On Q

THE United States Carriage of Goods by Sea Act (COGSA) does not contain a piracy or force majeure defence to ocean carriers. Whenever a theft occurs and a plaintiff is able to establish its prima facie case of delivery of the cargo in good order and condition to the carrier, the carrier must avail itself of the Q Clause defence in order to escape liability for total or partial non-delivery.

46 USC §1304(2) of COGSA lists all the uncontrollable losses for which the carrier is not liable, and 1304(2)(q), commonly referred to as the Q Clause, provides that a carrier is not responsible for loss or damage resulting from:

‘Any other cause arising without the actual fault and privity of the carrier and without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage.’

A good example of a carrier’s attempt to use a Q Clause defence to escape liability for non-delivery of cargo can be found in the case of Levi Strauss & Co v Tropical Shipping & Construction Co Ltd. In this case, the ocean carrier, Tropical Shipping & Construction Co Ltd. issued a through bill of lading for the transportation of Levi Strauss & Co wearing apparel from the Dominican Republic to Little Rock, Arkansas. The bill of lading contained a paramount clause extending COGSA to the inland part of the transportation.

The shipment was transported by sea from the Dominican Republic to Florida. When it arrived in Florida, Tropical turned the cargo over to All Coast Intermodal Services Inc (All Coast), which it had hired to transport it by truck from Florida to Little Rock. The truck driver for All Coast picked up the cargo from Tropical at the port of Palm Beach, drove a little over 100 miles, and stopped around noon at a Day’s Inn hotel for an overnight visit in Melbourne, Florida with some family he had in the area. The driver left his truck and trailer, with the cargo inside, in the parking lot of the Day’s Inn that night. Although the driver left the trailer unhooked from the truck, he took no other security precautions. When he woke up the following morning his truck and trailer were missing.

Levi Strauss sued Tropical and All Coast for the loss. Tropical and All Coast defended the case by invoking the Q Clause defence of COGSA. The court found that Levi Strauss had established its prima facie case. It then turned to the Q Clause defence and pointed out that the carrier had the burden of establishing that defence. The court also found that the carrier could not establish that defence because the driver had not taken sufficient precautions to safeguard cargo that he knew was valuable and, by doing so, the driver had substantially increased the exposure of the cargo to foreseeable dangers.

In South Florida, the theft of high-value cargo is not uncommon. In fact, many trucking companies have designed specific protocols for their drivers to follow to help reduce or eliminate the risk of theft. For example, to reduce the risk of theft, trucking companies are instructing their drivers
(a) to go as far as possible from the shipper (at least 300 miles) before stopping,
(b) to not delay a load in transit for unnecessary reasons,
(c) to makes sure that one driver remains with the truck, and
(d) to ensure that no load is parked while in transit unless it is in a secure facility.

As the All Coast driver failed to take any of these precautions, any one of which could have prevented the theft, the court found the defendants liable for the loss. Trial on damages is scheduled for November this year.

Theft of high-value cargo occurs all over the world. Most of the large losses involve cargo sent overland, when fully loaded trailers are either stolen or hijacked. Carriers must take certain precautions to reduce the risk of loss. As the carrier has the burden of proof to establish a Q Clause defence, it must put these and/or other precautions into practice in order to attempt to avoid liability. It would not be surprising, either, if insurers for both the carriers and the cargo interests were to require certain precautions to be taken in order to bring coverage into effect.