A 100-foot track to nowhere is no railroad

 

October 21, 2021 | View PDF



Businesses have learned over the years how to steer around government rules, avoiding many of the requirements that will cost them money. Nothing necessarily illegal about that unless the company goes so far over the line that even the federal bureaucracy can’t help but notice.

It’s similar to baseball, when a runner is trying to avoid the tag. Umpires allow a little latitude when the runner steps outside the basepath, but if the player go so far outside the line that they could shake hands with fans in the stands, the ump has no choice but to call them out.

That’s sort of what happened with moving frozen blocks of Alaska pollock to U.S. East Coast buyers, where the seafood is packaged and sold as fish sticks and for fast-food sandwiches.

The Jones Act, a century-old protectionist federal law, prohibits moving goods, including frozen fish chunks, between U.S. ports unless the ship is U.S. owned, operated and crewed. But because it’s so much cheaper to build oceangoing cargo ships overseas, and so much cheaper to staff them with foreign workers, the attraction to get around the U.S. shipping law is enticing.

And that’s what a U.S. seafood company has been doing for years to move frozen pollock and other products from Dutch Harbor to the U.S. East Coast — using foreign vessels and a short rail line in Canada.

The chartered ships landed in New Brunswick, Canada, and the containers were loaded on railcars for a 30-mile ride in Canada before they were offloaded and delivered by truck across the border into the U.S. The short track in Canada was used to short-circuit the Jones Act. The law makes an exception for using foreign vessels to move goods between U.S. ports if part of the journey includes a ride on a train in Canada.

But the shipper decided that 30-mile train ride and transfers was costing too much, so in 2012 the company started using a specially built, 100-foot-long train track to nowhere. The containers were offloaded from the cargo ships in New Brunswick and on to a rail flatcar nearby, then choo chooed back and forth down the mini-track for about a minute before they were driven away by trucks for delivery in the U.S.

It took a long time for the U.S. Customs and Border Protection folks to figure out and decide that 100 feet of steel rail wasn’t enough to qualify under the Jones Act provision. The factory trawlers that catch the pollock in the Bering Sea are almost three times the length of the rail spur.

U.S. Customs in August levied almost $350 million in fines against shipping and logistics affiliates of American Seafoods Co. and other companies in the supply chain for alleged violations of the maritime law. The government described the setup as “a calculated and secret scheme to find a loophole in the Jones Act, which was only revealed when the government received a tip from a third party.”

The shipping companies have sued to derail the penalties and keep the fish moving. They contend that the Bayside Canadian Railway satisfies the Jones Act exemption. Customs and Border Protection has never set a minimum distance for the rail line or required that it go anywhere in particular, the companies said in their court filing.

Besides, there isn’t enough U.S. shipping capacity to move all the fish, the companies said.

Fiddlesticks, four U.S. shipping lines said in September, filing in court in support of the enforcement action and arguing that the scheme was costing them business.

Just what this needs: More lawyers booking passage on the train.

The seafood company affiliates are correct, the law does not say how long the railroad has to be. But it’s disingenuous to claim 100 feet of track is a rail line. Trains don’t use a caboose anymore, but this fight should end. The companies should negotiate and pay a settlement and U.S. Customs and Congress should fix the law.

 

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