Carriage of Goods by Sea Act (COGSA)
Under traditional admiralty common law, ocean common carriers were held strictly liable for cargo placed in their custody. Ocean common carriers have only limited defenses, so ocean common carriers began including in their Bills of Lading (B/L) exculpatory clauses. Bills of Lading (B/L) exculpatory clauses tended to completely reverse the common law. Exculpatory clauses make it difficult for shippers to hold a carrier responsible for cargo loss or damage. Like many maritime nations, United States governments attempted to impose a balance between carriers’ and shippers’ rights through the enactment of:
- Harter Act 1893
- Carriage of Goods by Sea Act (COGSA) 1937
- Federal Bills of Lading Act 1916 (Pomerene Act)
Under Carriage of Goods by Sea Act (COGSA), carrier cannot impose exculpatory clauses on a shipper. According to Carriage of Goods by Sea Act (COGSA), carrier cannot escape its statutory liabilities and responsibilities for ocean transportation of a movement by requiring shippers to agree to exculpatory clauses in Bills of Lading (B/L). Nevertheless, Carriage of Goods by Sea Act (COGSA) reserves to carriers and shippers the right to contract for certain specific conditions, reservations, or exemptions with respect to liability for custody, care, and handling of goods prior to loading on a ship and subsequent to discharge from ship.
According to Carriage of Goods by Sea Act (COGSA), carrier cannot require a shipper to obtain cargo-related insurance. Carriage of Goods by Sea Act (COGSA) provides that a carrier cannot require a shipper to procure insurance for the benefit of the carrier. On the other hand, nothing in Carriage of Goods by Sea Act (COGSA) prohibits shipper from procuring insurance for its own benefit. Practically, prudent shippers always make sure that their goods are properly insured.
Under Carriage of Goods by Sea Act (COGSA), ocean carrier is not strictly liable for loss or damage to cargo. Ocean Carrier must be found to have been negligent to be held liable for such losses. Ocean Carrier can be liable for mis-delivery of goods, if ocean carrier delivers the goods to a person not entitled to receive the goods, such as a person who is not listed as the consignee on a non-negotiable bill of lading.
Ocean carrier cannot delegate its duty to load and stow the cargo on the ship. Under Carriage of Goods by Sea Act (COGSA), ocean carrier’s duty to load and stow the cargo is non-delegable. On the other hand, ocean carrier can make a contract for the charterer to pay for the cost of stevedores.
Under Carriage of Goods by Sea Act (COGSA), ocean carriers have a number of recognized defenses in the event of the loss or damage to cargo entrusted to their care:
- Defenses relating to unseaworthiness of the ship and the negligence of the ship’s crew
- Defenses relating to Acts of God like hurricanes, natural disasters and manmade events like act of war or strike
- Defenses where the shipper was at fault
- Defenses where the loss occurs despite carrier’s exercise of due care
According to Carriage of Goods by Sea Act (COGSA), ocean carrier is only liable for unseaworthiness of ship if the unseaworthiness was caused by lack of due diligence to make the ship seaworthy by the carrier before and at the beginning of the voyage. If ship has a defect which could not have been discovered through due diligence which leads to the loss or damage to cargo, carrier is not liable. Carrier is not liable:
- When unseaworthy condition is not reasonably discoverable
- When unseaworthy condition comes about during course of the voyage.
As with seaworthiness, carrier’s responsibility is to exercise due diligence in properly manning, equipping, and supplying the ship. However, carrier has a defense against liability if the crew members are negligent and causes a loss or damage to cargo which carrier could not have prevented through the exercise of due diligence. If ship collides with another ship due to crew member’s fault and wrong decisions in navigating, then carrier would not be liable. But, if carrier hired crew members who were improperly trained, carrier should have known that with exercise of due diligence and lack of training caused loss or damage, then carrier may be liable.
Defense of due diligence against a claim of ship unseaworthiness is available to the carrier as a matter of course. Shipper bears the initial burden of proving that loss or damage to the cargo was the result of ship’s unseaworthiness. If shipper proves the ship’s unseaworthiness, then carrier bears the burden of proving that he exercised due diligence to make the ship seaworthy before and at the beginning of the voyage. According to Carriage of Goods by Sea Act (COGSA), carrier is responsible for properly caring for the cargo on board the ship. Carriage of Goods by Sea Act (COGSA) imposes duty on the carrier to properly care for the cargo while on board the ship. Carrier is responsible to preparing holds, refrigerating and cooling chambers and all other parts of the ship in which goods are carried, fit and safe for cargo reception, carriage, and preservation. Carrier may be liable for loss or damage to cargo if it can be shown that his duty was violated, despite the availability of seaworthiness and other defenses to the carrier.
According to Carriage of Goods by Sea Act (COGSA), carrier is has a defense in the event of a ship fire. Ship owner is not liable for loss or damage to cargo on ship caused by fire, unless fire resulted from the design or neglect of ship owner.
According to Carriage of Goods by Sea Act (COGSA), carrier is has a defense if cargo is lost or damaged as a result of perils, dangers, and accidents of the sea or other navigable water. But, not every storm is peril of the sea, as courts have concluded that carriers bear a responsibility to ensure their ships are prepared for the weather conditions that might reasonably be expected during sea voyage. In order to be considered as peril of the sea, storm or wind measured on a scale known as Beaufort Scale. Beaufort Scale provides a commonly understood measure of wind force based on observed sea conditions. Beaufort Scale was developed by the English Royal Navy. Beaufort Scale ranges from Force 0 to Force 12.
According to Carriage of Goods by Sea Act (COGSA), carrier is not responsible if goods themselves have inherent defects. Carriers have defense against inherent defects known as inherent vice. Carriage of Goods by Sea Act (COGSA) provides that carrier is not responsible when damage to cargo results from wastage in bulk or weight or any other loss or damage arising from inherent defect, quality, or vice of the goods. Hence, shipper is generally responsible for insuring that the goods that require special packaging have been packed for such purposes. According to Carriage of Goods by Sea Act (COGSA), when cargo requires special conditions like refrigeration, it is the shipper’s responsibility in general to make sure that the carrier is aware of those conditions and responsibility for ensuring that the conditions are maintained generally falls on the shoulders of the carrier.
According to Carriage of Goods by Sea Act (COGSA), catch all defense is available to ocean carriers. Carriage of Goods by Sea Act (COGSA) provides defense, known as Q Clause which grants ocean carriers a defense when the loss or damage is due to “any other cause arising without the actual fault and privity of the carrier and without the fault or neglect of the agents or servants of the carrier . . . .”
According to Carriage of Goods by Sea Act (COGSA), ocean carrier can contract away its Carriage of Goods by Sea Act (COGSA defenses. Ocean carrier can agree to take on increased responsibilities and liabilities by contract with shipper.
According to Carriage of Goods by Sea Act (COGSA), ocean carrier may lose its defenses, if the ship deviates from route. Deviation is an intentional and unreasonable change in the geographic route contracted. Deviation deprives the carrier of its defenses, if deviation is the cause of the damage or loss. If deviation in route is reasonable, like to avoid storm or to assist another ship in distress, then ship would not have engaged in deviation. Quasi-Deviation is a breach of shipping agreements other than change in geographic route to be deviations.
