Government Opposition To Restraining Order

E.
BRYAN WILSON
Acting United States Attorney
SETH M. BEAUSANG
Assistant U.S. Attorney
U.S. Attorney’s Office, District of Alaska
Federal Building & U.S. Courthouse
222 West Seventh Avenue, #9, Rm. 253
Anchorage, Alaska 99513-7567
Phone: (907) 271-5071
Fax: (907) 271-2344
E-mail: [email protected]
Attorneys for Defendant
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
)
KLOOSTERBOER INTERNATIONAL
)
FORWARDING LLC and ALASKA
)
REEFER MANAGEMENT LLC, Case No. 3:21-cv-00198-SLG
)
)
Plaintiffs,
)
vs. UNITED STATES’
)
OPPOSITION TO PLAINTIFFS’
)
UNITED STATES OF AMERICA, U.S. MOTION FOR TEMPORARY
)
DEPARTMENT OF HOMELAND RESTRAINING ORDER AND
)
SECURITY, U.S. CUSTOMS AND PRELIMINARY INJUNCTION
)
BORDER PROTECTION, and TROY A.
)
MILLER, U.S. Customs and Border
)
Protection Acting Commissioner, in his
)
official capacity,
)
)
Defendants.
INTRODUCTION
Prior to 2012, Plaintiffs utilized the New Brunswick Southern Railway
Case 3:21-cv-00198-SLG Document 38 Filed 09/10/21 Page 1 of 43

(“NBSR”) as a through route over Canadian rail lines for the transportation of
their product from Alaska to Maine and other destinations in the United
States. Plaintiffs knew that U.S. Customs and Border Protection (“CBP”) had
previously issued a Ruling Letter concluding that the NBSR route met the
requirements of the Third Proviso to the Jones Act. There was also a rate tariff
on file with the STB for this route. All was good.
In 2012, because Plaintiffs believed the NBSR was too costly, Plaintiffs
radically changed their method of transporting seafood. Plaintiffs devised a
scheme whereby instead of using an established Canadian railway that would
transport their product from one destination to another, they decided to utilize
a specially-built mini-railtrack, approximately 100 feet in length, that goes
nowhere. Plaintiffs’ product travels the length of the track and back, after
which the product is driven by truck to the United States. According to
Plaintiffs, this special railway, called the Bayside Canadian Railway (“BCR”)
is utilized for the “transportation” of their product over a “through route.” CBP
disagrees, and therefore has issued Notices of Penalty to Plaintiffs for millions
of dollars in Jones Act penalties, because Plaintiffs did not use coastwise-
qualified vessels to transport their product from Alaska. The potential
penalties are large because Plaintiffs have been engaged in this illegal conduct
for many years.

Kloosterboer v. United States, et al.
Case No. 3:21-cv-00198-SLG Page 2 of 43

Having received the Notices of Penalty, Plaintiffs seemingly could have
reverted to using the NBSR, or another legal method of transportation, and
sought review of CBP’s actions, either in an administrative process or through
an action under the Administrative Procedure Act. Instead, Plaintiffs seek
breathtaking equitable relief on an expedited basis. Specifically, they ask this
Court to permanently enjoin CBP from collecting penalties for what CBP
believes was years of flagrantly illegal conduct. Not only that, Plaintiffs ask
the Court to permanently enjoin CBP from seeking any penalties for this
conduct for the duration of this litigation—even if the Court ultimately
concludes that Plaintiffs’ scheme is illegal. In short, Plaintiffs are asking the
Court for a license to break the law. There is no authority for that kind of
equitable relief. Plaintiffs brought this situation upon themselves, they have
not shown that they are likely to suffer irreparable harm without an
injunction, and they are not entitled to equitable relief from this Court.
STATEMENT OF FACTS 1
Plaintiff Kloosterboer International Forwarding LLC (“KIF”) is an
Alaskan wholly-owned subsidiary of Plaintiff Alaska Reefer Management LLC
(“ARM”). KIF and ARM arrange transportation and related services for the
1Facts taken from Plaintiffs’ complaint are assumed true only for purposes of
this opposition.

transportation of frozen seafood products from Alaska to the eastern United
States. [Dkt. 1 ¶¶ 21-25]
ARM specifically arranges ocean carriage of the products from the port
of loading in Alaska to the port of discharge in Bayside, New Brunswick,
Canada. [Dkt. 1 ¶ 21] KIF is a registered non-vessel operating common carrier
specializing in refrigerated freight services for frozen seafood products
originating in Alaska (i.e., the arrangement of transportation and cold storage
from place of product receipt to its ultimate destination on behalf of shippers),
including those moving through the Bayside Port. [Dkt. 1 ¶ 21] KIF and ARM
arrange for the further transportation of the products from Bayside to and
through the border crossing at Calais, Maine, and into the United States. [Dkt.
1 ¶¶ 24-25]
ARM contracts with non-coastwise-qualified vessels to transport
merchandise to the Bayside Port. [Dkt. 1 ¶ 22] Attempting to take advantage
of the Third Proviso to the Jones Act, which would otherwise prohibit the use
of non-coastwise-qualified vessels to transport merchandise from Alaska to
Maine, KIF contracts with Kloosterboer Bayside Cold Storage (“KBB”) to
transfer the frozen seafood products, once they arrive at the Bayside Port, onto
trucks that are then driven onto flat rail cars on the rail trackage of the BCR.
[Dkt. 1 ¶¶ 28, 31] The BCR track is approximately 100 feet in length and is

located near the cold-storage facility in the Port of Bayside. The BCR is entirely
located within the Port of Bayside. The trucks travel on the rail cars the length
of the rail trackage and back. The trucks are then driven off the rail cars and
directly to the Calais, Maine border crossing and into the United States. [Dkt.
1 ¶ 31] Upon information and belief, the BCR was constructed and is operated
for the sole purpose to attempt to evade the requirements of the Jones Act.
Frozen seafood products have been shipped from Alaska to Bayside since
at least the 2000s. [Dkt. 7 ¶ 17] However, the BCR has only been utilized since
2012. [Dkt. 8 ¶ 15] Prior to that, the manner of transportation of seafood from
Alaska to Maine was drastically different.
The prior manner was disclosed to CBP in 1998, 2000 and 2001 by two
other shippers, Sunmar Shipping Inc. (“Sunmar”) and American Seafoods
Company LLC (“ASC”), when they sought and obtained Ruling Letters from
CBP to ensure that their manner of transportation would comply with the
Third Proviso. [Dkt. 6, Ex. 23, 6, & 7] Sunmar, in 2001, described the prior
manner of transportation as follows:
Sunmar is an ocean carrier engaged in the transportation of

cargoes between points in the United States, Canada, Northern
Europe, and Russia. The transportation currently under
consideration involves the shipment of frozen fish products from
fishing vessels and shore plants in the Dutch Harbor, Alaska area
on foreign-flag, non-coastwise-qualified vessels and then by
intermodal carriage via the New Brunswick Southern Railway

