Carmack Vs. COGSA

Q: I’ve read there’s a case before the Supreme Court on whether carrier liability for a railroad move under an international through bill of lading involving connecting maritime service should be under the Carriage of Goods by Sea Act (COGSA) or the Carmack Amendment to the Interstate Commerce Act.

Why is this important enough for a Supreme Court case? Aren’t the liabilities pretty much the same?

A: Not hardly.

Never mind the reasons — they go deep into the history of the different forms of transportation and the varying ways in which government has chosen to deal with them. The two regimes could scarcely be more disparate. And lots of folks are hanging on this decision, which I’ll make no effort to predict but which will have a major impact on commerce of the future.

Briefly, COGSA — the U.S. codification of the international Hague Rules treaty governing international maritime service — places severe limits on carrier liability for in-transit loss and damage. Not only does it set strict limits on monetary liability, but it also excuses the carrier for numerous failings.

As perhaps the most extreme illustration, the captain of a vessel may get blind drunk and sail the ship onto a reef, where it founders, and the carrier won’t be liable for a penny of the value of the cargo lost. And it goes on from there.

Under Carmack, however — still incorporated in contemporary law at 49 U.S.C. Sections 11706 and 14706 (rail and motor carriers, respectively) — the carrier’s excuses are much more limited, and there are no dollar limits on the amount of liability.

Now, admittedly, Carmack has been rather emasculated by some recent court rulings. Some courts have held that rail and motor carriers may restrict their liability by means of unilateral tariff provisions or other such means without the express agreement of their shippers.

But other courts have rejected such liability limits. And either way, under the law, the domestic U.S. surface transportation liability standard is the strictest, and most comprehensive, of any country. That is why this case is so important.

International through bills of lading are a comparative newcomer to the transportation scene. Prior to deregulatory legislation of the 1980s, they simply weren’t available; surface land transportation was surface land transportation, maritime transportation was maritime transportation (the same with air transportation), and while the twain might conjoin end-to-end, they were, for regulatory purposes, mutually incompatible; each leg of the service, however operationally connected, was a separate and independent entity.

These days, though, with regulation largely eliminated, such things are not only allowed, but they’re also increasingly common. And thus, we have a Supreme Court case on an issue that hasn’t previously been (at least fully) decided in law: Is it the mode of movement or the through international bill of lading contract that governs?

Specifically, if the bill of lading shows a maritime operator as “carrier,” but the actual segment of the move on which the loss or damage occurred was via rail, is carrier liability to be construed under the tighter standards of Carmack or the much looser ones of COGSA?

As I said, I won’t try to predict the ruling. I will, however, say this: If the high court holds that Carmack applies, there’s going to be a screeching halt to international through bills covering surface domestic movements in the U.S., as well.

I mentioned that Carmack is much more stringent than the laws of other countries (including even Britain from which we inherited the stringency of Carmack). No ocean carrier, nor any maritime-oriented third party, will accept that standard for its shipments to and from this country. They’ll instead cut off “continuously billed” service at the U.S. border, and oblige shippers to make their own transportation arrangements on U.S. soil.

This won’t be all that crippling. It’s the way international commerce was conducted (from a legal standpoint) until quite recent years. Everybody lived with it before; they can live with it again. It’s not even all that inconvenient.

So whichever way the Supreme Court decides, it’s not the end of the world (no matter how proponents on one side of the issue or the other portray it publicly). Through shipments existed before, and they’ll continue to exist. All the court’s ruling will affect is the legalities involved in the interchange.

Well, the decision will certainly affect those few shippers who can demonstrate that their loss/damage occurred on the inland movement. You win some, you lose some — and some are rained out.

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, Contact him to order the 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping.

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