THE CHANGING FACE OF CARRIAGE OF GOODS BY SEA - PART
II
(published August 1999)
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This is the second of a two part article discussing the more important proposed changes to the United States Carriage of Goods By Sea Act, 46 U.S.C. § 1300 et seq ("COGSA"). The last article, published in Issue 25 of Cruise & Carrier Legal Update, discussed the proposed changes regarding: the Tackle to Tackle Rule; Bills of Lading; Deck Carriage; the Navigational Fault Exception; the Fire Exception; and, Package or Customary Freight Unit Limitation. This article covers the remaining significant issues: |
HIMALAYA CLAUSE
The Himalaya clause has been placed in most bills of lading to extend the carrier's right to limit liability, and its defenses to liability, to its agents - such as terminal operators, inland carriers, and stevedores. Himalaya clauses have generally been upheld by the courts although there has been litigation over how clearly drafted the clauses must be and how far they reach under certain factual situations. The new COGSA would make Himalaya clauses unnecessary by extending the carrier's limitations and defenses to those who perform any of the carrier's functions under the contract of carriage via the expanded definition of the word "carrier" in the new Act. Thus, virtually anyone who could have been protected under a well drafted Himalaya clause will be protected under the new COGSA. The trade off for this, however, is that under the new Act, cargo claimants are entitled to sue those other parties, (i.e. the inland carriers or the terminal operators) directly in federal court. The one exception to this applies to interstate motor or rail carriers while performing their services, unless they are the contracting carriers. For example, if a railroad damages property while acting as a "performing carrier" for the inland portion of a multimodal shipment under an ocean carrier's bill of lading, the cargo claimant may not sue the railroad under the proposed COGSA but rather under other applicable law. The cargo claimant would still have COGSA remedies against the contracting carrier and the rail or motor carriers to the extent that they were not performing transportation services.
TRYING TO AVOID COGSA - JURISDICTION
In the past, cargo claimants attempted to avoid carriers' limitations and defenses by filing suit under theories of bailment, tort, or in state court invoking state law. Similarly, carriers have attempted to rely on defenses in their bills of lading even though those defenses were prohibited by COGSA. The drafters of the proposal have thwarted these efforts by providing that the new COGSA will govern the rights and liabilities of the parties regardless of the alleged form of the action, or the chosen forum. Thus, whether suit is brought under contract, tort, bailment or some state law, if the case could have been brought under the new COGSA, that law will govern. Inconsistent state law will be preempted and distinctions between contract and tort will be irrelevant.
NUMBER QUANTITY AND WEIGHT
Under current COGSA the carrier is required to issue a bill of lading if the shipper desires one. It must include several items such as the number of packages or pieces, or the quantity or the weight of the cargo. Current COGSA, however, excuses the carrier from that obligation when there is no reasonable means of checking the accuracy of the statement. This has caused problems with respect to containerized cargo. Often it is impossible for the carrier to verify the number or quantity in the container unless it opens it. Opening a container leads to other problems and potential liability to the carrier. Although the carrier is entitled to omit any reference to number, quantity or weight from the bill of lading, the shipper insists on that information appearing in a bill of lading because letter of credit transactions often require that information. Thus, to give itself some wiggle room the carrier has often provided those numbers and weight accompanied by the statements "said to contain" or "shipper's load and count." This has lead to a number of litigated cases over whether the carrier had the ability to weigh containers.
In an effort to avoid these problems, the new Act modifies the current subsection 3(3) and adds two new sections covering containerized and non-containerized shipments. For non-containerized shipments the carrier is permitted to qualify the description of the goods with respect to marks, number, quantity or weight by statements such as "said to contain" and "shipper's weight load & count," when it can prove that there is no reasonable means of checking the information provided by the shipper. A properly qualified statement relieves the carrier of the responsibility for the accuracy of the statement. The new Act provides that a statement of weight, for example, properly qualified, shall not constitute prima facia evidence that the goods were received, nor does the statement prevent the carrier from proving that it did not receive the goods as described in the bill of lading.
Thus, the claimant is forced to either obtain independent evidence that the carrier had a reasonable means of checking the information provided by the shipper, or that the carrier had in fact received the number or weight of the goods described in the bill of lading. If the cargo interests can prove that the carrier was not acting in good faith when it issued the contract than the carrier can be liable.
For containerized cargo the new Act has a different rule pertaining to weight, and a different rule covering marks, numbers and quantity information. With respect to marks, numbers and quantity, the carrier can qualify the information received by inserting a phrase such as "said to contain" or "shipper's load & count" when it receives a loaded, sealed container. The cargo interests will no longer be able to argue that the carrier had an opportunity to open the container to inspect it. The single exception to this rule is when the carrier has actually verified the contents of the container.
The carrier will be able to qualify weight information, and thereby avoid liability for shortages based on weight, when the shipper provides a loaded and sealed container and the carrier did not in fact weigh the container. To do so, the bill of lading must expressly state that the carrier did not weigh the container. Further, the carrier must not have agreed in writing to weigh the container before receiving it. If it did, the carrier cannot qualify the weight.
If the carrier delivers the container in a damaged condition or if the seal is compromised, none of the qualifying statements regarding weight, marks, number or quantity help the carrier. In other words, the qualifying language on the bills of lading will only assist the carrier if it delivers the same container that it received from the shipper with the seal intact. If the container is delivered damaged or with the seal compromised then the claimant can rely on the description of the cargo on the bill of lading, and the qualifying statement will be ignored.
FORUM SELECTION CLAUSES
The Supreme Court in its decision in Vimar Seguros Y Reaseguros S.A.Vv. M/V SKY REEFER, 515 US 528, 115 S.Ct. 2322, 132 L. Ed. 2d 462, 1995 AMC 1817 (1995) applied the rule that forum selection clauses are generally enforceable. However, in the discussions over the new COGSA, cargo interests prevailed over carrier interests and the SKY REEFER decision will no longer be the law. Under the new COGSA, if the cargo was to be loaded, discharged, received or delivered in the U.S., or if that was the intended result, then a foreign forum selection clause is null and void and of no effect. The parties, however, are free to agree on foreign litigation or arbitration after the claim has arisen.
Thus, foreign arbitration clauses in bills of lading will not be enforced under the new COGSA. However if one party to the bill of lading with a foreign arbitration clause wants to arbitrate in the U.S., the court can order U.S. arbitration if such a request is made in a timely manner. Finally, if suit is brought in the U.S. only to obtain jurisdiction over the ship, the validity of the forum selection clause will be determined by the general maritime law and not the new COGSA.
THE POMERENE ACT
The new COGSA would have required that the Pomerene Act be changed and updated. Instead the drafters of the new Act decided instead to incorporate the affected provisions of the Pomerene Act into the new COGSA. Thus, 16 amended subsections of section 13 of the Pomerene Act are now located in subsection 3(4)(b) of the new COGSA. These changes concern the expanded scope of COGSA beyond tackle to tackle and to all "contracts of carriage - not just bills of lading. Thus, the Pomerene Act remains in full force and effect except to the extent that it is inconsistent with the new COGSA.