Ferry project cancelled after Buy American controversy - Updated

Alaska officials have abruptly cancelled a ferry project after Canada’s ministry of trade refused to budge on blocking Buy American policies.

The federal government put its foot down, signing a legal order to halt Buy American policy requiring only American steel and iron be used on the Prince Rupert, B.C. ferry terminal project.

Patricia Eckert, associate director for international trade in the Alaska governor’s office, said the State of Alaska Department of Transportation & Public Facilities project is cancelled for the time being.

Eckert added that the department will maintain the obligation on federal funds for this project.

"As we have said before, the department can maintain the Alaska Marine Highway System (AMHS) Prince Rupert operations at normal standards over the next several years until this is sorted out," she said.

Eckert also stressed that Canadian construction firms were never excluded from the bidding process.

"We anticipated Canadian firms would have been highly competitive," she said. "The Buy American requirement for the Prince Rupert project applies to the steel and iron and not to labour."

The project is part a 50-year lease agreement made in 2013 between the Alaska Department of Highways and the Prince Rupert Port Authority.

The terminal and ferry service between Alaska and Prince Rupert has been operated by the Alaska Marine Highway for more than half a century.

The project – estimated to cost $10 million to $20 million – is funded 91 per cent by the U.S. federal government and 9 per cent by the State of Alaska.

The Canadian federal government asked Alaska to seek a waiver on the requirements from the U.S. Department of Transportation, which Governor Bill Walker declined to do.

"We are disappointed by the State of Alaska’s decision not to seek a waiver from the U.S. Department of Transportation regarding these provisions," read a statement by Ed Fast, minister of international trade. "A waiver would have resolved this issue in a manner that would have allowed this project to move forward without delay.

Fast added that the ministry believes the application of protectionist Buy America provisions on Canadian soil is "unacceptable and an affront to Canadian sovereignty."

In response, he signed an order under the Foreign Extraterritorial Measures Act (FEMA) to prevent the protectionist policies.

Just hours before the state announced the project was cancelled, Eckert had said that the bid offering process would proceed.

Some Canadian steel industry advocates applauded the government’s actions.

"This sends a strong message to our trading partners around the world that Canadians and the Canadian government will stand up to any threats to our sovereignty, our economy and Canadian jobs", said Ed Whalen, president of the Canadian Institute of Steel Construction.

Whalen added that the Canadian steel industry has been strongly advocating for free, fair and reciprocal trade.

According to the ministry’s legal order, the Foreign Extraterritorial Measures Act permits the Attorney General of Canada, with the concurrence of the minister of foreign affairs, to issue an order to block the application in Canada of foreign measures that have had or will likely have an adverse effect on significant Canadian interests in relation to international trade or commerce involving business carried on in whole or in part in Canada, or that have otherwise infringed or are likely to infringe Canadian sovereignty.

Violations of the legal order would be investigated by the RCMP.

A fine up of to $1.5 million could be issued to a corporation or $150,000 to an individual. The person could also face up to five years in prison.

To see a previous story about the Canadian federal government’s reaction to the Buy American policies, click here.