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The state of Alaska on Wednesday canceled bids for a ferry terminal update that the Canadian government threatened to block because of a dispute over the use of American steel.

JUNEAU, Alaska — The state of Alaska on Wednesday canceled bids for a ferry terminal update that the Canadian government threatened to block because of a dispute over the use of American steel.

The Canadian government has issued an order Monday that would have blocked the state from doing the project on land it leases at Prince Rupert, British Columbia, unless a resolution was reached.

The dispute centered on "Buy America" requirements for steel, iron and manufactured products used in projects funded by the Federal Highway Administration.

Much of the construction funding for the project was to come from the federal agency, with the rest coming from the state.

Canadian officials called the requirement to only use U.S. steel on Canadian soil unacceptable. They suggested that the state seek a waiver from the federal government of the "Buy America" provision, but Gov. Bill Walker said he had not seen a need for one. Another option would have been for the state to fund the project itself, but Alaska faces multibillion-dollar budget deficits because of the fall in oil prices.

It was not immediately clear what Wednesday's action will mean for the project in the long run. The Prince Rupert terminal is part of the Alaska Marine Highway System.

A state transportation department spokesman referred calls to Patricia Eckert, the associate director for international trade within the governor's office. She did not immediately return an email message sent after business hours.