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DESCRIPTION OF THE UNITED STATES
CARRIAGE OF GOODS BY SEA ACT OF 1998

This proposal to amend the United States Carriage of Goods by Sea Act, 46 U.S.C. App. $81300, et seq. (COGSA 36) is intended eventually to bring the United States into unity with the rest of the maritime world. The great majority of the maritime world was in unity in 1936, but that unity has now broken down. The unity was based on the Hague Rules' which were finalized in 1924. They were enacted, with minor amendments, as the United States Carriage of Goods by Sea Act domestically in 1936, and were ratified with the same exceptions in 1937.

As technology in ocean transportation changed, and as inflation lowered the value the treaty's limitation of liability provision, both the Hague Rules, and COGSA 36 needed to be amended. In 1968, the Comité Maritime International (CMI)? finished work on amendments to the Hague Rules. The amendments are referred to as the Visby Amendments. In 1979, the CMI modified the amendments with a Protocol to base the limitation amount on Special Drawing Rights of the International Monetary Fund.

In 1978, the United Nations Commission on International Trade Law finished drafting a completely different set of rules, the Hamburg Rules."

Several nations have amended their laws that govern the carriage of goods by sea to laws other than Hague/Visby or Hamburg. In addition, over the years, various courts of various countries have interpreted the Hague Rules and Hague/Visby Rules somewhat differently. As a result, the law governing the carriage of goods is now not uniform.

The Maritime Law Association of the United States (MLA), various underwriters of cargo and ships, and ocean carriers have, since 1968, urged ratification of the Hague/Visby Rules. On the other hand, certain cargo interests have, since 1978, urged ratification of the Hamburg Rules. As a result of this disagreement, neither the Hamburg Rules nor the Hague/Visby Rules have been ratified, and the United States is out of step with our trading partners. Our cargo shippers cannot look to our courts to recover what their foreign competitors can recover in foreign courts.

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Brussels Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, Aug. 25, 1924, 51 Stat. 233, T.S. No. 931, 120 L.N.T.S. 155, reprinted in 6 BENEDICT ON ADMIRALTY doc. 1-1 (7th ed. 1993); enacted with certain minor changes as the United States Carriage of Goods by Sea Act (COGSA), 46 U.S.C. App. $$ 1300, et seg.

An international association of national maritime law associations. CMI was founded in 1897 and has drafted many maritime treaties, including the Hague Rules.

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The Special Drawing Right (SDR) is a fictitious currency used by the International Monetary Fund to temper fluctuations amongst currencies. It is a mixture of United States dollars, British pounds sterling, Japanese yen, German marks and French francs. It's value in various currencies is reported daily. As of April 1, 1998, one SDR was valued at about $1.34.

United Nations Convention on the Carriage of Goods by Sea, Mar. 31, 1978, 17 I.L.M. 608, reprinted in 6 BENEDICT ON ADMIRALTY doc. 1-3 (7th ed. 1993).

COGSA 36 has forced many cargo interests to travel to the courts of foreign countries that have enacted the Hague/Visby or the Hamburg Rules for recovery. Nations which comprise approximately 70% of the United States trade by sea have enacted the Hague/Visby Rules, while nations which comprise about 2% of the United States trade by sea have enacted the Hamburg Rules. COGSA 36 limits an ocean carrier's liability to $500 per package or, for cargo not packaged, $500 per customary freight unit. The Hague/Visby Rules limit the carrier's liability to 666.67 Special Drawing Rights of the International Monetary Fund (SDRs) per package, or 2 SDRs per kilogram, whichever is higher. At the present time, April 1, 1998, an SDR is valued at about $1.34. At this rate, the limit per package is $893.34, and per kilo $2.68. In addition, the Hague/Visby Rules generally do not consider larger packages such as pallet loads, as packages if they contain smaller packages. The smaller packages are the limitation packages, and are usually worth less than $893.34, and are, therefore, not limited. The Hamburg Rules use the same limitation system as the Hague/Visby Rules, but the Hamburg Rules' limitation is slightly higher than Hague/Visby's.

In 1988, the Department of Transportation held meetings of various parties in the United States interested in the carriage of goods by sea in an effort to reach a compromise between the Hague/Visby factions and the Hamburg factions. In 1992, the Subcommittee on the Merchant Marine of the Committee on Merchant Marine and Fisheries of the House of Representatives held Oversight Hearings for the same reasons. The parties still disagreed.

Approximately six years ago, the Committee on the Carriage of Goods of The Maritime Law Association of the United States appointed a working group comprised of persons interested in various aspects of carriage of goods by sea. This working group was asked to attempt to reach a compromise. COGSA 98 is that compromise.

At the outset, those interests favoring the Hamburg Rules insisted that the errors of navigation and management defenses be eliminated. Those defenses would exonerate a carrier if cargo were lost or damaged as the result of an error in the navigation of a vessel or the management of a vessel at sea. The drafters of the Hague Rules in the 1920s reasoned that an error of navigation or management was beyond the control of the shipowner. They decided not to assign liability for matters not under the control of either party to a contract of carriage by sea. Thus, any damage to or loss of cargo caused by an error of navigation or management of a vessel at sea would be suffered by cargo interests. Correspondingly, any damage to the vessel caused by an error of navigation or management would be suffered by the carrier. That defense has been criticized for several years and should now be eliminated.

