1. The Carriage of Goods and the Liability of Air and Sea Carriers
Chapter 6 1
© 2002 West/Thomson Learning

2. Bailments & Common Carriers
Bailment: legal concept where owner of property transfers possession to bailee, but retains ownership
Shipper is bailor
Carrier is bailee
Common Carrier: carrier contracting with public for transport services
Contract of Carriage: contract btwn shipper and carrier – in transport documents

3. Bailment Law
Bailee (Carrier) must return property to bailor in same condition as it was received
Carriers liable for damage or loss to cargo, except caused by:
Acts of God
Acts of public enemy or terrorist
Acts of govt. intervention or court order
Acts of shipper
Inherent characteristics of cargo that cause its destruction
Carrier may use disclaimers, but legal limitations on use

4. Liability of International Air Carriers: Warsaw Convention
General Principle: Air Carrier is presumptively liable for all damage to cargo UNLESS the airline shows:
Not at fault or negligent
Shipper was negligent
Air Carrier liable for death or bodily injury resulting from accident aboard aircraft or in boarding or disembarking
Accident: event that is peculiar risk of air travel and “external” to passenger – Olympic Airways v. Husain
Warsaw Convention is exclusive remedy – El Al Israel Airlines v Tseng 2

5. Warsaw Convention Provisions (As Amended)
Limits liability of Air Carrier
For death or bodily injury, 1999 Montreal Convention abolished $75K limit; carrier strictly liable for 100K SDR (Subject to contributory negligence)
Carrier liable for damages beyond 100K SDR unless unless:
Not due to negligence of airline, employees or agents
Due to negligence or wrongful acts of 3rd parties 3

6. Warsaw Convention Provisions (As Amended)
Liability for Cargo Loss or Damage
Protocol 4 of 1999: Carrier liable unless due to:
Inherent defect, quality or vice of cargo
Defective packaging not by carrier
Act of war or armed conflict
Act of public authority
Contributory negligence of shipper
Cargo: Liability limited to 17 SDR per Kg unless shipper declares higher value ( and pays additional fee if required)
Limitation doesn’t apply if damage due to intentional act or act done recklessly
Baggage: Liability limited to 1000 SDR per passenger unless has declared higher value; can’t recover more than actual value

7. Enforcing Warsaw Convention
Suits can only be brought in countries that are signatories
Where ticket purchased, final destination or where carrier has principal place of business
Montreal Convention: suits for death or injury in passenger’s principal residence if carrier operates there
Time Limits
Must file notice:
Cargo or baggage damage: notify within 7 days of receipt of checked luggage, 14 days from receipt of cargo
Delay of baggage or cargo: notify in writing no later than 21 days from date of actual delivery
Must file suit against air carrier within 2 years

8. Liability for Carriage of Goods by Sea
Historically, carrier absolutely liable
Carriers used exculpatory clauses
Legal limitations on such clauses
Hague Rules – 1924 Convention defines liability for ocean carriers
US Carriage of Goods by Sea Act codifies Hague Rules
Covers liability from loading to unloading (“tackle to tackle”)
Parties can extend application beyond “tackle to tackle” by provisions in Bill of Lading (B/L)
Invalidates all exculpatory clauses in B/L
Forum selection and arbitration clause in B/L valid – Vimar Seguros y Reaseguros S.A. v M/V Sky Reefer (USSC 1995) 4

9. COGSA Principles
Carrier must use due diligence in providing seaworthy vessel at beginning of voyage
Carrier liable for failure to use due diligence
But carrier not liable for damage due to fire, storms, and negligence in navigating or managing ship 6

10. COGSA Principles
Delivery of damaged cargo: shipper must give written notice to carrier at port of discharge
For visible damage: give notice before or at time goods taken from carrier’s custody
If damage not apparent or visible, give written notice within 3 days of delivery
Failure to give notice creates presumption goods delivered in good condition
Suit must be brought within 1 year
P must show goods loaded in good condition and lost or unloaded in damaged condition
Clean B/L establishes presumption goods delivered to carrier in good condition – shifts burden to carrier
Problem with sealed containers: clean B/L only establishes outer condition of container 7

11. COGSA Exceptions to Liability
Errors in ship navigation or management
Fire (unless carrier’s fault)
Perils of the sea
Act of God
Act of war
Acts of public enemies
Legal seizure
Quarantine
Acts of shipper
Labor strikes
Riots
Saving life or property at sea
Insufficient packing
Inherent defect in goods
Inadequate marking of goods
Latent (hidden) defects in ship 8

12. COGSA: Defenses to Liability
“Warranty of Seaworthiness”: ship reasonably fit to carry cargo undertaken on intended journey
Competence of crew, suitability of equipment, etc.
Carrier responsibility for proper loading, storing and carrying, and unloading goods
May presume unseaworthy if breaks down shortly after departure
Errors in Navigation or Management of ship: carrier not liable for errors of master, mariner, pilot or crew member
Depends on severity of storm and how cargo damaged
Negligence of crew may void defense 10

13. COGSA: Defenses to Liability
Fire: carrier not liable unless negligence of carrier caused fire
Liable for inadequate equipment or inadequately trained crew
Asbestos Corp. Ltd. v. Comapgnie de Navigation (2nd Cir. 1973): carrier negligent when firefighting equipment stored in engine room, couldn’t be used for fire in engine room
Perils of Sea: “fortuitous action of sea or weather of sufficient force to overcome strength of seaworthy ship or diligence and skill of good crew”
Look to severity of storm

