Q: We’re a maritime freight forwarder and will soon be handling overseas shipments, primarily from China. We have a question regarding the Himalaya Clause and how it may affect our operations. The 2010 Supreme Court decision in Kawasaki Kisen Kaisha v. Regal-Beloit Corp. 130 S.Ct. 2433, affirmed that the Carriage of Goods by Sea Act overrides the Carmack Amendment (to the Interstate Commerce Act) for shipments originating in a foreign country if the shipment moves under a through bill of lading.
Would this hold true if the through bill originated in the U.S.? Common sense would seem to say yes, but we would like your thoughts on this issue.
A: I’d agree with your assessment of what “common sense” might tell you. But there’s a reason lawyers are called “lawyers,” and not “common sense practitioners.” Common sense and the law have at best only a nodding acquaintance with one another.
Regal-Beloit says that if the through international multimodal bill of lading is subject to a Himalaya Clause — specifically extending maritime COGSA liability to the inland portion of the transportation on shipments entering the U.S. from abroad — that clause supersedes Carmack Amendment liability that would otherwise apply. That is, the connecting rail or motor carrier is only subject to the same liability for loss or damage as an ocean carrier would be, which is much more limited.
You might well think that this would be so in reverse, as well. Unfortunately, this old saw applies only if the two birds differ only in gender. In law, however, it seems that in this instance they are also two different species of waterfowl.
At least, so said the only court to have reviewed such a case post-Regal-Beloit (at least, so far as I’m aware). And that court had a fairly sensible reason — in legal terms, anyway — for its conclusion, although a number of attorneys who have commented on the ruling seem to, as is not uncommon in the legal profession, disagree vociferously.
In American Home Assurance Co. v. Panalpina, No. 07 CV 10 947, 2011 U.S. Dist. LEXIS 16677, the U.S. district court for the southern district of New York found that injuries sustained by a shipper as a result of a derailment involving a shipment moving on a through bill of lading to a U.S. port for export to a foreign destination were subject to Carmack liability notwithstanding a Himalaya Clause in the through bill. The court distinguished that situation from Regal-Beloit because the shipment originated in this country.
The court’s reasoning may seem a bit convoluted and technical to the non-lawyer, but it makes perfect sense if you think about. It said the railroad, which originated the shipment, was therefore the “receiving carrier” in the sense that it received the goods from the shipper. Carmack, by its terms, imposes on the receiving carrier a duty to issue a bill of lading, which bill of lading must by the same law incorporate Carmack liability terms. And there is no provision in Carmack that would allow application of a Himalaya Clause substituting COGSA liability standards instead.
There’s also something of a “common sense” argument in support of this position. The purpose of a Himalaya Clause is, after all, to avoid the commercial inconvenience of having a separate liability regime attached to the tail end of a lengthy movement billed from origin to destination in a unified fashion, the majority of which movement was by water. Such was the case in Regal-Beloit, where the shipment originated abroad.
In Panalpina, however, no water movement had commenced — and, in fact, because of the derailment, never took place — and, accordingly, there was no similar discrepancy. The circumstance was no different than if the sole transportation service involved had been by rail, irrespective of what was intended to happen to the shipment after it had been delivered to the port.
To be sure, a single unpublished decision of a lower court is scarcely dispositive of the issue. But some weight must be attached to the fact that this is the first ruling following Regal-Beloit to deal with the question. Certainly, despite the reservations that many lawyers in the field may have about its applicability, at least Panalpina stands for the proposition that different standards may apply in the case of imported and exported shipments.
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.