(“NBS Railway”), a Canadian rail line, for ultimate delivery, via a
through bill of lading, to cold storage facilities in Boston or
Gloucester and other points in the United States.
Sunmar will charter foreign-flag, non-coastwise-qualified vessels

from foreign owners (the “Vessels”). The products loaded onto the
Vessels in the Dutch Harbor area will be unitized for intermodal
carriage and handling under the through bill of lading. The Vessels
will then move the cargo from Dutch Harbor to New Brunswick,
Canada.
When the Vessels arrive in New Brunswick, Canada, the products

will be discharged to the Bayside Food Terminal near Bayside,
New Brunswick, where they will be staged for intermodal carriage.
At the Bayside terminal, the products will be transferred into
intermodal reefer trailers. The loaded trailers will be hauled by
truck to either McAdam, New Brunswick or Saint John, New
Brunswick, where the trailers will be loaded onto rail flat cars.
The rail cars will then be moved by the NBS Railway over rail
trackage in Canada, either from McAdam to Saint John, or Saint
John to McAdam. At either of these rail-truck transfer facilities,
the NBS Railway truck trailers will be offloaded and then driven
from there into the United States via the St. Stephen, New
Brunswick/Calais, Maine, border crossing. After entry, the trailers
will be trucked to a cold storage facility in the United States.
Sunmar will be documented as the shipper, while each respective
customer is the consignee and the Canadian rail carrier will be
NBS Railway.
[Dkt. 6, Ex. 6 at 1-2]
Under these past operations, the rail movement occurred under the
control of either the NBSR, or the NBSR in conjunction with the Canadian
Pacific Railway, and involved rail movements of approximately 34 to 91 miles
or more. [Hebert Decl. ¶ 8] CBP was made aware of these past operations

through various requests for Ruling Letters. [Hebert Decl. ¶ 8] It is common
and encouraged for shippers to request administrative rulings from CBP
concerning CBP’s conclusions about how the Jones Act applies in specific
factual scenarios. [Hebert Decl. ¶ 11]
CBP responded to Sunmar’s request by issuing a Ruling Letter stating
CBP’s conclusion that Sunmar’s proposed manner of transportation would
comply with the Third Proviso. CBP’s Ruling Letter stated in part:
The Third Proviso simply permits transportation between two

coastwise points that would otherwise be prohibited by that
statute when such transportation is on a through route recognized,
or exempted by, the STB and is in part over Canadian rail lines.
HOLDING:
The transportation of frozen fish indirectly between coastwise

points, in part via both foreign-flag vessel and rail trackage in
Canada, as described above, is in accord with the Third Proviso to
46 U.S.C. App. § 883.
[Dkt. 6, Ex. 6 at 6] CBP issued a similar Ruling Letter to ASC. [Dkt. 6, Ex. 7]
CBP further concluded that Sunmar was not required to file a rate tariff
for the proposed through route with the Surface Transportation Board (“STB”)
in order to comply with the Third Proviso. [Dkt. 6 at 25] Subsequently, CBP’s
Letter Ruling was challenged under the Administrative Procedure Act. In that
case, the court granted the plaintiff’s motion for summary judgment and held
that CBP’s conclusion that no rate tariff needed to be filed for the proposed

through route, in order to meet the requirements of the Third Proviso, was
arbitrary and capricious because it violated the plain language of the Third
Proviso. Horizon Lines, LLC. v. United States, 414 F. Supp. 2d 46, 60 (D.D.C.
2006). The court stated that its vacatur of the Sunmar Ruling Letter had the
effect of revoking as a matter of law all substantially identical CBP rulings. Id.
at 54 n.5.
After the decision in Horizon, ASC filed a rate tariff with the STB for the
above-described manner of transportation utilizing the NBSR. Specifically,
ASC’s rate tariff filing identifies the NBSR as the Canadian rail carrier used
in the transportation of frozen seafood products from Dutch Harbor to Maine
via Bayside. [Dkt. 7 ¶ 30] The tariff filing expressly describes ASC’s intermodal
transportation as follows: “water and rail transportation and related services,
southbound between Dutch Harbor, Alaska and named places in the Eastern
United States” using carrier New Brunswick Southern Railway Company
Limited, issued on August 28, 2006. [Dkt. 7 ¶ 31]
In 2012, KBB decided to cease using the NBSR as part of the
transportation of seafood from Alaska to Maine in order to save costs and for
other business reasons. [Dkt. 8 ¶ 15] KBB decided to utilize the BCR instead
of the NBSR. [Id.] KIF was aware and supportive of this change because its
customers, when the NBSR was in use, experienced difficulties in reliably


providing timely delivery to end-customers and extremely high transportation
fees. [Dkt. 8 ¶ 15] Moreover, the distance of the NBSR from the U.S. border,
depending on where the seafood products were off-loaded in St. John, Canada
(where the seafood products were transported along the NBSR), was anywhere
from 30 to 50 miles away from the Calais, Maine border crossing. [Dkt. 8 ¶ 15]
Plaintiffs allege that it is their “understanding that CBP was apprised
of the change from NBSR to the BCR rail trackage in 2012.” [Dkt. 8 ¶ 16] It is
undisputed that no new rate tariff was filed with the STB for the new route.
No entity sought a new Ruling Letter from CBP for the new manner of
transportation. The only “disclosure” in the record of this new manner of
transportation is via various bills of lading, which are submitted to CBP at the
time of entry of merchandise into the United States. Bills of lading are
commercial documents (not CBP forms) that should be included in all
shipments. [Hebert Decl. ¶ 10]
Plaintiffs provided an example of such a bill of lading that they claim
notified CBP of their change in operations. [Dkt. 8 Ex. 2] This bill of lading
lists the “routing” of the shipment which takes place after it is unladen from
the cargo vessel. [Hebert Decl. ¶ 10] The example indicates that the shipment
moves from “Kloosterboer Bayside to Bayside Canadian Railway North,” then
from “Bayside Canadian Rail to Bayside Canadian Railway South,” then from

“Bayside Canadian Rail” to “New Bedford, MA.” [Id.] In fact, the shipment does
not go from the Bayside Canadian Rail to New Bedford, but rather, the final
transportation to New Bedford is done by the tractor-trailer, in this example,
operated by John Cook trucking. [Id.] Plaintiffs’ bill of lading also misleadingly
suggests that Bayside Canadian Railway North and Bayside Canadian
Railway South are discrete stops on the railway, and it fails to disclose that
the train reverses itself and returns with the merchandise to its original
position. The bill of lading does not provide any other factual details about the
nature of the railway in use. [Id.] CBP does not expect it to, because that is not
the purpose of the document; CBP does not use a bill of lading for the purpose
of understanding the detailed facts about the rail being used. [Id.] Instead,
CBP utilizes the bill of lading to know what merchandise is in the shipment,
the quantity of the merchandise in the shipment, the entities involved in the
transportation of the shipment, from where the shipment and merchandise
originated, and to where and to whom the shipment is to be delivered. [Id.]
The Jones Act Division of Enforcement (JADE), within CBP’s Office of
Field Operations, provides information and guidance to CBP and industry
stakeholders to ensure uniformity in coastwise trade enforcement and
compliance, advocates for enforcement of coastwise trade laws, and assists
ports with any issues involving coastwise trade to include allegations and

investigatory procedures. [Hebert Decl. ¶ 2] JADE monitors incoming
allegations of violations of the coastwise laws and works with the CBP ports of
entry to evaluate such allegations. [Hebert Decl. ¶ 2]
In April 2017, JADE received a letter from a third party alleging
potential violations of the Jones Act and began evaluating the matter. [Hebert
Decl. ¶ 4 & Ex. A] In the letter, the complainant asserted that Plaintiffs were
not complying with the Third Proviso. [Id.] The issue raised by the letter was
that the tariff filing with the STB was inadequate because it had no expiration
date, was outdated with regard to rates quoted therein, did not expressly
encompass the identified violators or their movements of merchandise, and
failed to describe the rail route or routes used. [Id.] Based upon the allegations
presented, JADE began an internal evaluation of the matter. [Id.]
CBP had knowledge of the transportation route referenced in the letter
as it existed in the late 1990s and early-to-mid 2000s, based upon requests for
administrative rulings and CBP rulings issued in response thereto, and
subsequent litigation in the Horizon case. [Hebert Decl. ¶ 5] As part of its
investigation, JADE obtained video clips from the internet showing Plaintiffs’
current operation and that rail movement on the BCR. [Hebert Decl. ¶ 6 & Exs.
C & D] JADE also obtained from the internet images of the rail, where a rail
car mover is used to move a set of rail cars loaded with a tractor-trailer along

