THE CHANGING FACE OF CARRIAGE OF GOODS BY SEA - PART
I
(published November
1998)
One
of the few truisms in life is that rules are constantly changing. The rules
governing The Carriage of Goods by Sea Act are no exception. The proposed amendment
of the Act is currently resting with Congress. Despite Congress' preoccupation
with the President's libido, Senator Hutchinson of Texas (who sponsored this
new legislation) remains committed to the passage of the Act early in 1999.
The following is the first of a two-part article discussing the more important
of the changes.
The proposed new Act builds on the current Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. § 1300 et seq., and the cases decided under it. In many respects it is unchanged from the existing COGSA. In other respects, it attempts to restore U.S. Iaw to the original understanding of the Hague rules by rejecting inconsistent judicial doctrines that have departed from internationally accepted intent. The final result is intended to be both better suited to the modern commercial-maritime world and a legal regime closer to those in force in countries who are the United States' major trading partners. However, the new Act will not result in international uniformity and it will not put an end to all litigation.
Tackle To Tackle Rule
When the Hague rules were originally negotiated, it was thought unnecessary to have them apply preloading and postdischarge. The laws of the shipping and receiving countries were intended to apply to those phases of a shipment. As a result, goods shipped out of the U.S. were subject to both the Harter Act, COGSA, and if delivered inland, a different set of laws in the receiving country. Many carriers have attempted to avoid that problem by bill of lading terms which extend COGSA beyond "tackle to tackle." The new COGSA proposal eliminates tackle to tackle clauses and applies from the time the goods are received by the carrier, or any person authorized by the carrier, to the time they are delivered to the person authorized to receive them.
The proposal expands the scope of COGSA so that it applies to all domestic shipments involving carriage by sea, for some or all of the journey, regardless of whether the bill of lading explicitly invokes COGSA. The intent is that the Act applies whenever "blue water" voyages are included as part of the transport. Purely "brown water" voyages are not covered under the Act. The Harter Act essentially becomes irrelevant to the carriage of goods by sea.
Bills Of Lading
There is some uncertainty under the current Act with respect to what is a "bill of lading" or any similar "document of title." The proposal will apply to all contracts concerning the carriage of goods by sea except charter parties. This is accomplished by amending the definition of what constitutes a contract of carriage. Thus, sea waybills, electronic data interchanges, and whatever might be developed with new technology, is within the definition of a bill of lading under the new Act. Charter parties will be excluded under the proposed Act as they are now under the Hague rules. The parties can still stipulate that COGSA will apply to a charter party if they wish, and COGSA will apply to any bill of lading issued under a charter party that passes into the hands of a third party whose rights are governed by that bill of lading.
Deck Carriage And Live Animals
It is common to carry containers, yachts and heavy lift cargo on decks. Recognizing that carriage of cargo on deck is now not as risky as it was in 1924 when the Hague rules originally came into force, deck cargo is included within the scope of the new Act. The one remaining exception under the Hague rules is the shipment of live animals. That is also excluded under the new COGSA. Such shipments are the only remaining area still governed by the Harter Act.
Navigational Fault Exception
As you know, currently the carrier is not responsible for loss or damage due to the "act, neglect, or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship." This results in odd cases wherein the carrier goes out of its way to prove the negligence of its own employees. The carrier often has the upper hand in such cases.
Carriers were concerned about eliminating the error in navigation exception as they feared it might lead to the loss of other exceptions under COGSA. Nonetheless, the new Act eliminates this exception, but requires the cargo claimant to prove negligence in the navigation or management of the vessel in cases where negligence is an issue. For example, if a ship is run aground on a clear day, and cargo can establish its prima facie case of "good delivery bad outturn," cargo need not prove carrier's negligence for the carrier could not raise the navigation error defense. Only when the carrier can legitimately raise another defense, for example peril of the sea, will it be necessary for the claimant to establish carrier's negligence in the navigation or management of the vessel. The result of this change is that carriers will no longer try to prove that their own employees were negligent.
