A MOVE THAT'S BAD FOR INTERMEDIARIES

A MOVE THAT'S BAD FOR INTERMEDIARIES

The draft law proposed to replace the Carriage of Goods by Sea Act of 1936 is said to be a ''carefully crafted compromise'' among many groups.

When lawmaking becomes dealmaking, someone inevitably gets the short end of the bargain. Such is the case for the ocean transportation intermediaries - non-vessel-operating common carriers and freight forwarders.The proposed new Cogsa would be a multimodal transport law that covers inland point to inland point (door-to-door contracts of carriage).

It adopts the tackle-to-tackle Hague-Visby liability limitations of two special drawing rights (US$2.75) per kilogram or 666.67 SDR (US$917) per package, which ever is higher, and it extends those limitations to inland movement. (The current COGSA applies tackle-to-tackle only, and the maximum liabililty for loss and damages is $500 per package.)

The creation of a new liability regime for inland loss and damages outside U.S. territory conflicts with foreign laws. For example, in Europe the CMR Convention sets a maximum liability limit of 8.33 SDR per kilo for motor carriage. In Canada, the laws set a limit of $4.41 per kilo. Neither law has a per-package limititation.

So the U.S. Senate's surface transportation and merchant marine subcommittee, reflecting the view of the American Maritime Law Association, would cleverly neutralize the conflict by exempting rail and motor carriers from the proposed multimodal transport law.

Also, since most ocean carriers operate intermodal services involving rail and truck carriage under their combined transport bills of lading, the AMLA would grant them, too, an exemption from liability - but only through confidential service contracts under the Ocean Shipping Reform Act. NVOCCs are not entitled to make service contracts with shippers under OSRA.

Meanwhile, the proposal creates a new definition called ''performing carrier'': ''a person that performs, undertakes to perform, or procures to be performed any of a contracting carrier's responsibilities under a contract of carriage; but only to the extent that the person acts, either directly or indirectly, at the request of, or under the supervision or control of a contracting carrier, regardless of whether that person is a party to, identified in, or has legal responsibility under the contract of carriage.''

Since all NVOCCs and freight forwarders who issue contracts of carriage in their own name are contracting carriers, this cleverly worded definition basically would mean that the releasing agent, subcontractors (e.g. co-loaders, warehouses) of the NVOCC or freight forwarders are also deemed carriers and are therefore subject to lawsuits in contract, jointly and severally, with the principal contracting carrier.

While cargo interests may laud this proposed multimodal transport law, the unfairness is that actual carriers are virtually exempted from the law - while ''performing carriers'' will be facing an increased burden of liability that they cannot fully recover from the actual carriers due to the different liability regimes.

The proposed law also would grant plaintiffs the right to sue in the United States regardless of foreign jurisdiction clauses. And that is not good news for foreign NVOCCs and freight forwarders who have security bonds with the Federal Maritime Commission.