the rail, and comments made in chat boxes associated with social media posts
of the rail operation. [Hebert Decl. ¶ 6 & Ex. B] Because the current rail
operation was drastically different from the prior operation, JADE began a
more extensive internal evaluation. [Hebert Decl. ¶ 5]
In 2021, as a result of a lengthy investigation and internal evaluation
involving several components within the Agency, CBP determined that
Plaintiffs and others were liable to the United States for civil penalties equal
to the value of the merchandise transported or the value of the transportation,
whichever is greater. An example of the Notices of Penalty issued by CBP in
this matter is found at Dkt. 7-4. The Notices of Penalty invited the recipients
to submit a petition to the Fines, Penalties, and Forfeitures Officer concerning
the Notices. [Dkt. 7, Ex. 4 at 4] By law recipients of a Notice of Penalty have
the right to file such a petition for remission or mitigation of the penalties. See,
e.g., 19 U.S.C. § 1618; 19 C.F.R. §§ 171.1, 171.12, 171.21. The Notices of Penalty
are not self-executing; CBP must bring a judicial action to compel payment. 19
C.F.R. § 171.22.
ARGUMENT
I. Standard of review.
To obtain a preliminary injunction, Plaintiffs must establish that (1)
they are likely to succeed on the merits; (2) they are likely to suffer irreparable

harm in the absence of preliminary relief; (3) the balance of equities tips in
their favor; and (4) an injunction is in the public interest. Winter v. Nat. Res.
Def. Council, Inc., 555 U.S. 7, 20 (2008). The last two elements merge when the
Government is the opposing party. Nken v. Holder, 556 U.S. 418, 435 (2009).
Plaintiffs may also obtain a preliminary injunction if they make a lesser
showing on the first element, that there are “serious questions going to the
merits,” if they also make an enhanced showing on the fourth element, that
the “balance of hardships tips sharply in the plaintiff's favor.” Friends of the
Wild Swan v. Weber, 767 F.3d 936, 942 (9th Cir. 2014).
“[I]njunctive relief is an extraordinary remedy that may only be awarded
upon a clear showing that the plaintiff is entitled to such relief.” Winter, 555
U.S. at 22.
II. Plaintiffs have not met their burden to show that they are likely
to prevail on Count I.
Plaintiffs have not established that they are likely to prevail on the
merits of Count I, which seeks a declaratory judgment that their manner of
transportation of frozen seafood from Alaska to Maine complies with the Third
Proviso. Nor have Plaintiffs shown even a serious question going to the merits
of Count I. Under the plain language of the statute and based on the
undisputed facts, Plaintiffs’ utilization of the BCR to transport seafood from


Alaska to Maine does not meet the requirements of the Third Proviso.
Pursuant to the Jones Act, 46 U.S.C. § 55102, a vessel may not provide
any part in the transportation of merchandise by water, or by land and water,
between points in the United States, either directly or via a foreign port, unless
the vessel is coastwise-qualified, i.e., U.S.-built, U.S.-registered, and U.S-
owned. The Jones Act was enacted, in part, to ensure a vibrant U.S. maritime
industry. 46 U.S.C. § 50101.
There is no dispute that the seafood Plaintiffs transport is merchandise,
which was transported from one U.S. coastwise point (Alaska) to another U.S.
coastwise point (Maine and subsequent U.S. destinations), in part by the use
of a foreign-flag, non-coastwise qualified vessel. This case arises from
Plaintiffs’ reliance on the Third Proviso as an exemption to the requirement
that Plaintiffs use a coastwise-qualified vessel for this transportation.
Under the Third Proviso, 46 U.S.C. § 55116, the requirement to use
coastwise-qualified vessels “does not apply to the transportation of
merchandise between points in the continental United States, including
Alaska, over through routes in part over Canadian rail lines and connecting
water facilities if the routes are recognized by the Surface Transportation
Board and rate tariffs for the routes have been filed with the Board.”


To qualify for the Third Proviso, Plaintiffs must establish that their use
of the BCR meets three elements: 1) there must be “transportation of
merchandise” over a “through route”; 2) “in part over Canadian rail lines”; and
3) the routes must be recognized by the STB and rate tariffs for the routes must
have been filed with the STB. As an exception to the general requirements of
the Jones Act, the Third Proviso should be construed narrowly. See, e.g.,
Comm’r of Internal Revenue v. Clark, 489 U.S. 726, 739 (1989) (“In construing
[statutes] in which a general statement of policy is qualified by an exception,
we usually read the exception narrowly in order to preserve the primary
operation of the provision.”); but see Am. Mar. Ass’n v. Blumenthal, 590 F.2d
1156, 1165 (D.C. Cir. 1978) (holding that the Jones Act in general should be
“construed strictly” because it imposes a forfeiture).
Failing to meet any element renders the Third Proviso inapplicable.
Plaintiffs’ manner of transportation via the BCR does not meet the
requirements of the Third Proviso for at least two reasons.
A. Plaintiffs’ use of the BCR is not “transportation” over a

“through route.”
Plaintiffs’ use of the BCR is not “transportation” over a “through route.”
The term “through route” is not defined in the statute, but has been defined by
the U.S. Supreme Court as “an arrangement, express or implied, between


connecting railroads for the continuous carriage of goods from the originating
point on the line of one carrier to destination on the line of another.” St. Louis
Sw. Ry. Co. v. United States, 245 U.S. 136, 145 (1917); see also BNSF Ry. Co.
v. Surface Transp. Bd., 748 F.3d 1295, 1299 (D.C. Cir. 2014) (in the context of
railroads, defining a “through route” as “routes where two railroads must carry
the shipment to get from origin to destination”). As defined by the Supreme
Court, a “through route” requires a “continuous carriage of goods” from one
point to another. Plaintiffs accept this definition. [Dkt. 5 at 35 n.10]
“Continuous” is defined by the Oxford English Dictionary as:
“Characterized by continuity; extending in space without interruption of
substance; having no interstices or breaks; having its parts in immediate
connection; connected, unbroken;” and “In unbroken connection with; joined
continuously to; forming one mass with.” OED Online, Oxford University
Press, Sept. 2021 (http://www.oed.com/view/Entry/40280).
Here, Plaintiffs’ movement of merchandise via the BCR is not part of a
continuous carriage of goods. As described by Plaintiffs, and as seen in the
video of the BCR in operation, the rail cars with the merchandise go by rail
from point A, to point B, then back to point A, all within the Bayside Port,
before the merchandise is offloaded from the rail cars and transported by truck
to the United States. [Hebert Decl. Exs. C & D] There is nothing about the

movement along the BCR that resembles a continuous carriage of goods along
a route. The merchandise also does not move “without interruption” in a
“connected, unbroken” manner. The BCR does not connect to any destination.
Instead, the merchandise travels by rail for approximately 100 feet, and then
reverses course over that same distance. Even without focusing on the
dictionary definitions of each word in the Supreme Court’s definition of a
through route, there is no question that the movement of merchandise back
and forth on the BCR is completely unlike what the Supreme Court described.
Furthermore, the movement of merchandise via the BCR defies the
concept of “transportation.” The Supreme Court has stated that
“[t]ransportation implies the taking up of persons or property at some point
and putting them down at another.” Gloucester Ferry Co. v. Pennsylvania, 114
U.S. 196, 203 (1885); see also Black’s Law Dictionary at 1729 (10th ed. 2014)
(defining “transportation” as “movement of goods or persons from one place to
another by a carrier”); OED Online, Sept. 2021
(http://www.oed.com/view/Entry/205017) (defining “transport” as “[t]o carry,
convey, or remove from one place or person to another; to convey across”). The
merchandise does not travel along the BCR “from one place to another,” it
begins and ends in the same place. While on the BCR, the merchandise also
never leaves the Bayside Port. For all of these reasons, the BCR is not part of

