Q&A: Liability: Himalaya Clause and Effect

Q: We set up with an ocean carrier, through an international freight forwarder, to import a load of goods from a point in inland Europe to our plant in the U.S. Midwest.

The shipment made it with no problems to the U.S. arrival port. The final leg involved a move by truck from the port to our plant, and that’s when there was a problem. The trucker, who was selected by the ocean carrier or our international forwarder (I’m not sure which), had a wreck and the goods were destroyed. We filed a claim with the motor carrier, of course.

The motor carrier, however, has declined our claim. It doesn’t dispute the loss happened because of the wreck, but it says it isn’t liable to us because the goods were still moving under a through international bill of lading. It tells us we need to refile our claim with the ocean carrier.

We certainly don’t want to do that. My understanding is that ocean carriers have much more limited liability under the Carriage of Goods by Sea Act. Further, the loss didn’t occur in the ocean carrier’s custody; it was when the motor carrier had the shipment. My reading of the law, 49 U.S.C. Section 14706(a), is that a regulated motor carrier is “liable to the person entitled to recover under the receipt or bill of lading” — that’s us — “for the actual loss or injury to the property.”

I’ve already contacted a lawyer, who says he thinks we have a case. But our lawyer admits he’s not very familiar with transportation law, so I’m asking you: Do we have a good case?

 

A: Without the actual documents in front of me, I’m hesitant to give you a firm opinion, but from the bare facts you’ve given me, I don’t like your position.

This sounds basically like another of those “Himalaya Clause” matters that seem to crop up with increasing frequency in these days of through international transportation arrangements. In general, both the wording of the clause itself (to be found in your maritime bill of lading) and the courts’ construction of it agree with what this motor carrier has told you.

Despite the name, a Himalaya Clause has nothing to do with those mountains in Asia. The designation derives from the name of the vessel in an early legal case involving such a contract provision. Because the clause has become fairly standard, it’s referred to by that name.

The clause amounts to an agreement between shipper and carrier that, on a through ocean movement extending beyond port limits, the same liability regime — COGSA — will cover the whole thing, including any overland portion. Usually, the rubric is that the overland carrier(s) is (are) acting in an agency capacity for the maritime carrier.

That agreement is deemed to override application of the Carmack Amendment, the provision of law you quoted. Thus, the motor carrier has, for this movement, only the same liability COGSA imposes on the maritime carrier, instead of the normal liability it would have for a point-to-point haul.

Now, this is only so because of the through bill. Had you arranged independently for the ocean and inland portions of the move, with each carrier handling its leg under a separate bill of lading, the different legal regimes applicable to each mode would have applied to the different legs. That is, the motor carrier would be liable under Carmack, and COGSA’s reach would have ended as soon as the maritime carrier relinquished custody of the goods at the port of arrival.

But you didn’t do things that way. So instead of this being three separate and independent movements — one from the inland European origin to the debarkation port there, a second port-to-port by sea, and a third from the U.S. arrival port to the inland destination — it was a single coordinated move both operationally and for purposes of the law. That multiple carriers of different modes handled the shipment isn’t relevant here under Himalaya Clause standards.

Tell your lawyer to check out Kawasaki Kisen Kaisha v. Regal-Beloit Corp., 130 S.Ct. 2433 (2010), which is probably as definitive a judicial opinion on this issue as has been handed down in recent years. Again, I can’t say for certain that your case is a loser, because I haven’t seen the shipping documents, but it sure sounds to me like this fits the Himalaya Clause model.

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, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.

 

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