If cargo loss or damage is caused by multiple causes of accident, carrier bears the burden of showing that the cause of loss or damage was an aspect to which it has a defense. According to Carriage of Goods by Sea Act (COGSA), once shipper satisfies its burden of showing that the cargo was loaded in an undamaged condition and discharged in a damaged condition, carrier must show that it has a defense under Carriage of Goods by Sea Act (COGSA). If shipper can show that carrier’s negligence was contributing cause of the damage, carrier can attempt to segregate out portion of the damage due to causes for which it is not liable, from those resulting from its own negligence.
Traditionally, calculation of cargo damages is based on the loss measured against market value of the goods at the cargo’s destination.
Carriage of Goods by Sea Act (COGSA) limits carrier liability to $500 per package or customary freight unit. Generally, Bills of Lading (B/L) controls with respect to defining what constitutes package. If Bills of Lading (B/L) discloses contents of container, then container is not Carriage of Goods by Sea Act (COGSA) package. Carrier is not permitted under Carriage of Goods by Sea Act (COGSA) to seek a lower package limitation. Shipper is only permitted to recover its actual damages with $500 per package limitation is a limit, not a minimum recovery amount. Carriers are permitted to take on by contract damage limitations greater than $500 per package.
According to Carriage of Goods by Sea Act (COGSA), shipper is not stuck with According to Carriage of Goods by Sea Act (COGSA) limits of liability. Carriage of Goods by Sea Act (COGSA) requires that ocean carrier offer shipper the opportunity to be able to claim a higher limit of liability. Ocean carriers are permitted to agree to contractual provisions for damage limitations greater than $500 per package. Ocean carriers may charge more for greater liability limits, in order to cover the cost of insuring against that risk. As a result, shipper can obtain higher limits of liability, shipper bears costs of ocean carrier’s insurance for those higher limits. On the other hand, shipper can also obtain his own insurance against risks of loss and damage that would not be covered by the carrier. Hence, if shipper insists on higher liability limits, shipper ends up paying more for insurance than if shipper agreed to accept the lower limits on liability. Under Carriage of Goods by Sea Act (COGSA), modest recovery for damaged goods may appear to be unfair to the shipper, in reality it is an economically efficient way to allocate the risk of loss or damage for the cargo, with the remaining potential liability of the carrier serving as a token incentive to the carrier to exercise due care over the cargo.
According to Carriage of Goods by Sea Act (COGSA), shipper may recover damages for Delayed Delivery.
If Delayed Delivery of the cargo is due to:
- a cause that is either permitted under Bills of Lading (B/L) like loading another cargo at intermediate ports
- reasons beyond control of the carrier
Shipper may not be able to recover for Delayed Delivery. On the other hand, if contract of carriage required delivery by certain date, or if the delayed delivery was due to an unreasonable deviation in the voyage that exposed the cargo to additional risks, and resulting delays caused damages to the shipper, then shipper could recover, not only the $500 per package amount generally provided in Carriage of Goods by Sea Act (COGSA), but shipper’s actual losses. Furthermore, carrier and shipper can agree to provide for payment by carrier to the shipper in the event of specified delay.
Shipper establishes a prima facie case for recovery if it has evidence of damage to its goods and can present Clean Bills of Lading (B/L). Afterwards, it is up to ocean carrier to set forth one of its defenses or show that the damage was due to unseaworthiness of ship despite exercise of due diligence. Shipper can attempt to rebut claim of due diligence and the assertion of defenses or show negligence of the carrier.
Carriage of Goods by Sea Act (COGSA) imposes duty on the consignee to inspect goods for damage before taking custody and carrying them away. If delivered goods are damaged, consignee must give the carrier prompt notice that the goods have been damaged. Carriage of Goods by Sea Act (COGSA) provides that unless notice of the loss or damage is given to the carrier or its agent at the port of discharge before or at the time of the removal of the goods into the custody of the consignee, then the removal of the goods is prima facie evidence that carrier delivered the goods as described in Bills of Lading (B/L). Consignee’s notice of the loss or damage does not have to be overly specific, notice of the loss or damage only has to state the general nature of the damage or loss. If loss of damage of delivered cargo is not immediately apparent, notice of the loss or damage must be given within 3 days of the delivery. Most of the shippers hire cargo surveyors who will examine shipments on arrival for obvious damage. For example, cargo surveyors inspect agricultural cargoes and check for water damage or mold. Also, cargo surveyors carefully check amounts discharged. Failure on the part of the consignee to inspect and give notice of damage is not fatal to the shipper’s claim.
Carriage of Goods by Sea Act (COGSA) states that such a failure does not affect or prejudice the right of the shipper to bring suit. But, failure to inspect and give notice of damage can make case more difficult for shipper. Carrier may be able to point to the lack of notice as evidence that the cargo was in good condition when cargo left the carrier’s custody. If shipper could introduce evidence to the contrary, shipper would need to prove that damage observed had to come from the time the cargo was in the carrier’s custody and control.
According to Carriage of Goods by Sea Act (COGSA) provides that a law case for recovery of damages to goods must be brought within 12 months of the delivery of the goods. There are two interpretations of cargo delivery:
- Some courts interpret delivery to mean when cargo is taken off the ship, regardless of when (the consignee receives cargo
- Some courts interpret delivery occurs only when the consignee has had a reasonable chance to inspect
According to Fifth Circuit Court of Appeals, delivery occurs when ocean carrier places cargo into the custody of whomever is legally entitled to receive cargo from the carrier. If cargo is never actually delivered, limitation period begins when cargo should have been delivered. If shipment is delayed but then delivered late and damaged, limitation period still starts when goods should have been delivered.
Difference between Common Carrier and Private Carrier
Contracts (Charterparties) for the carriage of goods by sea are based upon the general Common Law principles of Contract Law. Besides the general contractual and tortious regulations, there are specific rules relating to contracts (charterparties) that involve the carriage of goods by sea.
What are the 3 types of carriers?
1- Common Carriers
2- Private Carriers
3- Other types of carriers with special rights and duties
Private Carriers Vs Common Carriers
The fundamental difference between Private Carriers and Common Carriers lies in the Carrier’s Liability.
A Common Carrier is ready for employment to transport from place to place, either by land, sea, or air, the goods of anyone, or any passenger wishing to employ him.
A Common Carrier must carry cargo or passengers as a business and not as a casual operation. A Common Carrier is bound to carry all goods offered by individuals that are ready to pay the freight unless;
1- The goods are offered at an unreasonable hour
2- The goods offered are not of the type the common carrier professes to carry
3- The goods are not appropriately packed
4- Reasonable charges are not reimbursed in advance
5- The common carrier has no space in the vessel
6- The destination is not one to which the common carrier usually transits
If the Common Carrier inaccurately refuses to carry any goods or passengers, the Common Carrier may be sued for Damages in Tort.
In Crouch & London v North Western Railway (1854) Case, the common carrier by rail (Defendant) refused to accept packed parcels from another carrier company (Plaintiff) which was under-cutting Defendant’s railway freight rates. The court decided that the common carrier by rail (Defendant) was liable for refusal to carry the packed parcels.
Similarly, the Liner Operator (Common Carrier) might be liable, if the Liner Operator refuses to carry containers offered by NVOCs (Non-Vessel Operating Carriers) that can offer better rates than the Liner Operator.
What is meant by a Common Carrier?
Whether a carrier is a Common Carrier or not depends on the circumstances. If a person holds himself out to all and sundry as being organized to carry, he is a Common Carrier.
If the carrier reserves to himself the right of accepting or rejecting offers of goods, whether his conveyances are full or empty, he is not a common carrier. Standard examples of Common Carriers comprise a shipowner, taxi service, railroad, airline, etc.