a “transportation” over a “through route.”
The Court should reject Plaintiffs’ straw man argument that CBP’s issue
with the BCR is that it is a “sham or commercially impractical Canadian rail
movement to achieve ‘technical compliance’ with the literal terms of the
statute.” [Dkt. 5 at 39] The concept of “commercial soundness” was raised in
the Horizon litigation because the cargo in that case was transported on
Canadian rail further away from the U.S. port of entry, and not on a direct
route that otherwise could have been taken without using rail. The Horizon
court, in a footnote, rejected the argument that “the commercial soundness of
a proposed route” should determine whether the route meets the Third Proviso.
414 F. Supp. 2d at 55 n.6.
CBP did not consider the commercial soundness of the BCR when it
issued the Notices of Penalty in this case. Rather, CBP determined that the
rail operation itself, i.e., its inherent nature, does not meet the statutory
requirements of the Third Proviso. To construe the BCR as being part of a
“through route in part over Canadian rail lines” would make the requirements
of the Third Proviso meaningless. Such a construction would also make the
Third Proviso a broad exception to the Jones Act when it is supposed to be read
narrowly. Clark, 489 U.S. at 739. Plaintiffs’ use of the BCR does not meet the
requirements of the Third Proviso because Plaintiffs are not using the BCR for

“transportation” over a “through route.” The commercial soundness of the BCR
is irrelevant.
Plaintiffs cite United States v. Louisiana & P.R. Co., 234 U.S. 1 (1914)
and Sea-Land Serv., Inc. v. Fed. Mar. Comm'n, 404 F.2d 824 (D.C. Cir. 1968)
in support of their argument the BCR qualifies as part of a through route [Dkt.
5 at 43], but those cases are inapposite. Louisiana & P.R. Co., was concerned
with the Interstate Commerce Commission’s regulatory authority over “plant
facilities,” determining whether something was private carriage or common
carriage, and whether financial allowances to certain parties involved in the
industrial activities and movements by rail were permissible. 234 U.S. at 23-
24.
Sea-Land involved a jurisdictional dispute between two regulatory
agencies. 404 F.2d at 825. In that case, the court held that a through route
under the Shipping Act of 1916 could include activities that were minimal, or
incidental to a dominant mode of transportation, but critically the court also
held that for a through route “[w]hat is required is that both motor and water
carriers hold themselves out to the public as participants in a joint
transportation endeavor and file appropriate tariff schedules reflecting these
joint rates and through services.” Id. at 827. That holding is of no help to
Plaintiffs, as the BCR is not a participant in a “joint transportation endeavor.”


In determining whether Plaintiffs’ use of the BCR qualifies as a through
route, the Court should be informed by the Supreme Court’s decision in Central
Vermont Transp. Co. v. Durning, 294 U.S. 33 (1935). In that case, which
rejected a different attempt to expand the Third Proviso as inconsistent with
the “words of the statute and the unmistakable policy of Congress,” the
Supreme Court discussed the origins and the purpose of the Third Proviso:
[The exception’s] evident purpose was to avoid disturbance of

established routes, recognized by the Interstate Commerce
Commission as in the public interest, between the northwestern
and eastern states through the lake ports. In these routes foreign-
owned water carriers participated as well as Canadian and
American rail lines…. The proviso obviously would enable
American carriers, participating in such through routes, to retain
the benefits of the traffic which in some instances might otherwise
be diverted to all water transportation by foreign owned vessels
between points in Canada and the United States.
Central Vermont, 294 U.S. at 39.
As described by the Supreme Court, the intent of the Third Proviso was
to exempt certain existing movements of merchandise from the Jones Act in
order to protect U.S. carriers. It was not enacted to expand the use of foreign-
flagged vessels. In the same matter, the Second Circuit discussed the context
surrounding the passage of the exception, and concluded that Congress
specifically enacted the “Canadian rail lines” exception to permit existing U.S.
– Canada – U.S. traffic routes from the Midwestern states through the Great


Lakes and Canada, ultimately to the Eastern states. Central Vermont Transp.
Co. v. Durning, 71 F.2d 273, 276 (2d Cir. 1934). These existing routes were
commonly understood at the time to be the “through routes” that were intended
to fall within the Third Proviso: routes operated by different carriers but as
part of a continuous journey from one coastwise point to another, in part over
the Great Lakes and in part within Canadian territory.
By contrast, the BCR was constructed solely as an attempt to make
otherwise impermissible coastwise traffic appear to fall within the statutory
exception. Plaintiffs are not using an existing and recognized route, or even a
“route.” To adopt a construction of the statute that would permit Plaintiffs to
invoke the exception in this way, in the words of the Supreme Court in Central
Vermont, would do “violence to the words of the statute and would thwart its
purpose.” 294 U.S. at 38.
B. Plaintiffs cannot show that they have filed the required

routes and tariff rates with the STB.
The Court should also reject Plaintiffs’ attempt to invoke the Third
Proviso exception because Plaintiffs have not filed the required route and tariff
rates with the STB in connection with their use of the BCR. The Horizon court
held that the plain language of the Third Proviso requires a carrier to file a
route and tariff rate with the STB in order to invoke the benefit of the Third


Proviso. Horizon, 414 F. Supp. 2d at 60.
Plaintiffs attempt to sidestep the Horizon ruling by claiming that CBP’s
pre-Horizon rulings, which had concluded that there was no filing
requirement, “remain unchanged and in effect.” [Dkt. 5 at 40] That is incorrect,
as those past CBP rulings were overruled and negated by the decision in
Horizon. See 19 C.F.R. § 177.12(d)(1)(iv) (no notice required when judicial
decision overturns findings in an administrative ruling). CBP did not need to
take any action to revoke or modify its pre-Horizon rulings concerning the
filing requirement. See also Horizon, 414 F. Supp. 2d at 54 n.5 (stating that
“any substantially identical Customs ruling will be revoked as a matter of law
if the Court vacates the Sunmar rulings”).
The Court should also reject Plaintiffs’ argument that ARM did not need
to file a rate tariff for the BCR route because “[w]hen ARM took over the vessel
chartering operation in 2009 from ASC … it stepped into ASC’s shoes as the
shipper in the tariff.” [Dkt. 5 at 40] A tariff filing that fails to identify the
correct company performing the purported ocean transportation is not valid,
and the rate information contained in the document would likely no longer be
valid. See 49 U.S.C § 13702(b)(2)(A) (requiring tariff filings with the STB to
include, at a minimum, “the carriers that are parties to it”); see also
§ 13702(b)(5) (allowing “carriers to change rates, classifications, rules, and


practices without filing complete tariffs” under certain circumstances).
Furthermore, ASC’s filing does not identify the route that ARM is using.
ASC’s filing states that the route utilizes the NBSR. At the time of that filing,
the BCR had not even been constructed. Even if ARM could “step into the
shoes” of ASC, it cannot rely on a filing for a completely different route to meet
the requirements of the Third Proviso. Plaintiffs’ assertion that they were not
required “to formally notify or request approval from CBP for the change” in
the railway [Dkt. 5 at 41] is irrelevant. To meet the Third Proviso exception
Plaintiffs were required to file their route with the STB. Horizon, 414 F. Supp.
2d at 60.
III. Plaintiffs have not met their burden to show that they are likely
to prevail on Counts II and III.
The Court should also reject Plaintiffs’ argument that they are likely to
prove a violation of 19 U.S.C. § 1625(c)(1) & (2), which require CBP to publish
a proposed interpretive ruling or decision which would:
(1) modify (other than to correct a clerical error) or revoke a

prior interpretive ruling or decision which has been in effect
for at least 60 days; or
(2) have the effect of modifying the treatment previously

accorded by the Customs Service to substantially identical
transactions.
19 U.S.C. §§ 1625(c)(1) and (2). Plaintiffs argue that CBP’s Penalty Notices


