By R. Bruce Striegler

“So it’s a really interesting project, in the fact that we have what is essentially a U.S. ferry terminal being built on Canadian land in Canadian waters.” The remark, contained in published reports, came from a spokesperson for the Alaska Marine Highway System, and was made only days before the State of Alaska cancelled plans to seek construction bids for the replacement of an existing terminal in Prince Rupert. A 50-year lease, signed in 2013, between the Port of Prince Rupert and the Alaska Department of Highways, operator of the ferry, included provisions for construction of a new terminal. The Alaska Marine Highway has been operating from the current facility since 1963.

What became an international dispute, is centered on “Buy America” requirements for steel, iron and manufactured products used in projects funded by the U.S. Federal Highway Administration. The request for proposals from the State of Alaska are specific that the project, estimated to cost as much as US$15 million, must be built under the conditions of the American legislation. Canadian companies are able to bid on construction and goods or services, and it was expected jobs would skew to Canadian workers. Nevertheless, some have questioned how many Canadian companies would bid on a project that could catch them between the contractual requirements of U.S. steel and other materials, and potential fines from Canadian authorities for using those supplies.

In November 2014. B.C. Premier Christie Clark told media, “This is our country, it is our land, it is our port, it is our laws and the Americans are building a facility here in Canada, in our province, where we aren’t allowed to have a chance to supply or fabricate the steel. That’s just wrong.” Clark called for the federal government to take action. In response, International Trade Minister Ed Fast said the Canadian government would invoke the Foreign Extraterritorial Measures Act (FEMA) to keep bidders on the project from agreeing to use only U.S.-made steel as mandated under American purchasing requirements. He then took the unusual step of signing a legal order to prevent Alaska from imposing “Buy American” policies on the ferry terminal work in Prince Rupert. A conviction under FEMA could mean a fine of up to $1.5 million for a corporation, or up to $150,000 for an individual, as well as up to five years behind bars.

U.S. protectionist provisions unacceptable

Fast is quoted, saying, “We have been clear: The application of protectionist Buy America provisions on Canadian soil is unacceptable and an affront to Canadian sovereignty. We are disappointed by the State of Alaska’s decision not to seek a waiver from the U.S. Department of Transportation regarding these (Buy America) provisions. A waiver would have resolved this issue in a manner that would have allowed this project to move forward without delay.” FEMA has only been used once before, in the early 1990s, when the U.S. government tried to prevent the subsidiaries of U.S. companies in Canada from engaging in trade and commerce with Cuba.

Fast said the situation, coming so quickly following a similar dispute over a bridge in Morrison, Colo., is another example of how illogical and counterproductive it is to try to segregate economies. In that situation, the U.S. government reversed a decision in October, saying it wouldn’t force the small Colorado town of Morrison to take apart a bridge that had been built with a small amount of American steel manufactured in a Canadian plant. “The extraterritorial application of these protectionist restrictions on trade within Canada by a foreign government is unreasonable.”

Alaska Marine Highway is a State-owned ferry system operating 11 vessels year-round to 35 port communities along a scenic 3,500-mile route. It connects Alaska to Washington State with a stop at Prince Rupert. Some 16,000 travellers and 6,000 vehicles used the Alaska ferry service in and out of Prince Rupert last year. As well, the Alaskans are paying $3.3 million on the 50-year lease for the facility, plus $175,000 a year in property taxes. A local firm has the $280,000 annual contract to handle ticketing, cleaning and other work. A spokesperson for Alaska Marine Highway said if the cross-border dispute causes an “inordinate delay,” the Alaskan government is prepared to continue its ferry service using existing facilities in Prince Rupert for the next several years, or until the feud is sorted out.