A Common Carrier is a person or a company that hauls goods or passengers for a price and verifies that their service is available to the general public.
It might be challenging to determine whether a carrier is a Common Carrier or a Private Carrier by an examination of the legal principles governing this topic.
Today, most carriers express in their conditions of carriage that they are not Common Carriers.
In many jurisdictions, the courts do not regularly assume that a carrier is a Common Carrier. It should be noted that Common Carriers are by no means extinct. For example, in the United States, the Federal Maritime Commission is stringent in its governance of shipping companies and has decided that NVOCs (Non-Vessel Operating Carriers) are deemed to be Common Carriers under United States law. Therefore, shipbrokers can encounter the NVOCCs (Non-Vessel Operating Common Carriers).
What is the difference between Common Carrier and a Private Carrier?
The crucial distinction between Private Carriers and Common Carriers is in respect of their Liability.
Common Carriers are strictly liable for any loss or damage that occurs to the goods in their care. Common Carriers are liable irrespective of their lack of negligence.
Private Carriers are bailees of the goods. Private Carriers are exclusively liable for damage through their negligence.
When loss is caused by delay, both Private Carriers and Common Carriers are only liable if the delay was caused by their negligence.
Even though Common Carriers can always be sued for refusal to carry, a Carrier is not bound to undertake the Common Carriers’ strict liability. A Carrier may make a particular agreement with the charterer that either excludes altogether or restricts the strict liability. Today, most Carriers design express agreements that deal with the Carrier’s obligations.
Common Carriers’ liability is strict, in other words, Common Carriers are deemed as the insurer of the safety of the cargo carried. Consequently, Common Carriers are liable for any damage to or loss of the cargoes, whether caused by Common Carriers’ negligence or not.
There are exceptions to the Common Carriers’ strict liability. These are known as the four Common Law Excepted Perils whereby the Carrier is not liable for loss or damage to the cargo. The burden of proving these defenses falls on the Common Carriers.
Common Carriers cannot rely upon Common Law Excepted Perils if in all the circumstances Common Carrier has been negligent. Common Law Excepted Perils are usually incorporated into the modern charterparties (contracts of carriage) of Private Carriers.
Common Law Excepted Perils
1- The Queen’s Enemies: A Common Carrier is not liable for any loss that is caused by armed forces at war with the UK. In English law, damage to the cargo driven by terrorists, robbers, or via a riot is not an exception. Other jurisdictions have equivalent terms covering warlike actions.
2- Act of God: A Common Carrier is not liable for any loss where Common Carrier can prove that the loss is due to natural causes directly and exclusively, without human intervention, and that the loss could not have been prevented by any amount of foresightedness and pains and care reasonably to be anticipated from the carrier
3- Fault or Fraud of the Consignor: A Common Carrier is not liable for any loss or damage when the cargo is not being appropriately packed. Furthermore, A Common Carrier is not liable for any loss or damage where the loss is caused by inaccurate addressing or fraudulent practice by the consignor.
4- Inherent Vice: A Common Carrier is not liable for any loss or damage because of cargo’s intrinsic qualities are lost without the negligence of anyone. The implied liability of a Common Carrier does not include responsibility for ordinary wear and tear in transit, ordinary loss or deterioration in quality or quantity such as evaporation or loss or damage through deficiency of packing. The Carrier’s knowledge of the deficiency of packing when the cargo is delivered to him does not prevent the Carrier from relying on this ground as a defense. Nevertheless, the account should be taken off the Carrier’s contractual and statutory obligations, such as the warranty of seaworthiness, duty to use reasonable care, obligations arising under the Merchant Shipping Dangerous Goods Regulations 1981, or the Carriage of Goods by Sea Act 1971.
Common Carrier Exclusion of Liability
A Common Carrier may exclude or limit his strict liability as a common carrier. Certainly, Private Carriers may incorporate into the charterparties (contracts of carriage) particular Exclusion Clauses which will exclude the carrier’s liability for damage caused to the cargo in specific cases.
Currently, the Exclusion Clauses are predominantly governed by statute. However, under most jurisdictions, such statutes do not apply to charterparties (contracts of carriage). An Exclusion Clause incorporated properly into an agreement, according to the Common Law rules, Exclusion Clause will be effective even if not deemed reasonable.
The Carriage of Goods by Sea Act 1971 incorporates the Hague-Visby Rules into English law. The Carriage of Goods by Sea Act 1971 aims to protect certain parties in a contract for the carriage of goods by sea. The Carriage of Goods by Sea Act 197 provides contracting parties certain rights of which they cannot be deprived. Furthermore, The Carriage of Goods by Sea Act 197 provides contracting parties with some Exclusion Clauses.
Merchant Shipping Act 1979 (Section 18) provides a Statutory Exclusion of Liability for British shipowners in specific cases. Merchant Shipping Act 1979 (Section 18) provides that there shall be no liability for loss or damage, in the absence of fault:
1- If any gold, silver, watches, jewels, or precious stones on board the vessel are lost or damaged because of theft, robbery, or other dishonest conduct and their nature and value were not at the time of shipment declared by their owner or shipper to the Shipowner or Ship Master in the Bill of Lading (B/L) or otherwise in writing.
2- If the property on board the vessel is lost or damaged by fire on board.
What is an NVOC operator?
NVOCs (Non-Vessel Operating Carriers) organize the transportation of cargo, usually from manufacturers’ premises to the consignee. NVOCs (Non-Vessel Operating Carriers) do not own the ocean vessels involved. NVOCs (Non-Vessel Operating Carriers) may usually own the road vehicles used from plant to port, it is by no means unusual for the NVOCs (Non-Vessel Operating Carriers) to own no form of transport at all. However, NVOCs (Non-Vessel Operating Carriers) accept the liability as a carrier. Furthermore, in the United States, the carriers accept the liability as NVOCCs (Non-Vessel Operating Common Carriers).
When containerization was first introduced, NVOCs (Non-Vessel Operating Carriers) operations started as an extension of Freight Forwarding. The Container Line Operators made lavish advertising about door-to-door container transportation. However, door-to-door container transportation is solely applied to FCL (Full Container Load). The Container Line Operators offered LCL (Less than Container Load) service to shippers with small consignments but they required a minimum freight.
Freight Forwarders noticed the niche market and bargained a keen FCL (Full Container Load) rate from the Container Line Operators and then offered a per-kilo rate to consignors.
The Container Line Operators produced the NVOCs (Non-Vessel Operating Carriers) a Bill of Lading (B/L) for an FCL (Full Container Load) with no details as to the contents and the NVOCs (Non-Vessel Operating Carriers) produced each consignor a Bill of Lading (B/L) covering his shipment.
NVOCs (Non-Vessel Operating Carriers) have a correspondent at the discharging port to whom the FCL (Full Container Load) container is consigned and delivered by the Container Line Operators. NVOCs (Non-Vessel Operating Carriers) correspondent delivers each consignment to the respective Bill of Lading (B/L) Holders. Therefore, all the exclusions, exemptions, and liabilities which apply to carriers who operate vessels apply equally to NVOCs (Non-Vessel Operating Carriers). NVOCs (Non-Vessel Operating Carriers) take care to have sufficient insurance to meet any claims.
Today, NVOCs (Non-Vessel Operating Carriers) business has grown to reach almost every destination in the world. NVOCs (Non-Vessel Operating Carriers) handle FCL (Full Container Load) as well as LCL (Less than Container Load) cargo.