“are premised on some tacit modification or revocation of its long-standing
Third Proviso interpretative rulings.” [Dkt. 5 at 46] Plaintiffs’ argument is
meritless.
There is no evidence that CBP modified or revoked a prior interpretive
ruling, decision, or treatment. Rather, it was Plaintiffs that modified and
revoked their prior business operations when KBB abandoned the use of the
NBSR and began using the BCR, with KIF’s encouragement. CBP’s prior
Ruling Letters never sanctioned the use of the BCR to meet the Third Proviso.
All of those letters predated even the existence of the BCR.
Nor did CBP’s prior Letter Rulings involve facts “substantially identical”
to the BCR operation. [Dkt. 5 at 47] A review of the rulings reveals that each
dealt with facts significantly different. Specifically, the rail lines subject to the
previous rulings involved established routes used to move rail cars in a
continuous manner from one facility to another over many miles. [Hebert Decl.
¶¶ 7-9] None of those routes involved the “transportation” of merchandise
along a specialized mini-track from point A, to point B, and then back.
Plaintiffs are experienced importers of merchandise who know how to
seek an administrative ruling as to the applicability of the Third Proviso from
CBP by fully disclosing their change in operations. Many carriers have done
that, including ASC and Sunmar, who sought and obtained Ruling Letters for

their use of the NBSR. [Hebert Decl. ¶ 7] Plaintiffs never did. Instead,
Plaintiffs changed their operations to a model radically different from any
other transportation model previously reviewed by CBP, without seeking a
Ruling Letter, and without filing their new route with the STB.
The Court should reject Plaintiffs’ assertion that CBP was “well aware
of the specific rail trackage being used by Plaintiffs since the rail line began
operations in 2012.” [Dkt. 5 at 13] Plaintiffs apparently base this assertion on
the fact that they submitted bills of lading to CBP when merchandise entered
the country. Plaintiffs’ assertion is meritless.
CBP does not rely upon bills of lading to provide the type of detailed facts
necessary to determine if a particular operation complies with the Third
Proviso. [Hebert Decl. ¶ 10]. Indeed, Plaintiffs’ bills of lading provided no
details about their operation other than the name of the new railway. Rather,
CBP and regulated entities use the Ruling Letter process for that purpose, as
Plaintiffs well know. If Plaintiffs wanted the benefit of an administrative
ruling on whether their change in operations complied with the Third Proviso,
they could have had such a ruling nearly a decade ago (the answer would have
been “no”). Instead, in the best light, Plaintiffs chose to assume the risk that
their own interpretation of the statute, involving drastically different facts
from prior scenarios, would align with CBP’s interpretation. At worst,


Plaintiffs chose to proceed in the manner they did hoping they would not get
caught. 2
To a considerable degree, CBP relies upon the trade community to be
forthright in its transactions with the Government. Specifically, CBP expects
the entities who are bringing merchandise into the United States to exercise
reasonable care, file truthful paperwork, and when there is doubt, to use CBP’s
administrative rulings program. 19 U.S.C. § 1484(a) (reasonable care shall be
used to make entry of merchandise); 19 C.F.R. Part 177 (Administrative
Rulings); [Hebert Decl. ¶ 11]; CBP Informed Compliance Publication,
“Reasonable Care” (Sept. 2017)
(https://www.cbp.gov/sites/default/files/assets/documents/2020-
2 As additional evidence that Plaintiffs’ hands are unclean in this action for
equitable relief, consider that Plaintiffs never completed an STB filing for the
BCR, which is a relatively simple administrative task. Furthermore, videos of
the BCR were removed from social media shortly after Notices of Penalty were
issued, even though reference to the BCR or the Third Proviso were not
included in those Notices. [Hebert Decl. ¶ 6] Also, as pointed out in Plaintiffs’
motion, CBP agreed to a two-week pause in the issuance of penalties at the
behest of Plaintiffs’ counsel. [Dkt. 15 ¶ 10] This pause was so Plaintiffs’ counsel
could provide the Agency with some form of documentary evidence establishing
that CBP approved Plaintiffs’ use of the BCR or other proof that its
transportation model was not a violation of the Jones Act. [Id.] While the
Agency engaged with Plaintiffs’ counsel in good faith, Plaintiffs never
submitted any supporting documentation to the Agency. Instead, it is apparent
that their time was spent drafting their pleadings and filings to this Court,
including a request for expedited consideration of their motion which provided
the Government limited time to respond.

Feb/icprescare2017revision.pdf). CBP does not and cannot perform an in-depth
investigation about every movement of merchandise into this country. In this
case, CBP only became aware of the nature of the BCR operation when a third-
party presented an allegation to CBP about a potential violation of the Jones
Act, at which time CBP began investigating the matter. Plaintiffs appear to
have taken advantage of CBP’s familiarity and acceptance of their NBSR
operation, and CBP’s expectation that Plaintiffs would have sought a Ruling
Letter had they made the kind of radical change that they made to their
operations in 2012.
IV. Plaintiffs have not met their burden to show that they are likely
to prevail on Count IV.
Plaintiffs are also unlikely to succeed on the merits of their claim that
the issuance of the Notices of Penalty in this matter violates their due process
rights. Specifically, Plaintiffs allege that the Agency failed to give Plaintiffs
fair notice that their conduct violated the Jones Act prior to CBP issuing the
Notices of Penalty. [Dkt. 5 at 50] According to Plaintiffs, CBP is relying on
“new, secretively implemented interpretative guidance.” [Dkt. 5 at 51]
Plaintiffs’ argument is meritless.
It is well settled that “laws which regulate persons or entities must give
fair notice of conduct that is forbidden or required.” FCC v. Fox Television


Stations, Inc., 567 U.S. 239, 253 (2012). A statute that forbids or requires
certain conduct would only violate the Due Process Clause if “men of common
intelligence must necessarily guess at its meaning.” Id. (citing Connally v.
General Constr. Co., 269 U.S. 385, 391 (1926)).
“A statute is vague not when it prohibits conduct according ‘to an
imprecise but comprehensible normative standard, but rather in the sense that
no standard of conduct is specified at all.’ ” Botosan v. Paul McNally Realty,
216 F.3d 827, 836 (9th Cir. 2000) (quoting Coates v. City of Cincinnati, 402 U.S.
611 (1971)). Moreover, because the Jones Act “is a statute that regulates
commercial conduct, it is reviewed under a less stringent standard of
specificity” than, for example, criminal laws or restrictions on speech. Id.
(citing Vill. of Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 489,
498-99 (1982)). A statute need not have “mathematical certainty” to survive a
vagueness challenge; instead, it may be marked by “flexibility and reasonable
breadth, rather than meticulous specificity.” Grayned v. City of Rockford, 408
U.S. 104, 110 (1972) (citation omitted). 3
3 Plaintiffs cite ExxonMobil Pipeline Co. v. United States Dep't of

Transportation, for the proposition that “fair notice requires the agency to have
state[d] with ascertainable certainty what is meant by the standards [it] has
promulgated,” 867 F.3d 564, 578 (5th Cir. 2017), but they are misreading that
case. The quoted language from ExxonMobile dealt with when an agency’s
interpretation of its own regulations is entitled to Auer deference, which is not