While the sectors of the maritime industry favoring the Hamburg Rules insisted on the elimination of the error of navigation and management defenses, the sectors of the maritime industry favoring the Hague Visby Rules insisted on the retention of the catalogue of exemptions from liability (other than errors of navigation or management) contained in the Hague Rules, COGSA 36, and the Hague/Visby Rules.

These basic positions formed the foundation for the compromise. During the course of several years of discussions and drafts, various compromises were reached, improvements were made to COGSA 36, and the intent of the original drafters of the Hague Rules was restored where necessary. As a result, COGSA 98 represents a proposal which is not to the complete liking of any one sector of the maritime industry, but is acceptable, in whole, to all sectors of the maritime industry.

The following paragraphs will describe some highlights of COGSA 98.

1. COGSA will govern the entire multimodal carriage.

COGSA 36 governs, by the force of law, the carriage of cargo by sea from the time it is loaded on board a ship until it is discharged from the ship. This aspect of the law does not govern the modern, multimodal system of transportation. The new act will govern the entire period of carriage described in the bill of lading. Thus if cargo is shipped from Rotterdam to Chicago, the new act will gover, as between the carriers and cargo interests, from the time the carrier or his trucker or other agent receives the cargo in Rotterdam, through the ocean voyage, discharge in the Port of New York, rail transportation to Chicago and truck transportation to the consignee's premises.

Although trucks and trains are exempted from the direct application of the act, the carrier issuing the through, multimodal bill of lading (probably the ocean carrier) will be liable to cargo interests for the entire period of carriage pursuant to the terms of COGSA 1998. The parties and the courts will not have to litigate where damage might have occurred because the standard of liability and limitation of liability will remain the same throughout the cargo's journey.

In addition, all parties participating in the carriage, other than railroads and trucks will be granted, as a matter of law, all the rights and duties of COGSA 98. 2. List of Hague/Visby defenses will remain identical to Hague/Visby for the sake of uniformity except error of navigation or management defense.

The error of navigation and management defenses will be eliminated. Although these defenses will be eliminated, the cargo interests, in some instances, will bear the burden to prove the error of navigation or management. 3. The Burden of Proof Rules will be changed to allow apportionment of damage if more than one event combines to cause damage.

At the present time, if two events combine to damage cargo and the carrier would only be liable for one of those two events, the carrier would generally have the burden to prove the precise amount of damage caused by the event for which it was not liable. This rule was established in the landmark case of Schnell & Co. v. Vallescura, 293 U.S. 296, 1934 A.M.C. 1573 (1934). That case concerned a shipment of onions that was damaged due to a lack of ventilation during the voyage. The onions were not ventilated for part of the voyage because the seas were too rough to permit ventilation. The onions were not ventilated for other parts of the voyage because the crew failed properly to ventilate them. The Supreme Court placed the burden on the carrier to prove which onions were damaged because of a lack of ventilation during rough weather and which onions were damaged because the crew failed to ventilate them when the weather was not rough. The carrier could, of course, not meet this insuperable burden, and was ordered to pay 100% of the damages.

COGSA 98 would require the finder of fact to apportion the damage between the two causes. If the trier of fact could not determine an apportionment of damages, the trier of fact would have to split damages 50/50 and award a 50% recovery to cargo interests. 4. Quantity of cargo received by carrier.

The courts in the United States have interpreted COGSA 36 to treat the quantity described in a bill of lading as prima facie evidence of the quantity of cargo received by the

carrier. The courts grant this prima facie effect to the bill of lading description even if the carrier does not check, and should not have checked, the quantity of cargo it received. It, in effect, holds a carrier liable for cargo never delivered to it by the shipper.

COGSA 98 will permit a carrier to avoid this prima facie effect of the quantity description for cargo it did not count and was not expected to count, by a plain warning on the face of the bill of lading such as “shipper's load, stow and count."

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This crucial change will bring the United States into unity with nations that have adopted the Hague/Visby Rules or the Hague/Visby system of liability. It will also reduce or eliminate needless and wasteful litigation over the question of what constitutes a COGSA 36 package. COGSA 36 limits a carrier's

liability to $500 per package or for goods not shipped in packages, per customary freight unit. The freight unit is the unit on which the freight, the charge for carrying the cargo, has been computed. The Hague/Visby Rules increase that limitation to 666.67 SDRs per package, or 2 SDRs per kilogram, whichever is higher. In addition, the Hague/Visby Rules do not generally treat a pallet as a package and thus treat each carton loaded onto the pallet as the limitation package. This increase of limitation will allow cargo interests to obtain the same recovery in the courts of the United States which they are now forced to travel to foreign courts to obtain.

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COGSA 98 will overturn Vimar Seguros y Reaseguros, S.A. v. MN SKY REEFER, et al., 115 S.Ct. 2322, 1995 AMC 1817. SKY REEFER upheld a clause on the reverse side of a bill of lading, which required all disputes to be submitted to arbitration in Tokyo. The purchaser of the bill of lading for oranges carried from Morocco to Boston was required to submit its dispute to Tokyo arbitrators rather than the United States District Court in Boston. COGSA 98 will not honor a provision calling for a forum outside the United States for cargo shipped to or from the United States. If the choice of forum clause calls for arbitration outside the United States for cargo shipped to or from the United States, any party may move a United States court to order arbitration somewhere in the United States.

COGSA 98 presents the first crucial step toward uniformity in the law governing the carriage of goods by sea and may very well form a model for other nations to follow. We urge its enactment into the law of the United States.

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A transcript of the proceedings with enclosures of The Maritime Law Association Meeting of May, 1996

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