If Dangerous Cargo is delivered to a carrier for transportation, the shipper is deemed to warrant to the carrier, the carrier’s servants, and other shippers that the cargo is fit to be transported. For a breach of this warranty, the shipper will be liable for damages even if the shipper was unaware of the dangerous character of the cargo.
The carriage of dangerous cargo at sea is today regulated by the Merchant Shipping Act 1894 (Sections 446 – 450). The Merchant Shipping Act 1894 (Sections 446 – 450) has specific provisions which deal with dangerous cargo.
The Merchant Shipping Act 1894 (Section 446) sets out the restrictions on the carriage of dangerous cargo. The Merchant Shipping Act 1894 (Section 446) stipulates that it will be a criminal offense for any individual to send or attempt to send dangerous cargo by any ship without particularly and in writing informing the carrier of the nature of the cargo.
The Merchant Shipping Act 1894 (Section 447) stipulates the penalty for the misdescription of dangerous cargo.
The Merchant Shipping Act 1894 (Section 448) stipulates specific powers that the Ship Master or Shipowner will have to deal with cargo that is suspected of being dangerous.
The Merchant Shipping Act 1894 (Section 449) stipulates that any court having Admiralty jurisdiction has the power of forfeiture of dangerous cargo that has been improperly shipped or carried.
The Merchant Shipping Act 1894 (Section 450) stipulates that the provisions of the Merchant Shipping Act 1894 concerning dangerous cargo shall be in addition to and not in substitution for, or restraint of, any other enactment concerning dangerous cargo.
The existing balance of authority seems to favor the presumption that the shipper’s obligation is absolute and not limited to facts within the shipper’s actual knowledge. Usually, there are complications in determining the boundary between those risks that the shipowner contracts to bear and those which the shipowner does not. Everything depends on the description of the cargo.
The Hague-Visby Rules (Article IV Rule 6) stipulates that if inflammable explosive or dangerous cargo is accepted on board without knowledge of their nature, and without the approval of the Ship Master or Ship Agent, the cargo may be landed or destroyed or rendered harmless anywhere without any right of the cargo owner to claim compensation. The shipper of such dangerous cargo shall be liable for all damages and costs directly materializing out of or resulting from such shipment. Furthermore, cargo may be dangerous even though it is not inflammable or explosive, or noxious but only endanger the free movement of the vessel and cause unreasonable delay.
IMO (International Maritime Organization) publishes the IMDG Code (International Maritime Dangerous Goods Code). The IMDG Code was developed as an international code for the maritime transport of dangerous goods in packaged form, to enhance and harmonize the safe carriage of dangerous goods and to prevent pollution of the environment.
Numerous maritime countries have incorporated the IMDG Code (International Maritime Dangerous Goods Code) into statutes. In the United Kingdom, the Merchant Shipping Act 1995 (Section 85) now incorporates the Merchant Shipping (Dangerous Goods and Marine Pollutants) Regulations 1990 (SI 1990 No 2605) and the Merchant Shipping (Carriage of Cargoes) Regulations 1997 (SI 1997 No 19).
Agent of Necessity
A carrier may have the right to sell cargo without consulting the cargo owner when the carrier is an Agent of Necessity. For an Agent of Necessity to arise, it must commercially impossible to contact the cargo owner and there must be a real emergency. For example, the cargo is perishable.
In Common Law, transit commences at the point the cargo is delivered to the carrier or the carrier’s agent and the carrier accepts the cargo.
In Common Law, transit does not mean movement and the cargo can be in transit while being kept in a warehouse. Transit ceases when the cargo is delivered or tendered to the consignee. For example, if the containers are discharged into a container yard on a port-to-port (Container Yard to Container Yard CY/CY) Bill of Lading the containers are still technically in transit until picked up by the consignee or the consignee’s agent.
A carrier must deliver the cargo to the consignee at a place to which the carrier is directed. The Ship Master is not justified in delivering the cargo to someone who does not produce the Bill of Lading (B/L). A Shipowner may be liable to the Shipper for delivering cargo without the production of the Bill of Lading (B/L). Only if there is a custom of the particular port or express agreement in the contract of carriage, may the goods not be delivered to the consignee or the consignee’s agents. Cargo delivery at a dock where there is no particular custom of the port will not constitute proper delivery, and where cargo is delivered short of its destination and cannot be obtained elsewhere the consignees will be entitled to recover the expense of transshipment from the Shipowners.
Stoppage in Transitu
The Sale of Goods Act 1979 (Section 44 – 46) stipulates that a carrier must obey the orders of the Unpaid Seller of the cargo who may exercise the right of Stoppage in Transitu.
The Sale of Goods Act 1979 (Section 44 – 46) provides the Unpaid Seller with a right to claim the cargo in certain cases which are not available under Common Law, including the right of stoppage in transit.
The Sale of Goods Act 1979 (Section 45) stipulates that cargo is deemed to be in transit from the time when the cargo is delivered to the carrier or other bailee for dispatch to the buyer until the buyer or the buyer’s agent takes delivery of them.
The Sale of Goods Act 1979 stipulates that when a Notice of Stoppage in transit is given by the seller to the carrier or other bailee in possession of the cargo, that carrier or bailee must redeliver the cargo to, or according to the directions of, the seller. The redelivery costs must be paid by the seller.
Difficulties materialize when the Unpaid Seller wishes to exercise the right of Stoppage in Transitu but has already dispatched a Negotiable Bill of Lading (B/L) to the consignee who claims Cargo Ownership. More significant difficulties arise if the cause for failing to pay is because the consignee has become bankrupt and holds the Negotiable Bill of Lading (B/L).
The Right of Stoppage in Transitu is delivered under the Bills of Lading Act 1855 (Section 2) which has been overruled by the Carriage of Goods by Sea Act 1992. The Right of Stoppage in Transitu has been preserved under the Bills of Lading Act 1855 (Section 1).
What is Stoppage in Transitu?
“Stoppage in transitu” is a legal term referring to the right of a seller to stop the goods while they are in transit to the buyer, and regain possession of them. This typically happens in situations where the buyer becomes insolvent after the goods have been dispatched but before they’ve been delivered.
This concept originated from English common law and has since been integrated into many other legal systems, including the Uniform Commercial Code (UCC) in the United States. It allows sellers to mitigate losses that might occur when a buyer cannot pay for the goods.
However, the rules and specifics around how and when a seller may exercise the right of stoppage in transitu can vary depending on the jurisdiction and the specifics of the contractual agreement between the buyer and the seller.
It’s also important to note that the concept of stoppage in transitu typically applies in business-to-business (B2B) transactions rather than business-to-consumer (B2C) transactions, since consumer protection laws often provide different remedies in the event of non-payment.
Contract Types for Carriage by Sea
There are two (2) contract types for carriage by sea:
1- Contracts evidenced by a Bill of Lading (or Sea Waybill)
2- Contracts incorporated in a Charterparty
If the Charterer requires a full ship or a significant part of the ship, the Charterer hires the ship from the shipowner by way of a Charterparty. The Shipowner issues a Charterparty Bill of Lading (B/L).
If the Charterer requires only shipping space in a ship, the terms of the contract with the carrier are usually expressed in a Bill of Lading (or Sea Waybill).
When the cargo owner demands exclusively to ship his cargo on the ship, the contract between the cargo owner and the carrier is negotiated and agreed upon before the cargo is carried down to the quayside and loaded on board the ship.
The Bill of Lading (B/L) is completed and signed after the cargo is loaded onboard the ship. However, the Bill of Lading (B/L) takes effect from the moment the cargo crosses the ship’s rail.