CBP is relying on the plain language of the statute to support its Notices
of Penalty, specifically the statutory terms “transportation” and “through
route.” Plaintiffs do not—and cannot—establish that these terms are
impermissibly vague. They are common terms in the industry and have been
defined by numerous courts all the way to the Supreme Court. At the end of
the day, the Court may agree or disagree with CBP’s interpretation, but
Plaintiffs cannot transform an APA claim into a constitutional violation merely
because Plaintiffs disagree with CBP’s interpretation. 4
Plaintiffs’ due process argument is particularly curious given that
Plaintiffs failed to avail themselves of the well-recognized Ruling Letter
process. [Hebert Decl. ¶ 11] In other words, they had the opportunity for more
process, but declined to pursue that. When a defendant challenges the statute
as applied to his own conduct, whether the statute is vague “turns on whether
the statute provided adequate notice to him that his particular conduct was
at issue here. CBP has not promulgated a regulation interpreting the terms
“transportation” and “through route.” There is no need, as those terms are
unambiguous.
4 Plaintiffs’ reliance on Furie Operating Alaska, LLC v. U.S. Dep't of Homeland
Sec., is misplaced [Dkt. 5 at 50 n.23], as that case dealt with the court’s
jurisdiction to hear a dur process claim. 2015 WL 4076843, at *7 (D. Alaska
July 6, 2015). CBP is not questioning the Court’s jurisdiction to consider
Plaintiffs’ due process claim, the Agency’s is simply arguing that the claim is
meritless.

proscribed.” United States v. Harris, 705 F.3d 929, 932 (9th Cir. 2013). If the
defendant had actual notice that his conduct was prohibited, “there is no due
process problem.” United States v. Backlund, 689 F.3d 986, 997 (9th Cir. 2012).
Here, the Court can infer that Plaintiffs failed to seek a Ruling Letter because
they suspected CBP would not sanction their conduct.
To the extent Plaintiffs also argue that it was a violation of due process
for the Agency to fail to provide them pre-notice of the Notices of Penalty [Dkt.
5 at 51-52], that claim, too, is meritless. Plaintiffs cite no authority for their
argument. The Agency was unaware of Plaintiffs’ transportation scheme until
a third-party complaint was filed with the Agency. [Hebert Decl. ¶ 4] After
investigation of the illegal transportation of merchandise by Plaintiffs and
other entities, the Agency appropriately issued Notices of Penalty to the
violators. Due process merely requires notice and a meaningful opportunity to
be heard in accordance with the requirements in Mathews v. Eldridge, 424 U.S.
319 (1976). CBP’s Notices of Penalty are not self-executing, Plaintiffs have a
right to be heard in an administrative process, and Plaintiffs will receive (and
are currently receiving) additional due process before they ever will be
obligated to pay a penalty. There is also no statutory requirement for CBP to


issue pre-penalty notice for penalties issued pursuant to the Jones Act. 5
Plaintiffs’ due process claim is meritless.
Furthermore, as Plaintiffs appear to acknowledge, they have no
intention of changing their business practices. The outcome thus would have
been the same if CBP had provided pre-notice of the Notices of Penalty: the
penalties would have been the same given the longstanding violations,
penalties would have continued to accrue if Plaintiffs continued their conduct,
supply chain members may have been scared off for fear of liability, and
Plaintiffs would have disputed CBP’s interpretation of 46 U.S.C. § 55116 and
likely initiated litigation. Having failed to avail themselves of the opportunity
to seek an administrative ruling from CBP prior to changing their business
operation, Plaintiffs assumed the risk that CBP, a law enforcement agency,
might decide that Plaintiffs’ business practices violated the Jones Act and issue
penalties for said violations.
V. Plaintiffs have not met their burden to show that they are likely
to prevail on Count V.
5 Six statutes that CBP enforces require the issuance of pre-penalty notices
either by statute or policy: 1) 19 U.S.C. § 1466 (vessel repair penalty); 2) 19
U.S.C. § 1584 (non-narcotic manifest penalty over $1,000); 3) 19 U.S.C. § 1592
(commercial fraud penalty); 4) 19 U.S.C. § 1593a (false drawback penalty); 5)
19 U.S.C. § 1641 (broker penalty); and 6) 19 U.S.C. § 1509(g). See also 19
C.F.R. Part 162, Subpart G; 19 C.F.R. Part 171, Appendices B-C; 19 C.F.R.
Part 163. There is no similar requirement for Jones Act penalties.

Also meritless is Plaintiffs’ claim that the Notices of Penalty violate the
Excessive Fines Clause of the Eighth Amendment. [Dkt. 5 at 52-53] Pursuant
to 46 U.S.C. § 55102, merchandise transported in violation of the Jones Act is
liable to seizure, or “[a]lternatively, an amount equal to the value of the
merchandise ... or the actual cost of the transportation, whichever is greater,
may be recovered from any person transporting the merchandise or causing
the merchandise to be transported.” 46 U.S.C. § 55102(c). Plaintiffs claim KIF’s
penalties to date, issued pursuant to this section, total nearly $25 million. The
Court should reject Plaintiffs’ claim that such penalties violate the Eighth
Amendment.
The Court should not even reach Plaintiffs’ Eighth Amendment claim
because it is premature. This is not a collection action. Plaintiffs state that they
will be expeditiously filing a Petition for Remission or Mitigation with CBP.
[Dkt. 5 at 30] As a result, there is no way to know what penalty CBP will
ultimately seek to collect from Plaintiffs—and therefore no way to judge
whether that unknown penalty is grossly disproportionate to the gravity of
Plaintiffs’ conduct. 6
6Thus, this case is distinguishable from Kalthoff v. Douglas County, upon with
Plaintiffs rely, because in Douglas County the court found that a fine might
violate the Eighth Amendment, and issued an injunction, because the
government entity in that case in many instances was “without any authority

Assuming the Court reaches Plaintiffs’ Eighth Amendment claim, two
questions must generally be addressed: 1) is the statutory provision a fine, i.e.,
does it impose a punishment; and 2) if so, is the fine excessive? Wright v.
Riveland, 219 F.3d 905, 915 (9th Cir. 2000).
Even assuming the proposed penalties are a fine such that the Eighth
Amendment applies, Plaintiffs’ claim is still meritless. In United States v.
Bajakajian, the Supreme Court explained that reviewing courts should give
substantial deference to the broad authority of the legislature to determine an
appropriate punishment. 524 U.S. 321, 337 (1998). A fine is unconstitutionally
excessive under the Eighth Amendment if its amount “is grossly
disproportional to the gravity of the defendant's offense.” Id. at 336-37.
In Bajakajian, the Supreme Court identified the following four factors to
determine whether a punishment is grossly disproportional: (1) the nature and
extent of the underlying offense; (2) whether the underlying offense related to
other illegal activities; (3) whether other penalties may be imposed for the
offense; and (4) the extent of the harm caused by the offense. See United States
v. $100,348 in U.S. Currency, 354 F.3d 1110, 1122 (9th Cir. 2004) (enunciating
the “Bajakajian factors”).
to lower the fines for particular violators’ circumstances.” 2021 WL 3010006,

at *6 (D. Nev. July 15, 2021).

Here, those factors support deferring to the broad authority of Congress
to determine the penalty for a Jones Act offense. Considering the first factor,
Plaintiffs’ evasion of the Jones Act was carried out over many years. That is
one reason their penalties are so high. The largest Jones Act penalty that
Plaintiffs reference as a comparison was a one-time event that the company
disclosed in advance to the Government, and for which the company
unsuccessfully sought a Jones Act waiver. [Dkt. 6-2]; see also Furie Operating
Alaska, LLC v. U.S. Dep't of Homeland Sec., 2013 WL 1628639, at *1-2 (D.
Alaska Apr. 15, 2013) (describing history of the case). By contrast, Plaintiffs’
actions were not a one-time error or oversight, but rather part of 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 second and third factors are usually neutral in civil cases. See
Pimentel v. City of Los Angeles, 974 F.3d 917, 923 (9th Cir. 2020).
The fourth factor weighs heavily against Plaintiffs’ argument. The harm
to the public and the nation from a company evading the requirements of the
Jones Act, especially over a lengthy period of time, are substantial. [Strong
Decl. ¶ 11; Anderson Decl. ¶ 7; Lauer Decl. ¶ 8; Baggen Decl. ¶ 10; Roberts
Decl. ¶¶ 3-6] The Court should defer to Congress’ judgment that the Jones Act
is important enough to warrant severe penalties for violations.