The second part of the elimination of the navigational fault exception applies where the loss or damage is attributable to the carrier and also to an excepted peril. That second provision overrules the holding of Snhell v. Vallescura (and its oppressive burden of proof requirement for the carrier), and adopts a modern comparative fault approach wherein the court is to determine the relative degree of fault and thereupon apportion damages. If the court concludes that it is impossible to determine the relative degrees of fault, damages are to be divided equally.
The Fire Exception
Unless actual fault and privily are found on the part of the ocean carrier, it is protected by the fire exception of the current COGSA. But the current COGSA did not give that same protection to other entities performing the contract of carriage and which are now included in the new COGSA's broad definition of the word "carrier."
The proposal would extend the fire exception to all those included in its broad definition of "carrier." Under it the contracting carrier could escape liability for a fire caused by the fault of the employees of other independent contractors (such as stevedores, shiprepair yard workers, etc.) even though the contracting carrier generally assumes responsibility for the performance of all the other performing carriers. Further, under the proposal the actual ocean carrier can only claim the exception for a fire on a ship which it has furnished. Subcontractors are not protected when they are negligent.
Package Or Customary Freight Unit Limitation
One of the most contentious issues was the package or customary freight unit provision. Cargo interests have complained for many years that the $500 per package limit is too low, and that it is unfair to apply the limit to the large packages, such as locomotives and yachts, which many ships can now carry.
The proposal adopts the limitation amounts of the Visby amendments to the Hague rules under which there is a limitation for packages weighing less than approximately 735 lbs., or 666.67 SDRs (i.e. "special drawing rights") per package. For example, assuming an exchange rate of one SDR equaling approximately a $1.38, a 735-lb. package would result in a weight limitation of approximately $920. For all other shipments above 735 lbs. Visby established a weight-based limitation of two SDRs per kilogram which, at the same exchange rate, would be $2.75/kilogram or roughly $1.87/lb.
For a while we may find ourselves stumbling over these conversions since we in the U.S. simply are not that familiar with using SDRs or the metric system. These guidelines may help: (1) for packages weighing less than the roughly 735 lbs. (or 333.335 kilograms), the package limitation amount of 666.67 SDRs per package is higher than the weight limitation amount of two SDRs per kilogram; and (2) under the new COGSA the higher limitation amount always applies. The practical effect is the imposition of a weight based limitation when packages weigh more than approximately 735 lbs. The more traditional per package limitation concept, albeit at a higher level, will apply when the packages weigh less than roughly 735 lbs.
As under current law, a shipper may still declare a higher value for the goods on the bill of lading to escape the limitation. The proposal also provides that the shipper and the carrier can establish a different limitation amount by separate agreement. Contrary to current COGSA, the proposal will allow shippers and carriers who enter into service contracts to reduce the carrier's liability below the new COGSA's levels. This is in recognition of the increased competitive market among carriers and the fact that some shippers can now negotiate from an equal, if not superior, bargaining position. However, any such agreement will only bind the parties to the service contract and not, for example, a third party holder of the bill of lading. Conversely, any agreement to increase the carrier's liability would only bind the parties to that service contract.
Finally, the proposed Act attempts to ensure the predictability and certainty of the limitation provision by making it unbreakable. Under the current COGSA some courts have denied the carrier the right to limit liability if it committed an "unreasonable deviation," or failed to give the shipper a "fair opportunity" to declare a higher value. Under the proposal the carrier loses its right to limit liability only when the claimant proves that: (1) the carrier caused the damage intentionally, or acted recklessly and with knowledge that such damage or loss might occur, or (2) from an unreasonable deviation which the carrier knew or should have known would result in loss or damage.
The new COGSA makes clear that an unreasonable deviation is a breach of the carrier's obligations under the Act. It is not, as a number of courts have held, an excuse for the courts to ignore COGSA in its entirety and treat the carrier as an insurer. Thus, if an unreasonable deviation causes loss or damage to cargo, the carrier is liable - but it can still limit its liability under the new Act.