The Combined Bill of Lading (B/L) takes effect when the cargo passes into the carrier’s custody. Therefore, the Bill of Lading (B/L) cannot be the contract itself between the cargo owner and shipowner. If there were no contract for the carriage of the goods by sea then there would be no need for the Bill of Lading (B/L) to be completed and signed. Therefore, we state that the Bill of Lading (B/L) is evidence of the Contract.
On the other hand, when the cargo owner requires to hire the full ship or a substantial part of the ship, the cargo owner and carrier signs Charterparty. Then, the legal position is that the Charterparty itself is the contract. No other extraneous evidence is admissible to prove the existence of alleged terms which are not contained in the Charterparty. This is the most important difference between the two types of contracts of carriage by sea. Where the contract for carriage is evidenced by a Bill of Lading (B/L), as opposed to being incorporated in the Charterparty, it is open to either party to adduce other evidence than what is incorporated in the Bill of Lading (B/L) as to alleged terms incorporated into the contract.
What is a Contract of Affreightment (COA)?
Unfortunately, many Academics and Shipping Lawyers use the term Contract of Affreightment (COA) when referring to a Charterparty. Shipbrokers should refrain from using the terms synonymously.
Shipbrokers retain the term Contract of Affreightment (COA) as being a hybrid type of contract with separate considerations. Generally, a Contract of Affreightment (COA) involves the employment of more than one ship and the Contract of Affreightment (COA) covers a total quantity of cargo over a given period with vessels within specific size limits within settled periods. The legal principles of contract and the special rules relating to contracts for the carriage of goods by sea are equally applicable to both Charterparty and Contract of Affreightment (COA).
What is Carriage of Goods by Sea Act (COGSA)?
The Carriage of Goods by Sea Act (COGSA) is a U.S. statute that governs the rights and responsibilities between shippers of cargo and ship operators regarding ocean shipments to and from the United States. It was enacted on April 16, 1936, and it is essentially the U.S. enactment of the International Convention Regarding Bills of Lading, commonly known as the “Hague Rules”.
The main elements of COGSA include:
- Limitation of Liability: COGSA limits the liability of carriers to $500 per package, or in the case of goods not shipped in packages, per customary freight unit.
- Responsibility of Care: Under COGSA, carriers must properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.
- Bill of Lading: COGSA requires that a bill of lading be issued. A bill of lading is a document that evidences a contract for the carriage of goods by sea and the taking over or loading of the goods by the carrier, and by which the carrier undertakes to deliver the goods to the consignee.
- Time for Suit: COGSA provides that any lawsuit under it must be brought within one year after the delivery of the goods or the date when the goods should have been delivered.
- Jurisdiction and Validity of Contract Terms: COGSA also contains provisions regarding the validity of contract terms and forum selection clauses, under which parties can agree to litigate disputes in a particular location.
- Act of God: If the damage or loss was caused by a natural disaster that could not have been prevented, the carrier may not be held liable.
- Act of War: If the damage or loss occurred as a result of war or an armed conflict, the carrier may be exempted from liability.
- Seaworthiness of the Vessel: If the carrier has taken due diligence to ensure the ship was seaworthy before the journey began, they may not be held responsible for losses arising from the ship’s condition.
- Negligence in Navigation or Management: The carrier might not be held liable for losses resulting from negligence of the ship’s crew in navigation or in the handling and management of the ship.
- Inherent Defect of the Goods: The carrier is not liable for losses arising from the inherent nature of the goods, such as perishability, fragility, etc.
- Insufficient or Inadequate Packing: If the cargo was not properly packed or was inadequately described, the carrier may be exempted from liability.
- Strike, Riot, or Civil Commotion: Losses resulting from strikes, riots, or civil commotions may be considered as exempt risks under COGSA.
- Other Exempt Causes: The carrier might also be exempt from liability if the loss or damage can be attributed to an attempt to save life at sea, or from reasonable measures to save property at sea.
In summary, while COGSA seeks to protect the interests of the shipper by making the carrier responsible for the goods carried, it also provides certain defenses to the carrier to protect them from situations beyond their control. Therefore, COGSA represents a balanced approach to addressing the complexities of maritime transport, providing a legal framework that takes into account the unique risks and challenges of transporting goods by sea.
In practice, COGSA often extends beyond U.S. shores. Many international ocean bills of lading include a “Paramount Clause” that makes COGSA the governing law even when the carriage is between foreign ports. However, certain details such as the limitation of liability may differ depending on the application of national or other international laws.
Overall, COGSA provides a framework for defining the rights, responsibilities, and liabilities of all parties involved in the sea carriage of goods, aiming to balance their interests and promote predictability and stability in international trade.
The Burden of Proof under COGSA
In case of a dispute related to the loss or damage of goods, the initial burden of proof lies with the shipper or the cargo owner. They must demonstrate that the goods were in good condition when handed over to the carrier, and that they were damaged when they were delivered.
Once this is established, the burden of proof shifts to the carrier, who must prove that they were not negligent and that the loss or damage falls within one of the COGSA’s exemptions.
The Fair Opportunity Requirement under COGSA
Under COGSA, the shipper has the ‘fair opportunity’ to declare a higher value for their cargo at the time of shipment and pay a higher freight rate for increased protection. If this opportunity is provided and the shipper fails to declare a higher value, then the $500 per package liability limitation would apply.
Extension to Multimodal Transport under COGSA
While COGSA originally applied only to sea transport, in practice it is often extended to cover multimodal transport (i.e., transportation involving different modes such as rail, road, air, and sea) as well. This usually happens through the use of a ‘Clause Paramount’ in the bill of lading or the contract of carriage, stating that COGSA will apply to all legs of the transportation, not just the sea leg.
However, such an extension of COGSA’s applicability can be complex and is often subject to legal challenges, particularly in cases where another country’s laws or a different international convention might apply to the non-sea legs of the transportation.
Deviation from the Agreed Route under COGSA
Under COGSA, if a carrier deviates from the agreed route (which can be considered a serious breach of the contract), they may lose the protections and limitations provided by COGSA. In such cases, the carrier can be held fully liable for any loss or damage to the cargo.
In summary, the Carriage of Goods by Sea Act (COGSA) plays a significant role in governing the rights and responsibilities of shippers and carriers in sea transport, and understanding its provisions can be crucial for all parties involved in the carriage of goods by sea.
Understanding the Carriage of Goods by Sea Act (COGSA)
Introduced during the 1930s, the Carriage of Goods by Sea Act (COGSA) is a legal statute formulated to govern the rights and obligations between the proprietors of the cargo being transported (referred to as “shippers”) and the individuals or entities responsible for transporting the cargo for a fee (referred to as “carriers”).
Carriage of Goods by Sea Act (COGSA) holds significant importance in the realm of maritime legislation as it applies to agreements pertaining to the transportation of goods by sea between foreign and United States ports, involving the issuance of Bill of Lading (B/L). Due to its favorable provisions and conditions, carriers frequently incorporate Carriage of Goods by Sea Act (COGSA) into their domestic shipping contracts. One of the most renowned and contentious aspects of Carriage of Goods by Sea Act (COGSA) is the provision limiting liability to $500 per package. As stipulated in Carriage of Goods by Sea Act (COGSA) §4(5), if a package is lost or its contents are destroyed, the carrier may be entitled to restrict their liability to $500. However, United States courts have established two prerequisites that must be fulfilled by a carrier before they can enforce the liability limitation under COGSA.