VI. Plaintiffs have not met their burden to show that they are likely
to prevail on Count VI.
Plaintiffs are also unlikely to prevail on Count VI, which asks the Court
to invoke “constitutional tolling.” Plaintiffs’ claim is meritless.
Plaintiffs’ request for an injunction pursuant to the constitutional tolling
doctrine is striking. Not only do they request an injunction to prevent CBP
from temporarily issuing additional Notices of Penalty while the litigation
continues, they also ask the Court to permanently enjoin CBP from ever
collecting penalties related to this case from Plaintiffs, or anyone else, in the
past, or in the future as long as Plaintiffs’ judicial challenge is pending. [Dkt.
5 at 27-29] Essentially, Plaintiffs ask this Court for a get-out-of-jail-free card
for them and everyone they deal with in transporting seafood to Bayside, that
operates to absolve Plaintiffs and those unnamed entities of any consequences
for their illegal conduct in the past or in the future—even if the Court ultimately
agrees with CBP’s interpretation of the Third Proviso. There is no authority for
the Court to enter such an extraordinary injunction.
While Plaintiffs rely heavily on an older Ninth Circuit case to support
their claim, United States v. Pacific Coast European Conference, 451 F.2d 712
(9th Cir. 1971), a more recent case is closer to the facts here. In United States
v. Louisiana-Pac. Corp., the Louisiana–Pacific Corporation (“LP”) was


assessed a $4 million civil penalty by the Federal Trade Commission for
violating a consent order. 967 F.2d 1372, 1374 (9th Cir. 1992). Prior to the
Government’s assessment of the penalties, LP had filed to reopen the consent
order. Id. at 1375. But critically, LP never contested the underlying validity of
the consent order. Id. at 1378. Nevertheless, LP argued that the Government
should not be able to assess penalties during the pendency of its motion to
reopen, invoking the constitutional tolling doctrine and the Pacific Coast
decision that Plaintiffs rely on. Id.
The Ninth Circuit rejected LP’s argument. Relying on a similar case from
the Second Circuit, the court held that because LP was not contesting the
validity of the consent order, but rather was challenging the Government’s
interpretation of the order, constitutional tolling was not appropriate. Id.
The same is true here. Plaintiffs are not challenging the validity of the
Jones Act, of course not. What Plaintiffs are challenging is CBP’s interpretation
of the Third Proviso. Thus, the constitutional doctrine does not apply. Id. 7
7The other cases Plaintiffs rely on are distinguishable for the same reasons.
One case Plaintiffs cite actually directly contradicts their argument. See, e.g.,
Kansas-Nebraska Nat. Gas Co. v. Dep't of Energy, 1979 WL 998, at *13 (D.
Kan. July 31, 1979) (denying a stay of penalties and holding: “When the person
challenging the interpretation or regulation is not in compliance with it, as
plaintiff here is not, risk-free litigation would become risk-free noncompliance
as well.”).

By contrast, in Pacific Coast the defendants challenged the validity of
both the underlying statute, which had been recently enacted, and the order
which gave rise to the penalties in that case. 451 F.2d at 718. It was those
unique circumstances which led the Ninth Circuit to conclude that the
defendants had a “right to test the validity of the Act and Commission order
free from the risk of statutory penalties” Id. at 719. Plaintiffs cite no cases
holding the constitutional tolling doctrine applies whenever a party mounts a
substantial challenge to an agency’s interpretation of a statute, and the
Government is aware of none. 8
VII. Plaintiffs have not established that they are likely to suffer
irreparable harm absent injunctive relief.
Even if Plaintiffs could establish the other elements necessary for an
injunction, the Court should still deny relief because Plaintiffs have not shown
that they are likely to suffer irreparable harm that is causally connected to
CBP’s issuance of the Notices of Penalty. See, e.g., Nat'l Wildlife Fed'n v. Nat'l
8 Oklahoma Operating Co. v. Love, 252 U.S. 331 (1920) provides no support for
Plaintiffs’ argument. That case involved a challenge to a “legislative order,”
which triggered penalties for noncompliance. Id. at 336-38. Plaintiffs are not
challenging a legislative order. They were simply caught violating the Jones
Act by a law enforcement agency. Like all defendants, they will have their day
in court and can argue their innocence. But the Court has no authority to
preemptively absolve Plaintiffs for illegal conduct even if it were to conclude,
at this early stage, that Plaintiffs have reasonable grounds to challenge the
Notices of Penalty.

Marine Fisheries Serv., 886 F.3d 803, 819 (9th Cir. 2018) (“[t]here must be a
‘sufficient causal connection’ between the alleged irreparable harm and the
activity to be enjoined,” such as a “showing that ‘the requested injunction
would forestall’ the irreparable harm....”) (quotations omitted).
Plaintiffs make two arguments in an attempt to satisfy the irreparable
harm element. First, they argue that they have established constitutional
violations and do not need to show irreparable harm. [Dkt. 5 at 54-55] Second,
Plaintiffs argue that they are suffering irreparable harm because their Bayside
Program is “at a complete standstill.” [Dkt. 5 at 55-56] Each argument is
meritless.
A. Plaintiffs’ constitutional claims are meritless.
As explained, each of Plaintiffs’ constitutional claims are meritless. The
Court should not relieve Plaintiffs from having to establish irreparable harm
based on meritless constitutional claims.
B. That Plaintiffs’ illegal Bayside Program is at a standstill is not

irreparable harm.
Plaintiffs argue that their Bayside Program is at a standstill. [Dkt. 5 at
55-56] They say third parties will not participate in the program because they
fear additional penalties. [Id.] They also say if they are not permitted to resume
the Bayside Program there will be hundreds of seafood processor jobs lost.


[Dkt. 5 at 53-54] But Plaintiffs fail to explain why resuming the Bayside
Program is the only way to avoid these alleged harms.
For example, Plaintiffs fail to explain why they have not simply resumed
using the NBSR route that CBP has already sanctioned and which Plaintiffs
used until 2012. NBSR still exists. See https://nbmrailways.com/ Plaintiffs
ceased using NBSR for business reasons, because decided that their costs were
too high. [Dkt. 8 ¶ 15] Plaintiffs provide no information related to any recent
attempts to contact NBSR to inquire about the rail line’s abilities to meet
Plaintiffs’ current transportation needs. Nor do Plaintiffs state that they have
explored any other options for transporting product to the East Coast that does
not involve transiting through the West Coast, which Plaintiffs allege is too
difficult. 9 Plaintiffs have trucks in Bayside. Have they explored any other
Canadian railroads? They don’t say. 10
9 Even on this point, Plaintiffs’ claim is suspect. Plaintiffs appear to speculate

as to the feasibility of other modes or routes of transportation involving the
West Coast but do not demonstrate that they have actually vetted any
potential options.
10 Even if Plaintiffs were to investigate options now that they should have
investigated a month ago, to the extent they discover that it will be difficult to
establish an alternative route in Canada in a matter of days is a problem
Plaintiffs caused by their insistence on utilizing only the low-cost BCR route.
That is not a reason for an injunction.

