Rulings, remedies and court proceedings for customs and trade professionals

US Pushes for Oral Argument Over Reconsideration Bid in Case Nixing Jones Act Penalties

The U.S., in a July 28 brief at the U.S. District Court for the District of Alaska, argued oral argument is needed in a case over alleged Jones Act penalties committed by shipping companies Kloosterboer International Forwarding and Alaska Reefer Management. The U.S. pushed back against KIF and ARM's opposition to oral argument, arguing that the meeting is needed to "fully vet the complex issues in this case" and fully inform the court about the record (Kloosterboer International Forwarding v. United States, D. Alaska #3:21-00198).

Start A Trial

KIF and ARM ship seafood from Alaska to the eastern U.S. via a Canadian port on a Canadian-flagged ship. CBP said this violates the Jones Act -- the law that says shipping between U.S. ports must be conducted by U.S.-flagged ships that are also U.S. made and owned. 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."

The companies sought to fulfill the requirements of this exception by putting their fish shipments on a train in Canada, the Bayside Canadian Rail (BCR), sending them to a destination 100 feet away and bringing the train right back. From there, the shipments finished their journey to Maine by truck (see 2109170048). A three-part test exists to qualify for the Third Proviso. One of those parts says that the shipment must have used a route recognized by the STB and that it had filed rate tariffs for the routes with the STB.

The court ruled that the BCR failed this test, making KIF and ARM's shipments subject to Jones Act penalties (see 2206020069). However, Judge Sharon Gleason ruled that since CBP previously accorded treatment to the BCR, allowing shipments to pass on the rail line without Jones Act penalties, CBP's change in practice without a notice-and-comment period nullifies the penalties. In its reconsideration motion, the U.S. said that Gleason previously ruled the opposite way and that these differing opinions need to be reconciled (see 2207210047). The U.S. then filed for oral argument over the issue -- a move opposed by the plaintiffs, who argued that "oral argument is not necessary in light of the Court's clear and unambiguous Order on the parties' cross-motions for summary judgment."

In its response, the U.S. continued to vie for the oral argument, arguing that plaintiffs' opposition shows exactly why the court should grant oral argument so Gleason can fully address the issues in the case. For instance, the U.S. said its argument claiming that it should be able to pursue Jones Act violation penalties without a rate tariff filing was never addressed by the court, and was actually previously raised in the case, contrary to the plaintiffs' contention.

In its reconsideration motion, the U.S. raised a hypothetical over the ruling: "Suppose Plaintiffs had utilized the NBSR Route, which was the identical route addressed in the Sunmar letters, but the rate tariff for that route was no longer valid. The Court would agree that the United States could pursue penalties for that Jones Act violation. Yet, because Plaintiffs utilized the BCR Route without a rate tariff filing, a substantially identical route in the Court’s view, the Court concluded that the United States may not pursue penalties for that Jones Act violation."

The plaintiffs did not respond to this hypothetical in their opposition to the reconsideration motion. The U.S. said it is "perhaps unsurprising they do not wish to be asked to respond at oral argument." However, "given the voluminous record in this case and complexity of the issues, and the fact that the Court’s ruling on the motion for reconsideration is potentially dispositive of the United States’ counterclaims (even ones not yet brought), the Court should allow oral argument before it rules," the brief said.