US COGSA update

Chester Hooper comments on the attempts to achieve uniformity in the law that governs the Carriage of Goods by Sea between the United States and the rest of the maritime world

THE United States was very close to uniformity with the rest of the maritime world when it enacted the Carriage of Goods by Sea Act (COGSA). But, over the years, the interpretation of COGSA by the US courts has caused it to drift from many of its Hague Rules partners.

The disunity widened as many nations, but not the US, enacted the Visby Amendments to the Hague Rules and the 1979 SDR Protocol. The Hamburg Rules created the potential for further disunity, but not many nations enacted them. At the present time, nations that represent about 70 per cent of US foreign trade have enacted the Hague/Visby Rules, and nations that represent about two per cent of US foreign trade have enacted the Hamburg Rules. This enactment by most of the maritime world of the Visby amendments, and the enactment by a few nations of the Hamburg Rules, has increased the drift from uniformity.

The US government would not decide whether to follow the Hague/Visby or the Hamburg Rules route. As a result, it has been left with its COGSA, basically the 1924 Hague Rules. The US government, through staff members of the Department of Transportation, the United States Senate, and the United States House of Representatives, indicated that the US would take no action until, or unless, all aspects of the US maritime industry agreed on the course of action to be taken.

In 1992, the Maritime Law Association of the United States (MLAUS) formed a working group to attempt to form a consensus amongst the various segments of the US maritime industry. By May 1996, that lengthy process was complete. MLAUS approved, by an overwhelming vote at its May 1996 meeting, a proposal to amend COGSA. MLAUS did not want to draft a law that would separate the US from the rest of the maritime world and it hoped that the new COGSA would constitute the first step by the US toward uniformity.

The second, and hopefully final, step is now being taken by CMI and UNCITRAL, which are co-operating to draft a new convention. The CMI is preparing a good part of the new convention, and will deliver it to UNCITRAL by the end of 2001. UNCITRAL, in co-operation with CMI, will complete the work. UNCITRAL has scheduled its first working session at UN Headquarters in New York during April 2002.

The CMI has invested a great deal of productive time and effort in the project. The concept was first studied in a working group chaired by a former president of CMI, Francesco Berlingieri. Once the study was complete, an International Subcommittee (ISC) was formed to complete the project, chaired by Stuart Beare of the British Maritime Law Association (BMLA).

A working group of the ISC has provided guidance to the ISC while a drafting committee has been developing the instrument. Two principal drafters, one from a common law discipline and the other from a civil law discipline, have provided the first drafts. Professor Michael Sturley is the common law drafter, and Gertjan van der Ziel is the civil law drafter. Professor Sturley is also the rapporteur of the ISC and was the reporter and principal drafter of the MLAUS working group that drafted the new US COGSA.

MLAUS appointed three delegates with US COGSA drafting experience to the CMI's ISC. The experience gained by the MLAUS participants in the CMI ISC has prepared them well for the ISC. Some aspects of the new US COGSA have found their way into the present draft of the CMI instruments, while other aspects of the new US COGSA have been modified in the CMI draft in consideration of the laws of other nations. Other parts of the CMI instrument, however, are not found in the new US COGSA.

Both the new COGSA and its likely successor, the CMI instrument, must form a compromise amongst all aspects of the transportation industry and amongst various nations and legal regimes. They must also be drafted with sufficient clarity to allow uniform interpretation by the courts or arbitrators of various nations.

Significant changes being considered by the CMI include: a multimodal application; clarification of the burdens of proof between carrier and cargo interests; clarification of the effect of shipper's load and count and shipper's weight, load and count clauses on bills of lading; and the manner in which the catalogue of defences, absent error of navigation or management, will apply.

Multimodal application

The present COGSA and Hague/Visby Rules apply with the force of law only to a vessel's tackle-to-tackle period of transportation. This limited scope is obviously not well suited for present-day multimodal transportation. A third party logistics contract, and bills of lading issued under that contract, may evidence a contract to carry project cargo, such as a factory on more than one ship and on many other modes of transportation. Similarly, containers are routinely carried on several ships and on several other modes and means of transportation.

The present international status of the law may apply various different regimes to various different modes and means of transportation. Let us assume that cargo will be carried from Chicago, Illinois, in the US to Madrid, Spain. The cargo may be carried by truck from its place of manufacture in Chicago to a railroad. The railroad may carry it to the Port of New York, where it will be carried by truck to a ship. It may be carried on board a "line haul" vessel to the Port of Rotterdam, where it may be transhipped to another vessel to carry it to Malaga, Spain. From Malaga, the cargo may be carried by truck and/or rail to Madrid.

At the present time, if the carrier's bill of lading is properly drafted, and if suit were brought in the US, the US Carriage Of Goods by Sea Act would probably apply to the entire transportation. If the carrier's bill of lading were not properly drafted, the strict US Carmack Amendment to the Interstate Commerce Commission Act could apply from the moment the cargo was picked up at the manufacturer's premises until it was loaded on board a vessel, and the US Carriage Of Goods by Sea Act would apply while the cargo was on board the ship.