Firstly, the carrier must provide the shipper with “Adequate Notice” of the $500 limitation by explicitly adopting the terms of Carriage of Goods by Sea Act (COGSA) into their BLs.
Secondly, the carrier must grant the shipper a “Fair Opportunity” to circumvent the per-package limitation by declaring a higher value for the goods.
1- Adequate Notice
Carriers can fulfill the requirement of “adequate notice” by incorporating Carriage of Goods by Sea Act (COGSA) into their BLs through a Clause Paramount. This prerequisite is intended to inform the shipper that Carriage of Goods by Sea Act (COGSA) governs the Bill of Lading (B/L) and to caution them about the associated limitations imposed by Carriage of Goods by Sea Act (COGSA). However, the definition of “adequate notice” becomes somewhat ambiguous when the wording in the Bill of Lading (B/L) is excessively small or blurred to the point of illegibility. In fact, several United States courts have reasoned that such an “illegible statement” of Carriage of Goods by Sea Act (COGSA)fails to provide the shipper with sufficient notice, and consequently, Bill of Lading (B/L) containing “minuscule or indistinct text” are deemed inadequate for notifying the shipper of Carriage of Goods by Sea Act’s (COGSA) incorporation. Thus, carriers must be mindful that printing their Bill of Lading (B/L) with small, blurred, or illegible fonts could potentially jeopardize their entitlement to the $500 per package limitation.
2- Fair Opportunity
The second prerequisite necessary to restrict a carrier’s liability under Carriage of Goods by Sea Act (COGSA) is the requirement of an “Fair Opportunity.” A carrier can utilize the liability limit per package outlined in Carriage of Goods by Sea Act (COGSA) only if it affords the shipper an equitable opportunity to choose a higher liability by paying a correspondingly increased charge.
What does this signify precisely? A division of authority has emerged among the circuit courts regarding whether an “equitable opportunity” necessitates the carrier to provide the shipper with a specific chance to declare a higher value, such as granting the shipper a blank space in the Bill of Lading (BL) to indicate a higher value, or simply referring to Carriage of Goods by Sea Act’s (COGSA) restrictions through the Clause Paramount.
The majority of US courts have adopted the latter perspective, affirming that a shipper possesses constructive notice of Carriage of Goods by Sea Act’s (COGSA) limitation if the BL expressly incorporates Carriage of Goods by Sea Act (COGSA)via the Clause Paramount, irrespective of whether it contains a blank space for the shipper to insert a higher valuation. However, the 9th Circuit Court of Appeals, which holds legal jurisdiction over the entire West Coast of the US, has embraced a more stringent interpretation of the statute and now requires carriers to provide a space in their Bill of Lading (B/L) that enables the shipper to insert a higher value. As a result, West Coast carriers that fail to offer shippers an opportunity to declare a higher value face the risk of forfeiting their rights to the $500 per package limitation.
Practically speaking, the majority of shippers carry their own cargo insurance. A customary cargo insurance policy will reimburse the shipper for any lost or damaged cargo while in transit. However, these policies have their own specific terminology, notice requirements, and subjective elements, which may deceive the shipper into thinking that the cargo is insured when, in reality, it is not. To avert potential conflicts in the future, shippers should carefully review the terms and conditions of their cargo policy.
It is essential for shippers to pay particular attention to the policy’s deductible, geographical limitations, and the basis for evaluating the goods (actual cash value versus replacement cost). Moreover, if the shipped goods are unconventional or oversized, it would be wise for the shipper to understand any limitations the policy might impose on “on-deck” shipments. Frequently, cargo policies exclude or significantly restrict the coverage for goods shipped on the deck of a barge or ship.
In summary, a well-crafted cargo insurance policy can prevent numerous complications in the future. However, shippers must ensure that the language clearly encompasses the risks involved and avoids any concealed provisions.
The transportation of goods by sea, while providing a convenient means of shipping cargo, can lead to intricate legal complications in the event of loss or damage during transit. Carriers can mitigate this risk by explicitly notifying the shipper that Carriage of Goods by Sea Act (COGSA) governs their Bill of Lading (B/L) in a legible font and by amending their BL to include a blank space enabling shippers to declare a higher value. Conversely, shippers should be aware of the impact of Carriage of Goods by Sea Act (COGSA) on their shipped cargo and object to any illegible Bills of Lading (B/Ls).
To further mitigate this risk, shippers should secure a cargo insurance policy that sufficiently covers the value of the goods shipped, and remain vigilant for any language that may restrict the policy’s scope and lead to unexpected consequences in the future.
Differences Between the COGSA and the Harter Act
Carriage of Goods by Sea Act (COGSA) is enforced by virtue of the law on contracts for the transportation of goods by sea, to and from foreign ports as well as U.S. ports. The Harter Act is applicable to the transportation of goods to and from U.S. ports. Carriage of Goods by Sea Act (COGSA) supersedes the Harter Act concerning contracts of carriage related to international trade.
Parties involved in the transportation of goods between U.S. ports often choose to incorporate the provisions of Carriage of Goods by Sea Act (COGSA) into their contracts. This is not an uncommon practice.
It may be questioned why a carrier would consent to expand the scope of coverage. One possible reason is that Carriage of Goods by Sea Act (COGSA) offers carriers a wide range of defenses, and if liability arises, it can be limited.
Carriage of Goods by Sea Act (COGSA) governs the period from the goods being loaded onto the vessel until their discharge (“tackle to tackle”), whereas the Harter Act applies from the preloading or receipt of cargo to the post-discharge or delivery of the goods.
Neither the Harter Act nor Carriage of Goods by Sea Act (COGSA) applies to the transportation of live animals, and Carriage of Goods by Sea Act (COGSA) does not extend to cargo carried on the deck of a vessel.
Other notable distinctions between the two acts are that Carriage of Goods by Sea Act (COGSA) imposes a limitation of $500 per package, which is not present in the Harter Act. Additionally, claims under Carriage of Goods by Sea Act (COGSA) must be filed within one year, whereas the Harter Act does not specify a time limit for claims.
In relation to time limitations imposed by Carriage of Goods by Sea Act (COGSA) with regards to claims, a shipper is required to initiate legal proceedings for cargo damage within a span of one year subsequent to the “delivery” of the merchandise. Nonetheless, Carriage of Goods by Sea Act (COGSA) fails to provide an explicit definition for the term “delivery.” Courts have, however, construed delivery to transpire when the carrier relinquishes custody of the cargo to the party entitled to receive it under the law. It is noteworthy that if the goods are lost, the commencement of the one-year period is calculated from the point at which they ought to have been conveyed.
Who is a COGSA Carrier and What Are the Carrier’s Duties?
A Carriage of Goods by Sea Act (COGSA) Carrier typically refers to the proprietor of the vessel, the vessel itself (in rem), or a time charterer who engages in a contract of carriage and issues a bill of lading.
A Carriage of Goods by Sea Act (COGSA) Carrier bears certain responsibilities as specified by section 3(1). Precisely, the carrier, prior to and at the commencement of the voyage, must exercise utmost care to ensure the provision of a seaworthy ship, appropriately staffed, equipped, and supplied; and to ensure that the holds, refrigeration and cooling chambers, as well as all other areas of the vessel where goods are transported, are suitable and secure for their storage, preservation, and transportation.
Section 3(2) of Carriage of Goods by Sea Act (COGSA) mandates the carrier to “adequately and cautiously load, handle, stow, tend to, and discharge the goods carried.”