Thus, Plaintiffs’ irreparable harm, if any, seems to be caused by their
insistence that they use the low-cost BCR route and no other method to keep
the Bayside route intact, and ultimately their insistence on using foreign-
flagged vessels to ship product to Bayside. It cannot be overemphasized that
Plaintiffs voluntarily abandoned a compliant rail arrangement to begin using
the BCR for business reasons—without seeking an advance ruling from CBP
whether that arrangement would comply with the Third Proviso—and now
argue the Court must grant an injunction to allow them to continue using the
BCR due to adverse financial consequences. The Court should not grant an
injunction to save Plaintiffs from incurring costs that they incurred as recently
as 2012, especially since the Court’s injunction would thwart the purposes of
the Jones Act and harm others not parties to this case. That alternative
methods to transport product to Bayside are more costly does not justify an
injunction or continued violations of the Jones Act. 11
VIII. An injunction is not in the public interest.
An injunction is also not in the public interest for several reasons. First,
Plaintiffs seek an injunction that would allow them to break the law while this
11Plaintiffs’ insistence that CBP give them a “safe harbor” for the Bayside
Program [Dkt. 5 at 25] is curious given their assertion in their Motion that
CBP has already approved their program. [Dkt. 5 at 36]

case is pending, and that would permanently absolve them and others for past
violations. Obviously, that is not in the public interest.
Second, an injunction will cause additional harms to law-abiding
companies using coastwise-qualified vessels to transport seafood. Plaintiffs’
scheme has already harmed several U.S.-based shipping companies and an
injunction will continue these harms. [Strong Decl. ¶¶ 9-11; Anderson Decl. ¶
7; Lauer Decl. ¶ 9; Baggen Decl. ¶¶ 10-11; Roberts Decl. ¶¶ 2-8] Moreover, as
indicated by the third-party complaint in this case, Plaintiffs’ scheme also
impacts other U.S. industries, such as the rail and trucking industries, due to
a lack of continued investment. Conversely, denying Plaintiffs’ Motion will
likely result in immediate benefits to those same U.S. companies. [See, e.g.,
Strong Decl. ¶ 13 (stating that since CBP began issuing Notices of Penalty in
this case Coastal’s bookings on coastwise qualified vessels have “increased
substantially”)]
Third, permitting the Bayside Program to continue through an
injunction is contrary to the intent of the Third Proviso. As noted above, in the
Central Vermont decision, the Supreme Court stated that the Third Proviso
was enacted to avoid disturbance of established routes in order to enable U.S.
carriers, participating in such through routes, to retain business that might
otherwise be diverted to foreign-owned vessels. Central Vermont, 294 U.S. at


39. To enter an injunction allowing Plaintiffs’ Bayside Program to continue
would harm the same U.S. companies that the Third Proviso was enacted to
benefit.
Fourth, an injunction would be contrary to the purpose of the Jones Act,
which was enacted, in part, to ensure a vibrant U.S. maritime industry. 46
U.S.C. § 50101. Plaintiffs’ blatant use of the BCR to evade the coastwise-
qualified requirement, rather than investing in the U.S. maritime industry,
speaks to the very core of what the Jones Act was meant to protect. The alleged
“tremendous shortage of coastwise qualified vessels in the United States
merchant fleet” [Dkt. 5 at 15] is directly attributable to conduct like that of
Plaintiffs in this case. [Roberts Decl. ¶¶ 2-8]
Plaintiffs’ conduct is even more confusing because they were already
operating under an exception to the Jones Act, but that was not enough for
them, and they changed their business model to trim even more costs from
their operation, flouting the law in the process. Finally, demonstrating the
important public interest of the Jones Act itself, the Agency is only authorized
to waive the requirements of the Jones Act for reasons that implicate national
defense. 46 U.S.C. § 501(b)(1). Authority to grant this extremely rare waiver is
vested with the Secretary of the Department of Homeland Security. Plaintiffs’
Bayside Program is completely outside the realm of the waiver requirements.


CONCLUSION
For all of these reasons, the Court should deny Plaintiff’s Motion.
RESPECTFULLY SUBMITTED this 10th day of September 2021, in
Anchorage, Alaska.
E. BRYAN WILSON
Acting United States Attorney
s/ Seth M. Beausang
Assistant U.S. Attorney
Attorney for the Defendant
CERTIFICATE OF SERVICE
I hereby certify that on September 10, 2021,
a copy of the foregoing was served electronically on:
David Karl Gross, ABA #9611065

Edward E. McNally, ABA #9203003
Marc E. Kasowitz (Pro Hac Vice)
David J. Abrams (Pro Hac Vice)
David E. Ross (Pro Hac Vice)
Hector Torres (Pro Hac Vice)
Kim Conroy (Pro Hac Vice)
Attorneys for Plaintiffs
s/ Seth M. Beausang
Office of the U.S. Attorney


Government Opposition To Restraining Order

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What was the Plaintiffs' previous method of transporting seafood and why did they change it?

What was the Plaintiffs' previous method of transporting seafood and why did they change it?

What is the 'Bayside Program' and how does CBP view it?

What is the 'Bayside Program' and how does CBP view it?

E.

Attorneys for Defendant

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ALASKA

Prior to 2012, Plaintiffs utilized the New Brunswick Southern Railway

Case 3:21-cv-00198-SLG Document 38 Filed 09/10/21 Page 1 of 43

radically changed their method of transporting seafood. Plaintiffs devised a

scheme whereby instead of using an established Canadian railway that would

a specially-built mini-railtrack, approximately 100 feet in length, that goes

which the product is driven by truck to the United States. According to

qualified vessels to transport their product from Alaska. The potential

for many years.

Case 3:21-cv-00198-SLG Document 38 Filed 09/10/21 Page 2 of 43

reverted to using the NBSR, or another legal method of transportation, and

sought review of CBP’s actions, either in an administrative process or through

an action under the Administrative Procedure Act. Instead, Plaintiffs seek

breathtaking equitable relief on an expedited basis. Specifically, they ask this

conduct for the duration of this litigation—even if the Court ultimately

Plaintiff Kloosterboer International Forwarding LLC (“KIF”) is an

Alaskan wholly-owned subsidiary of Plaintiff Alaska Reefer Management LLC

Case 3:21-cv-00198-SLG Document 38 Filed 09/10/21 Page 3 of 43

States. [Dkt. 1 ¶¶ 21-25]

of loading in Alaska to the port of discharge in Bayside, New Brunswick,

Canada. [Dkt. 1 ¶ 21] KIF is a registered non-vessel operating common carrier

specializing in refrigerated freight services for frozen seafood products

originating in Alaska (i.e., the arrangement of transportation and cold storage

from place of product receipt to its ultimate destination on behalf of shippers),

ARM contracts with non-coastwise-qualified vessels to transport

merchandise to the Bayside Port. [Dkt. 1 ¶ 22] Attempting to take advantage

of non-coastwise-qualified vessels to transport merchandise from Alaska to

Maine, KIF contracts with Kloosterboer Bayside Cold Storage (“KBB”) to

Case 3:21-cv-00198-SLG Document 38 Filed 09/10/21 Page 4 of 43

Alaska to Maine was drastically different.

other shippers, Sunmar Shipping Inc. (“Sunmar”) and American Seafoods

manner of transportation as follows:

Sunmar is an ocean carrier engaged in the transportation of

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Sunmar will charter foreign-flag, non-coastwise-qualified vessels

When the Vessels arrive in New Brunswick, Canada, the products

[Dkt. 6, Ex. 6 at 1-2]

Pacific Railway, and involved rail movements of approximately 34 to 91 miles

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and encouraged for shippers to request administrative rulings from CBP

factual scenarios. [Hebert Decl. ¶ 11]

CBP responded to Sunmar’s request by issuing a Ruling Letter stating

CBP’s conclusion that Sunmar’s proposed manner of transportation would

The Third Proviso simply permits transportation between two

The transportation of frozen fish indirectly between coastwise

Case 3:21-cv-00198-SLG Document 38 Filed 09/10/21 Page 7 of 43

above-described manner of transportation utilizing the NBSR. Specifically,

in the transportation of frozen seafood products from Dutch Harbor to Maine

transportation as follows: “water and rail transportation and related services,

United States” using carrier New Brunswick Southern Railway Company

Limited, issued on August 28, 2006. [Dkt. 7 ¶ 31]