MULTIMODAL BILLS OF LADING SIMPLIFY LIABILITY PROCESS IF DAMAGE OCCURS

Today, multimodal container movement is the prevailing method of international common carriage of cargo. Many ocean carriers new offer door-to-door service throughout the world. A sealed cargo container may move from a shipper’s facility by various modes of transportation, traversing different countries, oceans and hemispheres until it arrives at the consignee’s premises. The container may be carried by trucks, barges, railroads, coastal feeder ships and large ocean container vessels before reaching its destination.

If the containerized cargo becomes damaged, who is responsible for the loss? This is a difficult question to answer because it is often impossible to determine where the damage occurred. Each carrier in the transportation chain may be subject only to its national laws. These laws may find liability only when the cargo owner proves the damage occurred while the cargo was in the custody of the carrier.

In the United States, a cargo movement may be subject to the Harter Act, Pomerene Act, Carriage of Goods by Sea Act (Cogsa), Carmack Amendment (rail and motor transport), as well as federal common law. Cogsa has a one-year time limit for bringing suit and a $500 liability limit per package or customary freight unit. Carmoack has a nine-month claim notice requirement, a two-year suit provision and no liability limit.

Many of the uncertainties formerly associated with international multimodal transportation have been eliminated by the use of ocean carriage multimodal through bills of lading. The ocean carrier that issues the bill agrees to be responsible for the goods from point of origin to final destination, regardless of where the loss occurs. The carrier also stipulates the shipment will be governed by Cogsa.

The recently reported M/V Mitchell case (1992 A.M.C. 63) in New York Southern District Court illustrates how the bill of lading can easily resolve liability issues in multimodal situations. In Mitchell, the shipper sued the ocean carrier for $200,00 because it contaminated its containerized chemical shipment. The ocean carrier sought to limit its liability to $500 under Cogsa.

The shipper loaded chemicals at its West Virginia plant into an ocean carrier’s tank container. The cargo was then trucked to New York, loaded aboard the shipowner’s vessel and transported to England where the cargo was found contaminated. The court was faced with the dilemma of determining whether the Carmack Amendment (with no liability limit) applied to the truck transport or whether Cogsa (with its $500 liability limit) applied to the entire journey.

The bill stated that Cogsa would govern before loading and after discharge from the vessel and throughout the entire time the goods were in the custody of the ocean carrier. The shipper argued that the bill signified Carmack would govern the inland transportation.

The court scrutinized the bill of lading and found a clause stating that if it could not be determined where the damage occurred, it would be conclusively presumed to have happened on the vessel and Cogsa would apply. Consequently, the ocean carrier was permitted to limit its liability to $500 because it was impossible to determine when the contamination occurred.

Multimodal bills of lading should alleviate cargo owners’ liability concerns when it is impossible to determine where damage occurs. However, there is a legal trade-off. The ocean carrier may be permitted to use the limitation of liability provisions of Cogsa.


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