14. COGSA: Defenses to Liability
Q-Clause Defense: general exception holding carrier not liable if carrier can prove it wasn’t at fault and show what was the cause of loss
Shipper Liability for Hazardous Cargo: shipper strictly liable for shipping inherently dangerous goods when neither shipper nor carrier had actual knowledge or danger, Senator Linie GmbH & Co. Kg. V. Sunway Line, Inc. (2nd Cir. 2002) 11

15. The Cargo Shortage Problem
Carrier may be responsible unless can use Q clause defense
P must establish that shortage occurred while goods in carrier’s custody:
P can show weight or quantity at destination less than that listed on B/L
Disclaimer – “shipper’s weight”- on B/L not recognized by court
Westway Coffee Corp. v. M.V. Netuno (SDNY ’81)
But Plastique Tags, Inc. v. Asia Trans Line, Inc. (11th Cir. 1996) 12

16. COGSA “Package” Limitation
Limits carrier liability to $500 per package or customary freight unit unless shipper declares (and pays for) higher value
Container not package under COGSA if contents and number of units disclosed on B/L
Z.K. Marine v. M/V Archigetis (SDFl 1991): is yacht a “package”?
COGSA limitations generally don’t apply to goods carried above deck – but parties can provide for coverage in B/L (clause paramount) 13

17. Other COGSA Provisions
COGSA holds carrier liable for a material deviation unless necessary to save lives or property at sea
Material deviation from terms of B/L causes carrier to lose protection under COGSA
Stowage of cargo above deck unless B/L so provides is material deviation – but not for sealed container
Himalaya Clauses: clause in B/L extending Hague Rules protection to agents, indpt. contractors, etc.
Recognized in US
Not recognized in UK and Canada 14

18. Amendments to Hague Rules
Hamburg Rules: Convention
Not adopted by US
Would hold carrier liable for negligence and errors of navigation or management of ship
Rules opposed by insurance companies and carriers
So far, most of endorsing states have been developing countries
Visby Amendments to Hague Rules
Raised liability per package to approx. $1000
Carrier liable for losses from recklessness in operation and navigation
Adopted by UK, Canada, Singapore, Japan, Western European Countries 15

19. Rotterdam Rules: 2009
UN Convention on Contracts for the Int. carriage of Goods Wholly or Partly by Sea
Replaces the international regime of Hague Rules (& Visby & Hamburg Rules)
Adopted by the UN on Dec. 11, 2008
US signed Rotterdam Rules on Sept. 23, 2009
Now signed by 20 nations – must be ratified by signatories; comes into effect 1 year after ratified by 20 members
Will change COGSA on international shipments to & from US
Carrier Liability: Focuses on Carrier fault or negligence
Carrier responsible for goods “door to door”
Carrier must exercise due diligence as to seaworthy vessel both at beginning and during voyage at sea
Carrier liable for errors in navigation
Liability limited to 875 SDRs per package (up from COGSA $500 limit)

20. Liability of Transport Intermediaries
Freight Forwarders: act as agent of shippers
US: must be licensed to operate; regulated by US Fed. Maritime Comm. and Int. Air Transport Assoc.
May also act as Customs Brokers
Must post bond and have power of attorney
Prima US Inc. v. Panalpina, Inc. (2nd Cir. 2000): FF not liable for cargo during shipment
Non-Vessel Operating Common Carriers: act as freight consolidators for smaller shippers
Issue B/L
Liable for loss or damage to goods during transport

21. Ocean Shipping Reform Act 1998
Amends Shipping Act of 1984 to allow carriers greater flexibility in contracting
Carriers can enter “service contracts”: confidential bargained freight rates instead of posted tariff schedules
Service contracts function as contracts of carriage – no need to issue B/L
Carriers not acting as common carriers, so not subject to COGSA; can negotiate own liability terms
Ocean carriers exempted from antitrust laws
Carriers must treat FF’s and NVOCC’s as shippers
Carriers may not unreasonably refuse to deal or negotiate with shippers or intermediaries

22. Marine Cargo Insurance
Large volume shippers maintain open cargo policies
Exporter authorized by insurer to issue certificate of insurance
Used under CIF contracts
US: certificate of insurance acceptable substitute for insurance policy; incorporated in UCC
UK: certificate of insurance not substitute
General average ( average means loss): loss that results when extraordinary expenses or losses result in saving the cargo or vessel at sea 17

23. Insurance Losses and Coverage
Policies cover total loss of all or part of shipment
General average loss: incur loss or extraordinary expenses in saving vessel or cargo from real and substantial danger at sea
York-Antwerp Rules of 1950: accepted principles of general average – incorporated into B/L’s
Particular average loss: partial loss to cargo
Depends on policy provisions: “free of particular average” (FPA) means no coverage for partial losses
Coverage:
Perils Clause: covers basic risks of ocean voyage; fortuitous losses only
All Risks Coverage: covers risks except those particularly excluded
War Risks: typically not covered but available for ocean shipments
Shaver Trans. Co. v. The Travelers Indemnity Co. (S. Ore. 1979): FPA and standard perils coverage, shore coverage clause, Inchmaree clause 19

24. Web Sites http://www.cargolaw.com http://www.joc.com