for violating the Jones Act, the second-largest ever settlement of a case brought under that law. AnnMarie Highsmith, executive assistant commissioner, Office of Trade, for U.S. Customs and Border Protection, said this resolution “sends a clear signal that CBP will use its law enforcement powers to detect and deter schemes that are designed to circumvent laws … intended to protect U.S. industries.”
The Jones Act generally requires goods to be transported by U.S.-flagged vessels between U.S. ports. An exception to this requirement allows seafood from Alaska to be transported to the mainland U.S. if it travels via Canadian rail.
According to a Department of Justice press release, the two companies at issue arranged transportation and related services to move frozen seafood from Alaska to a port in New Brunswick, Canada, on foreign-flagged vessels. There the seafood was offloaded from the vessels onto trucks, which were then driven onto flatbed rail cars on the Bayside Canadian Railway, a roughly 100-foot length of railroad track located entirely within the Port of Bayside. The trucks rode the length of the rail and back before being driven off the train cars and proceeding directly to a border crossing in Maine for final transport to the mainland U.S. According to the DOJ, this railway was specifically built and exclusively used to move seafood in this manner so companies could claim they met the Canadian rail exception to the Jones Act.
CBP determined that this scheme constituted a violation of the Jones Act and issued numerous penalty notices to the companies involved, which responded with a lawsuit claiming there was no violation and the penalties were unlawful. However, the U.S. District Court of Alaska ruled in favor of CBP, finding that there was no actual transportation of goods on the BCR and that the shipments at issue were thus ineligible for the claimed exception to the Jones Act.
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