Cargo Liability: Carmack vs. COGSA

John Anderson Cargo Liability, Transportation

The Supreme Court recently held that carriers (motor and rail) are entitled to the protections afforded by the Carriage of Goods by the Sea Act (“COGSA”) even if they provide only domestic service, that is, what generally is referred to as the “inland portion” of an international move. This means that the carrier’s liability generally is limited to $500 “per package,” which amount is frequently much less than under Carmack. To be entitled to the benefits of COGSA, the following conditions must exist:

  1. The shipment must be subject to COGSA, that is, it must be transported by an ocean carrier engaged in foreign trade;
  2. The ocean carrier must issue a through bill of lading, that is, one that covers the shipment from its point of origin in the foreign country to its ultimate destination in the United States;
  3. The ocean carrier’s through bill of lading must allow it to subcontract portions of the transportation provided (e.g., the inland portion); and
  4. The ocean carrier’s through bill of lading must contain a “Himalaya Clause” which extends the bill of lading’s defenses and liability limitations to subcontractors.

It is important for all parties to an international shipment to know which law governs liability. Shippers need to be aware of COGSA’s limits and the likelihood that those limits will apply to inland motor and rail carriers which, in turn, can impact the liability imposed on third party intermediaries and freight forwarders. Similarly, carriers need to know that Carmack does not always apply to their shipments and that other, more favorable, laws may apply.