If the cargo is transferred at Rotterdam from one ship to another, the Dutch law governing that means of transportation might apply. Once the cargo is discharged from a ship in Malaga, the CMR might govern its transportation to Madrid. Thus, the court or arbitrators would have to determine the location of the cargo when any damage occurred, before they may determine which regime to apply. If suit were filed in Europe, the court may be required to apply the CMR regime to the European inland transportation even though the bill of lading attempted to extend COGSA to the entire transportation.

The proposal to amend COGSA would apply COGSA to the entire transportation, but that aspect of the new COGSA might only be enforced by US courts. The present status of the CMI instrument would apply to the entire multimodal transportation, but would defer to various nations' laws or conventions that apply mandatorily to certain inland parts of the transportation. This "network" system of liability appears to be necessary because it may be politically difficult, or impossible, at this time, to persuade adherents to the CMR to change that convention to give precedence to a new CMI/UNCITRAL Convention. It is hoped that sometime in the future the CMR may be amended to permit a new CMI/UNCITRAL Convention to apply to an entire multimodal move.

Burdens of proof

Under the present US law, and the law of some other nations, a carrier is held 100 per cent at fault when more than one event causes damage, even though the carrier may be liable for one event and not for the other. If, for instance, damage was caused to cargo by a combination of improper ventilation and insufficient packaging, the carrier would be required to identify the pieces of cargo that were damaged by the insufficient packaging as opposed to improper ventilation. This insuperable burden leaves the carrier liable for the damage caused by insufficient packaging as well as the improper ventilation.

The new US COGSA, and the present status of the CMI draft, would impose an equal burden on the carrier and cargo interests. The judge or arbitrators would be encouraged to apportion damage. The judge or arbitrators could determine, for instance, that 70 per cent of the damage was caused by insufficient packaging and 30 per cent by insufficient ventilation, and award cargo interests 30 per cent of their damages.

Shipper's load and count clauses

The drafters of the original Hague Rules clearly expressed their intent to permit a carrier to clause a bill of lading with a term such as "shipper's load and count" if the carrier did not have reasonable means to determine the quantity of cargo it received. Despite this expression of intent, the courts of the US and other nations have refused to honour such clauses.

The courts of the US have reasoned that COGSA permits a carrier to refuse to issue a bill of lading containing the quantity description if the carrier does not have reasonable means to check that quantity. They have treated the quantity description of cargo said by the shipper to have been loaded inside a sealed container as prima facie evidence of the cargo received by the carrier even if neither the seal nor the container was violated and that quantity was not found inside the container when the container was opened at its place of destination. Some courts have even stopped a carrier from denying that it received that quantity of cargo. The courts have made those decisions even though the face of the bill of lading had been claused with a term such as "shipper's load and count." Both the new US COGSA and the present draft of the CMI instrument would require courts or arbitrators to honour such clauses.

Error of navigation and management

Cargo interests have long complained that a carrier should not be able to escape liability by proving that negligence of one of its seagoing servants caused the damage. While this defence has set the law of admiralty apart from other law, and while it has been fun to argue the defence, it is time to change this law. At the CMI meetings in Singapore in February 2001, a clear majority of those speaking to this issue favoured either abolition of the error of navigation or management defence at this time, or abolition of the defence if carrier interests received something in return. In drafting the new US COGSA, it was thought that the improvement in the burdens of proof and honouring shipper's load and count clauses would constitute a proper trade-off.

It is likely that the CMI will not address two aspects of the new convention before it gives its instrument to UNCITRAL at the end of 2001. Those areas are jurisdiction and the amount of the package or weight limitation. The new US COGSA jurisdiction clause permits suit to be filed in the US if one of five conditions exist. MLAUS adopted these conditions from the Hamburg Rules.

The other unknown is the amount of a package or weight limitation. The Hague/Visby Rules and the US COGSA limit a carrier's liability to 666.67 SDRs per package or 2 SDRs per kilo, whichever is higher. In addition, they specify that a pallet or container will not constitute the package if the bill of lading enumerates smaller packages. The Hamburg Rules use the same system, but increase the limitation to 835 SDRs per package or 2.5 SDRs per kilo, whichever is greater.

According to the present schedule, the CMI will deliver a draft instrument to UNCITRAL on or before December 31, 2001. UNCITRAL will start meetings at the United Nations Headquarters in New York in April 2002. Those meetings are anticipated to last approximately two weeks. UNCITRAL will next meet in Vienna in the fall of 2002.

It is hoped that the great effort put into this project by the CMI, and by MLAUS, will help the joint CMI/UNCITRAL effort to complete an international convention in short order. It is further hoped that the US will ratify that convention.