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Opinion: Goodbye Hague, Hello Rotterdam

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11/22/2010 12:00:00 PM

By Jim Mahoney
Transportation Attorney

This Opinion piece appears in the Nov. 22 print edition of Transport Topics. Click here to subscribe today.

Here’s a forecast from those of us who write and review numerous transportation contracts: A new international law looms ahead that will be very beneficial to truckers if we strategize to take advantage of it.

Globalization continues to change the motor carrier industry, and with the Rotterdam Rules sailing into our legal waters, we will soon replace the Hague Rules of 1924, under which the United States enacted the Carriage of Goods by Sea Act, also known as COGSA.

As those involved in surface transport know quite well, the Carmack Amendment to the Interstate Commerce Act, first enacted in 1906, addresses our liability for cargo lost or damaged in interstate and adjacent foreign commerce, generally preempting state laws on contracts and negligence.

Sometimes, however, COGSA and Carmack intersect and clash.

COGSA governs rights and responsibilities among owners or insurers of cargo on the high seas, and its terms are incorporated by reference in most bills of lading for the foreign transport of goods to or from the United States.

Most such foreign BOL contain a “Himalaya clause,� i.e., a clause purporting to extend liability limitations that benefit the carrier to others acting as agents for the carrier, for example, stevedores or longshoremen. These clauses have been used successfully to limit motor carriers’ exposure beyond the traditional “tackle to tackle� liability under COGSA.

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Last summer, the U.S. Supreme Court confirmed the 9th Circuit and reversed the 2nd Circuit with its ruling in Kawasaki Kisen Kaisha v. Regal-Beloit Corp. As a result, it is now the law of the land that Himalaya clauses extend COGSA limitations to surface carriers — or at least to inbound shipments.

In contrast with Carmack, COGSA contains some juicy strategic limitations such as a one-year statute of limitations and the ability to contract for shorter claim reporting requirements than Carmack’s nine-month minimum.

The COGSA limitation most attractive to motor carriers is the $500 limit generally applied on a customary freight unit (CFU) or package. Never, under COGSA, will we be liable for an amount greater than the actual value, as we might be under Carmack. That’s reassuring for planning purchases of cargo insurance.

© 2010, Transport Topics Publishing Group. All rights reserved.


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Emil Estafanous, CPA, CFF, CGMA