The saga of fishing vessel AMERICA’s FINEST continues

by Michael Hansen, Hawaii Shippers Council, June 12, 2017

The Settle Times published on June 3, 2017, the news article, “New Anacortes-built trawler could be grounded by old law, endangering two local firms,” describing the situation of the fishing vessel (F/V) AMERICA’S FISEST currently under construction at Dakota Creek Industries Inc. Anacortes, Washington State, shipyard.

We previously reported on this matter on May 25th covering an article published on May 22nd by Seafood News. However, as additional information has become available, it’s worthwhile revisiting the matter. In particular, as the more recent reporting indicates how vulnerable the two companies involved, Dakota Creek shipyard building the AMERICSA’s FIONEST, and, Fishermen’s Finest Inc., the owners of the vessel, to bankruptcy as a result of the shipyard’s error and failure of the vessel to qualify for entry into U.S. fishery.

The Seattle Times article (and the previous article from Fishing News) refers to the shipyard’s error being a violation of the Jones Act, which in a strict sense is not correct. However, the usage of Jones Act was to use a term that would be more familiar with general readers than the more proper reference to the coastwise laws of the U.S. as they apply to the fishery trade.

The shipyard’s attorney, Jonathan K. Waldron, Partner, Blank Rome LLP, made available his briefing paper on the matter, and we obtained a copy the special legislation commonly known as a “ship bill” to grant the vessel coastwise privileges. Both those refer to two sections in Title 46 Shipping, Chapter 121, Documentation of vessels, which require among other things that the vessels be built in the U.S. to be eligible for the coastwise trade or fishery trade. Those sections are 46 USC 12112, Coastwise endorsement, and 46 USC 12113, Fishery endorsement.

At issue is that the shipyard ordered that certain of the steel plate used to construct the hull was pre-formed in the Netherlands which exceeded the allowable limit of 1.5% by steel weight for hull and superstructure materials to be worked outside the U.S. Attorney Waldron corrected the published articles and informed us by email that the steel plate pre-formed was actually 10% of the total steel weight (s opposed to the 7% previously reported). All the steel plate used to construct the vessel was imported.

Waldron in his briefing paper explained how the U.S. Coast Guard applies the law and regulations:

Under Coast Guard interpretations, basic hull materials of foreign origin, such as steel sheets, plates, beams, and bars, may be used in a vessel constructed in the United States without affecting its U.S.-build status. These basic materials, however, may become disqualifying “fabricated major components” if they are subjected to any drilling, cutting, shaping, forming, or processing, no matter how minor, before coming to the United States and regardless of whether the plates are subject to further processing at a U.S. Shipyard.

U.S. Representative Rick Larsen (D-WA), whose district includes Anacortes, introduced an amendment to the Coast Guard Authorization Act of 2017, which would grant the AMERICA’s FINEST coastwise privileges. That amendment was approved by the House Committee on Transportation and Infrastructure, which must now go to the U.S. Senate.

Key excerpts:

The shipyard’s mistake — using too much foreign steel that was modified before coming into the U.S. — could mean the advanced, 264-foot ship must be sold abroad at a big loss, according to advocates seeking a waiver of federal rules to salvage the big investment.

The largest, most modern American-made trawler built in nearly three decades may be barred from fishing in U.S. waters, with financial repercussions to its local builder and buyer “so draconian that neither company may survive.”

That’s the scenario painted by the law firm that Anacortes shipyard Dakota Creek Industries has hired to seek a rare waiver from a century-old law called the Jones Act, which they acknowledge wasn’t properly followed when the shipyard began building the state-of-the art, $75 million vessel America’s Finest.

The shipyard’s mistake — using too much foreign steel that was modified before coming into the U.S. — could mean the advanced ship must be sold abroad at a big loss.

According to the law firm’s May 16 briefing paper on the situation, that could “eliminate two Washington companies (and) more than 500 highly paid and skilled trade jobs.”

Fishermen’s Finest, a fishing company based in Anacortes and Kirkland, hoped the 264-foot catcher processor would represent a big upgrade from its two 40-year-old vessels, and help make the fishing industry here safer and more sustainable.

But as it nears completion, the vessel threatens to sink both the fishing company and the shipbuilder.

Charlie Papavizas, a Jones Act expert at the Winston & Strawn law firm in Washington, D.C., who’s not involved with the case, said that without a waiver there are no good options for the companies.

It has already spent $62 million of the estimated $75 million cost of the ship, which is 86 percent complete and expected to be ready in November.

In order to fish or transport goods and people within U.S. waters, a ship must be assembled in the U.S. by American workers, and all major parts of the hull must be made with American materials. 
Steel plates, beams or bars can be bought abroad and still qualify, but work on these materials must be done in an American shipyard.

“A foreign worker drilling a single hole, or making a single bend on a 2-ton steel plate will automatically disqualify the entire weight of that plate” as American-made under the Jones Act, no matter how much additional work is done on it in the U.S., according to the briefing paper by Jon Waldron, a maritime lawyer at Blank Rome in Washington, D.C.

Such foreign-made parts are limited to 1.5 percent of a ship’s weight, under Coast Guard rules.

But because Dakota Creek had parts of the hull cut and bent in Holland before being processed in the U.S., America’s Finest has about 10 percent foreign parts by weight, according to Blank Rome. 
Waldron’s brief says the actual value of the foreign work on the steel was only $275,000, or 0.4 percent of the ship’s cost — but “because the foreign work was done on many different plates, all those plates are disqualified.”

Jones Act waivers have been granted before, but a situation like this is extremely rare, said Papavizas, the independent attorney.

The lobbying effort has gained support from U.S. Rep. Rick Larsen, whose district includes Anacortes. The House transportation and infrastructure committee on May 24 approved a Larsen-sponsored amendment to the Coast Guard Authorization Act of 2017 that would allow an exemption for America’s Finest.

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RELATED: US-built fish-boat needs congressional Jones Act waiver