Upon receipt of the goods, the carrier is obligated to issue a Bill of Lading (B/L), when requested by the shipper. Notably, the carrier cannot employ an exculpatory clause to evade the responsibilities and obligations outlined in Sections 3(1) and 3(2) of Carriage of Goods by Sea Act (COGSA), which necessitate the carrier to exercise due care or due diligence. Consequently, the liability of the carrier is established based on fault and negligence, rather than mere damage or loss to the cargo.
What Does the Carrier’s Obligation Entail in Ensuring Vessel Seaworthiness?
Seaworthiness, a term of relative nature, hinges upon the vessel’s capability to adequately transport the cargo it has undertaken. As per Section 4(1) of Carriage of Goods by Sea Act (COGSA), neither the carrier nor the vessel owner can be held liable for any loss or damage resulting from the unseaworthiness of the vessel, unless it can be proven that due diligence was not exercised in making the ship fit for the voyage.
Therefore, the carrier’s liability only arises if negligence is demonstrated in failing to identify or rectify any defects discovered. The duty to exercise due care is incumbent upon the carrier both before and at the outset of the voyage.
Consequently, the carrier cannot be held responsible for cargo damage caused by an unseaworthy condition that was not reasonably discoverable or emerged after the commencement of the voyage.
Carrier Immunities Under the Carriage of Goods by Sea Act (COGSA)
Pursuant to Section 4(1), Carriage of Goods by Sea Act (COGSA) carriers have 17 enumerated immunities, or defenses. These defenses are based upon a variety of circumstances. Some of the enumerated defenses can arise due to external forces, such as acts of public enemies, war, arrest or restraint of princes (or governments), and strikes. Defenses can arise due to the negligence of employees, such as errors in navigation. Defenses can also be attributed to natural forces such as acts of God and perils of the sea. Additionally, in some cases, carrier defenses can be attributed to the acts of the shipper, such as losses resulting from inherent vices, insufficiency of packaging or marking.
- Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship;
- Fire, unless caused by the actual fault or privity of the carrier;
- Perils, dangers, and accidents of the sea or other navigable waters;
- Act of God;
- Act of war;
- Act of public enemies;
- Arrest or restraint of princes, rulers, or people, or seizure under legal process;
- Quarantine restrictions;
- Act or omission of the shipper or owner of the goods, his agent or representative;
- Strikes or lockouts or stoppage or restraint of labor from whatever cause, whether partial or general: Provided, that nothing herein contained shall be construed to relieve a carrier from responsibility for the carrier’s own acts;
- Riots and civil commotions;
- Saving or attempting to save life or property at sea;
- Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality, or vice of the goods;
- Insufficiency of packing;
- Insufficiency or inadequacy of marks;
- Latent defects not discoverable by due diligence; and
- Any other cause arising without the actual fault and privity of the carrier and without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage
The Obligations of Demonstrating Liability in a COGSA Case
The burden of proof initially lies upon the cargo owner under Carriage of Goods by Sea Act (COGSA) to establish a prima facie case by demonstrating that the cargo was delivered to the carrier in a state of good order and condition but was discharged in a damaged state. To absolve itself from liability, the carrier must subsequently demonstrate that the cause of the loss can be attributed to one of the excepted causes specified in Section 4(1) and that it acted diligently in caring for the cargo. If successful, the burden then shifts back to the cargo interests, who must prove that the damage resulted from the carrier’s negligence.
In cases where negligence is proven to be a contributing factor to the damage, the burden shifts once more to the carrier to establish the extent to which the loss can be attributed to its negligence versus an excepted cause. Failure to meet this burden will render the carrier liable for the entire loss.
Per-Package Limitation under COGSA
In accordance with Carriage of Goods by Sea Act (COGSA) provisions, when cargo sustains damage or loss under circumstances not covered by the 17 specified defenses, the shipper is entitled to seek compensation. Carriage of Goods by Sea Act (COGSA) establishes a limitation on the carrier’s liability, capping it at $500 per package in such cases. For carriers to invoke this per-package restriction, U.S. courts generally require clear notification of the limitation and ensure that the shipper has been given a fair opportunity to declare a higher value beyond the prescribed limit.
To fully grasp the significance of the $500-per-package restriction, it is crucial to comprehend the definition of a “package” within the context of Carriage of Goods by Sea Act (COGSA). If the cargo is entirely enclosed, it qualifies as a package for Carriage of Goods by Sea Act (COGSA) purposes. Challenges arise when goods are only partially enclosed. Most courts consider the parties’ intention, as indicated in the bill of lading. It is also worth noting that a party with a cargo interest will never be awarded more than the actual damages incurred.
When goods are not shipped in a “package,” the liability is limited to $500 per CFU (customary freight unit). The CFU (customary freight unit) is determined based on the method employed to calculate the freight stated in the carriage contract, typically based on weight.
Unreasonable Deviations under COGSA
There are various ramifications under Carriage of Goods by Sea Act (COGSA) contingent upon whether a deviation is deemed reasonable or unreasonable. A deviation with the intention of safeguarding life or property at sea does not constitute a violation of the contract of carriage, thus absolving the carrier of any liability for losses or damages resulting from said deviation.
Conversely, Carriage of Goods by Sea Act (COGSA) stipulates that a deviation for the purpose of cargo or passenger loading/unloading shall be considered unreasonable.
Carriage of Goods by Sea Act (COGSA) does not explicitly delineate the consequences of an unreasonable deviation. However, the majority of courts hold that an unreasonable deviation not only strips the carrier of the defenses available under Carriage of Goods by Sea Act (COGSA) but also eliminates the limitation of $500 per package, provided that there exists a causal link between the deviation and the incurred damage or loss of cargo.
In summary, an ocean carrier is not inherently accountable for any potential incidents that may occur to the cargo during transportation. The Carriage of Goods by Sea Act (COGSA) does not impose strict liability. The liability under Carriage of Goods by Sea Act (COGSA) is contingent upon fault or negligence. The carrier can assert defenses due to internal or external factors. Hence, it is crucial for both the carrier and the shipper to conduct a cargo assessment to determine if the cargo can be exempted from liability.
What is the Article 3 of the Carriage of Goods by Sea Act?
The Article 3 of the Carriage of Goods by Sea Act (COGSA) outlines the responsibilities and liabilities of the carrier (typically the shipowner or charterer). Here’s a general description:
Article III – Responsibilities and Liabilities
- The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to:
- Make the ship seaworthy.
- Properly man, equip, and supply the ship.
- Make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage, and preservation.
- Subject to the provisions of Article IV, the carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.
- After receiving the goods into his charge, the carrier or the master or agent of the carrier shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things:
- The leading marks necessary for identification of the goods.
- The number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper.
- The apparent order and condition of the goods.
And so on. Note that this is a summary, and the actual legal text of Article 3 is more detailed and technical.
Carriage of Goods by Sea Act 1971 vs 1992
The Carriage of Goods by Sea Act 1971, which applies in the United Kingdom, implemented the Hague-Visby Rules into British law, providing a framework for the rights and obligations of shippers, carriers, and consignees under a bill of lading. The Act sets out provisions related to carrier liabilities for loss or damage, limits of liability, and the effect of a bill of lading as a document of title.
The Carriage of Goods by Sea Act 1992, on the other hand, did not replace the 1971 Act but supplemented it. It came into force to address certain deficiencies in the previous Act, particularly concerning the rights of suit under a bill of lading. The 1992 Act provides for the transfer of rights and obligations under a bill of lading when it is transferred to a third party, and also expanded the definition of a bill of lading to include sea waybills and ship’s delivery orders.
