Cargo Liability

UNCITRAL Negotiations

The World Shipping Council and the National Industrial Transportation League announced on September, 27, 2001, that they agreed on international cargo liability reform.           Press Release  >>         Joint Statement  >>

Both organizations are currently working with the U.S. Government to achieve this reform through a new international instrument being negotiated by the United Nations Commission on International Trade Law (UNCITRAL).

Background:

In the United States, the statute governing liability for the loss or damage of oceanborne cargo is the Carriage of Goods by Sea Act (COGSA). COGSA is the United States' enactment in 1936 of the international Hague Rules convention with some minor amendments. In 1968, a group of national maritime law associations, the Comité Maritime International (CMI), drafted the Visby Amendments to the Hague Rules(known now as Haque/Visby). Currently more than 70 percent of U.S. waterborne foreign trade is with countries which have ratified Hague/Visby . The United States, however, has not.

In 1978, UNCITRAL finished work on a new convention covering liability for the carriage of goods by sea known as the Hamburg Rules. The Convention never received significant acceptance and has only been ratified by countries representing about 2 percent of world trade.

In 1992, the Maritime Law Association of the United States (MLA) began a review of COGSA. Soon thereafter, the CMI formed an International Subcommittee on Transport Law which began drafting a new international instument on cargo liability with the intention of delivering that draft to UNCITRAL for governmental action. These two efforts tracked each other closely in form and content up until 1996, when the MLA decided to support legislation in the U.S. to unilaterally address the issues by amending COGSA. To date, no action has been taken on this issue by the U.S. Congress.

New International Instrument:

The CMI finished its work on a draft instrument late in 2001 and submitted the draft to UNCITRAL for governmental consideration. UNCITRAL held the first session of the Working Group to consider the new instrument in New York in April, 2002. By the end of 2006, the Working Group had held ten negotiating sessions.

The UNCITRAL Working Group continued its negotiations in April 2007 in New York.

The Working Group will reconvene in Vienna for the next negotiating session from October 15-26 Issues for discussion will include:

• Jurisdiction and arbitration;
• Limitation of liability
• Transport documents and electronic transport records
• Extent to which countries can take reservations to the instument
• List of potential topics to be deferred for future consideration in another instrument, such as a model law;

The World Shipping Council believes that development of an acceptable international instrument on cargo liability is appropriate and will support a regime that is substantively fair and balanced as well as politically acceptable for the United States and its trading partners. The Council is participating on the U.S. delegation to the UNCITRAL meetings.

Norfolk Southern V. Kirby Supreme Court Case

Early in 2004, a U.S. Court of Appeals issued a decision regarding cargo liability (Kirby v. Norfolk Southern). The case involved a shipment by an NVOCC, where equipment shipped from Australia to the U.S. was damaged during the U.S. rail carriage. The shipper sued the railroad and the Court found that the ocean carrier's bill of lading was ineffective in applying the normal cargo liability limits to the Norfolk Southern railroad, and that the NVOCC's bill of lading was similarly ineffective because the shipper had no contractual relationship with the railroad.

This ruling, if upheld, could have meant that the liability limits in an ocean carrier's bills of lading would not protect the ocean carrier, or its subcontractors, when an NVOCC's customer's cargo is damaged. The case also raised the issue of whether there would be uniform federal maritime law in the U.S. covering such cargo claims or whether there could be a profusion of different state laws being applied. This case was appealed by the railroad to the U.S. Supreme Court.

On March 24, 2004 the Council filed an amicus curiae brief with the U.S. Supreme Court in this case in support of Norfolk Southern (Brief  ) arguing 1) that NVOCCs do act as agents of the shipper for the purpose of binding their shipper customers to the liability limits and terms of the ocean carrier's bill of lading, and 2) that the performing carriers are also covered by the limits in the NVOCC's bill of lading. Oral argument before the Supreme Court took place in October, and in November, the Supreme Court of the United States unanimously ruled in favor of both arguments supported by the Council. The Court ruled that:

• A properly worded Himalaya Clause in an ocean carrier's bill of lading, issued to an NVOCC, protects the ocean carrier's subcontractors from liability to the NVOCC's customer to the same extent that the bill of lading protects the ocean carrier, regardless of the terms of the NVOCC's contract with its customer.

  
  

• An NVOCC acts as an agent for a shipper for the purpose of accepting limitation of liability provisions in an ocean carrier's bill of lading, thereby binding the NVOCC's shipper to the limitations in the ocean carrier's bill of lading.

In its decision, the Court noted the amicus briefs filed by industry, and recognized their importance in helping the Court bring needed clarity and uniformity to this inconsistent area of law and to determine the practical implications of the issues in question.

back to top