Key differences between the 1971 and 1992 Acts include:
- Transfer of Rights and Obligations: The 1992 Act allowed for the transfer of rights and obligations under a bill of lading when it is transferred to a third party. Under the 1971 Act, the lawful holder of a bill of lading had a right to sue the carrier, but did not assume any of the liabilities under the contract of carriage. This created legal complications which the 1992 Act sought to address.
- Expanded Definition of a Bill of Lading: The 1971 Act specifically applied to contracts of carriage covered by a bill of lading. The 1992 Act expanded this definition to include sea waybills and ship’s delivery orders, thereby broadening the range of contracts of carriage to which the Act applies.
- Rights of Suit: Under the 1971 Act, the right of suit was generally limited to the lawful holder of a bill of lading. The 1992 Act expanded this by giving rights of suit to a person who has become the lawful holder of a bill of lading, or a person to whom delivery of the goods was to be made by the shipper or charterer.
Responsibilities and Liabilities of the Carrier: The carrier is bound, before and at the beginning of the voyage, to exercise due diligence to make the ship seaworthy, properly man, equip and supply the ship, and make the holds fit and safe for the receipt, carriage, and preservation of the goods.
- Limitations of Liability: The carrier’s liability for loss or damage to the goods is limited to an amount based on the weight or volume of the goods, unless a higher value has been declared by the shipper and inserted in the bill of lading.
- Period of Responsibility: The carrier’s responsibilities apply from the time when the goods are loaded onto the ship to the time they are discharged from the ship.
The Carriage of Goods by Sea Act 1992 complements the 1971 Act by addressing some important issues:
- Transferring Rights and Obligations: The 1992 Act clarifies that when the bill of lading is lawfully transferred to a third party, the rights and responsibilities under the bill of lading pass to that third party. This eliminates confusion and complications that could arise when the holder of the bill of lading is not the original shipper or consignee.
- Broader Application: The 1992 Act broadens the scope of the 1971 Act by applying its provisions not only to bills of lading but also to sea waybills and ship’s delivery orders.
- Rights of Suit: The 1992 Act allows the right of suit to pass to a person who becomes the lawful holder of a bill of lading, or to a person to whom delivery of the goods was to be made by the shipper or charterer. This allows for more flexibility in enforcing the obligations under a bill of lading.
The two Acts together form the backbone of the UK’s law on the carriage of goods by sea. They establish the basic principles and standards for carriers, shippers, and consignees, and provide a legal framework for resolving disputes and claims. It is important for anyone involved in the shipping industry to understand these laws and their implications. As international commerce continues to evolve, these laws may continue to be updated to address new issues and challenges in the industry.
However, it’s always advisable to seek professional legal advice when dealing with complex matters related to maritime law. This is a high-level overview and the application of these laws can vary based on numerous factors including the specifics of the contract, the nature of the goods, the details of the transportation, and the countries involved.
Both the Carriage of Goods by Sea Act 1971 and 1992 play a crucial role in modern shipping law, with the 1992 Act addressing some of the deficiencies of the 1971 Act to provide a more comprehensive and robust legal framework for the carriage of goods by sea.
Please note, the details may vary by jurisdiction. It’s also important to note that both Acts only apply to carriage of goods by sea where a Bill of Lading (B/L) or similar document of title is issued. Other forms of carriage are likely to be governed by different rules or conventions.
Carriage of Goods by Sea Act UK vs USA
The Carriage of Goods by Sea Act (COGSA) is a key piece of legislation related to maritime law in both the United States and the United Kingdom, but the two versions of the act have some important differences.
The UK version of the Carriage of Goods by Sea Act was originally passed in 1924, and it was subsequently replaced by the Carriage of Goods by Sea Act 1992. This act mainly covers Bills of Lading (B/L) and similar documents and addresses issues such as the rights and liabilities of the carrier and the shipper. The UK version of Carriage of Goods by Sea Act (COGSA) is somewhat broader in scope than the US version, encompassing not only goods carried by sea but also the period before loading and after discharge if the contract of carriage so provides. This act is also known for applying the Hague-Visby Rules which are an updated version of the original Hague Rules. The Hague-Visby Rules introduce some additional provisions and protections not present in the original Hague Rules.
The United States version of the Carriage of Goods by Sea Act (COGSA) was enacted in 1936, primarily to address issues related to the carriage of goods by sea from U.S ports in foreign trade. Carriage of Goods by Sea Act (COGSA) in the United States implements the Hague Rules, not the updated Hague-Visby Rules. The act covers the period from when the goods are loaded on the ship to when they are discharged from the ship. It sets out a number of responsibilities and liabilities for carriers, as well as defining the maximum liability of a carrier in the event of loss or damage to goods. The US Carriage of Goods by Sea Act (COGSA) is applicable by default unless parties agree to different terms, with some limitations.
Both acts are designed to clarify and regulate the responsibilities and liabilities of carriers when transporting goods by sea. However, they do differ in several respects, primarily in terms of scope and the extent of carrier liability. It’s important for shippers, carriers, and their respective legal advisors to be familiar with the specific details and nuances of the Carriage of Goods by Sea Act (COGSA) as it applies in their jurisdiction. This understanding is crucial when drafting contracts of carriage and in dispute resolution.
Remember, however, this is just a broad overview. For specific legal advice or in-depth analysis, legal professionals should be consulted.
Further Differences between the US and UK versions of COGSA
One key difference between the US and UK versions of Carriage of Goods by Sea Act (COGSA) is their treatment of carrier liability. In the UK, under the Hague-Visby Rules incorporated into Carriage of Goods by Sea Act (COGSA) 1992, the carrier’s maximum liability is set at a level of 666.67 units of account per package or unit, or 2 units of account per kilogram of gross weight of the goods lost or damaged, whichever is the higher.
On the other hand, under the US Carriage of Goods by Sea Act (COGSA), the carrier’s liability is generally capped at $500 per package, or in the case of goods not shipped in packages, per customary freight unit. This cap can only be broken if the carrier is proven to have acted with intent to cause damage, or recklessly and with knowledge that damage would probably result.
Moreover, the UK version applies mandatorily to outbound shipments, while the US version doesn’t. For inbound shipments to the UK, the carrier and shipper can agree to use different rules. For outbound shipments from the UK, the Hague-Visby Rules apply, irrespective of any agreement to the contrary.
The US version of COGSA is only mandatory for outbound shipments. For inbound shipments, the parties can contract out of the statute. Also, the US COGSA’s application can be extended to the periods before loading and after discharge if the parties expressly agree in the bill of lading.
The U.S. Carriage of Goods by Sea Act (COGSA) applies by force of law only to the period from tackle to tackle (that is, from the time the cargo is loaded onto the ship until it is discharged). However, the “Paramount clause” in most bills of lading extends the application of the U.S. Carriage of Goods by Sea Act (COGSA) to the entire period in which the carrier has custody of the cargo, typically from receipt at the port of loading to delivery at the port of discharge.
The above differences emphasize the importance of understanding the specific terms and conditions set out in any bill of lading or other contract of carriage. Depending on the specifics of the shipment and the jurisdictions involved, there may be significant implications for both shippers and carriers in terms of risk and liability.
To navigate these laws properly, seeking advice from legal experts in maritime law is essential. They can provide guidance and detailed analysis to protect interests and prevent potential disputes.