[84] On page 10 of Appendix 1 to the Report (MLA doc. no. 716, page 10722), add the following as a new subsection 3(4)(b)(14): If a negotiable or order bill of lading is issued, the carrier shall have a Proposed subsection 3(4)(b)(14) on pages 10-11 of Appendix 1 to the Report (MLA doc. no. 716, page 10722) was renumbered as subsection 3(4)(b)(15). Corresponding changes were made on page 11 of Appendix 2 to the Report (MLA doc. no. 716, page 10737). An addition to the text of the Report on this subject is noted above. In addition, the Section-by-Section Analysis on page 46 of the Report (MLA doc. no. 716, page 10710) was updated to reflect this change. This change incorporates section 25 of the Pomerene Act, 49 U.S.C. § 80109, which should have been included in the original proposal. On page 14 of Appendix 1 to the Report (MLA doc. no. 716, page 10725), delete the language in subsection 4(2)(a), and replace it with the following: [reserved] A corresponding change was made on page 14 of Appendix 2 to the Report (MLA doc. no. 716, page 10740). On page 48 of the Report (MLA doc. no. 716, page 10711), the Section-by-Section Analysis was updated to reflect this change. The Review Committee felt that the proposal to eliminate the nautical fault would be easier to understand if subsection 4(2)(a) were deleted completely, but also felt that revising the remaining provisions in subsection 4(2) (i.e., changing the "Q" clause to the "P" clause) would cause confusion. On page 15 of Appendix 1 to the Report (MLA doc. no. 716, page 10726), in the proviso to subsection 4(2), insert the following after "Provided,": That if any person contends that the master, mariner, pilot, or servants A corresponding change was made on page 15 of Appendix 2 to the Report (MLA doc. no. 716, page 10741). Minor changes were made on page 15 of the Report (MLA doc. no. 716, page 10693) to conform to this new approach. On [85] page 49 of the Report (MLA doc. no. 716, page 10712), the Section-by-Section Analysis will also be updated. With the elimination of subsection 4(2)(a), the shifting of the burden of proof previously included in proposed subsection 4(2)(a) needed to be added elsewhere in subsection 4(2). The Review Committee decided to include this concept as the first proviso to subsection 4(2), with the current proviso becoming the second. The Review Committee believes that this drafting will be easier to understand; there is no change in substance from the original proposal in this regard. On page 18 of Appendix 1 to the Report (MLA doc. no. 716, page 10728), in the proviso at the end of the first paragraph of section 6, delete the word "negotiable" from the phrase "negotiable bill of lading." A corresponding change was made on page 19 of Appendix 2 to the Report (MLA doc. no. 716, page 10743). This change restores the current COGSA language. The Review Committee felt that section 6 has worked well in its current form and there was no reason to change this aspect of it. On page 19 of Appendix 1 to the Report (MLA doc. no. 716, page 10729), modify the first sentence of section 13 to conform to the modified enacting clause. This sentence would thus read: This Act shall apply to all contracts that include the carriage of goods A corresponding change was made on page 21 of Appendix 2 to the Report (MLA doc. no. 716, page 10745). On page 54 of the Report (MLA doc. no. 716, page 10714), the Section-by-Section Analysis was updated to reflect this change. On page 19 of Appendix 1 to the Report (MLA doc. no. 716, page 10729), in sec. 3, change "1995" to read: 1996 A corresponding change was made on page 22 of Appendix 2 to the Report (MLA doc. no. 716, page 10746) in section 16. [86] MARITIME LAW ASSOCIATION OF THE UNITED STATES DISSENTING REPORT of Members of the Committee on Carriage of Goods About REVISING THE CARRIAGE OF GOODS BY SEA ACT April 2, 1996 For more than a century the concept of the shared adventure has distinguished carriage of goods by sea from other forms of transportation rail, road and air. The Hamburg Rules remove the distinction by eliminating owners' defense for error in navigation and management of the vessel. Like the International Group of P. and I. clubs and the International Chamber of Shipping [whose views are annexed to this report for ease of reference], we dissent from the current Proposal which introduces the liability regime of the Hamburg Rules as a revision of the Visby Amendments. The Proposal is principally driven by the understandable desire of containership owners to avoid liability for shortages discovered when sealed containers are opened in discharge ports. Owners are entitled to the inference that cargo missing from a sealed container was never there in the first place, only if they weigh the container before loading and the weight is consistent with the cargo description inserted by the shippers in the bill of lading. These requirements are mandatory and owners cannot contract out of them under current law. A change in the law could be worthwhile. But not exactly the one proposed. The Proposal trades off relief from the burden of weighing containers at loading ports against elimination of the error in navigation and management defense. Fair enough, if the latter were limited just to containerships. The problem is that the Proposal deletes the error in navigation and management defense for all shipowners in every trade. The willingness of the containership owners to give up the defense stems from competition amongst themselves for market share. Many of their large customers are self insured or, perhaps, would like to become so. They resist having to accept unrecoverable cargo losses, as well as to contribute in general average, for the mistakes of the Master and crew. The containership owners responded to these market forces with g.a. absorption clauses in their hull policies and, in some cases, by voluntarily accepting increased responsibility for damage to 47-047 98-14 [87] cargo capped by higher levels of package limitation. Thus, the containership owners, by offering to waive the error in navigation and management defense, do not see themselves as giving up anything of very much value to them now. But for the rest of the industry, eliminating the defense would be of no practical benefit. Few cargo interests in other trades are self insured. On the contrary, in bulk commodities which are often sold afloat (like oil, ores, chemicals and grains) as well as virtually all sales of goods which are financed under letters of credit, cargo damage risks are generally covered by cargo insurance in order to provide reasonably prompt and more-or-less certain reimbursement of losses. Some aspects of crew negligence, like a failure to care for the cargo, puts only the cargo at risk. Such destructive behavior can be deterred by making owners vicariously liable for the crew's neglect. But other aspects of crew negligence, like an error in navigation, puts both the cargo and ship equally at risk. There can be no higher influence on crew behavior than when carelessness endangers the lives of the seafarers themselves. The shipping business is not a morality play. Crew negligence is not sin. If there is no practical benefit to be gained from risk reallocation, then the law should be designed so that the total amount which a shipper has to pay for cargo insurance and freight is kept to a minimum. Lord Diplock, Conventions and Morals Limitation Clauses in International Maritime Conventions, 1 J.Mar.L.Comm. 575 (1970). Without doubt, eliminating the error in navigation and management defense would cause an increase in the cost of p. and i. insurance which would need to be recaptured in higher freight rates. But since the requirements for cargo insurance would continue unabated, there is a consensus within the insurance industry that the level of cargo insurance premiums would not diminish proportionally, although the exact scope of disparity has so far resisted prediction. The effect of the Proposal, then, is to force insured cargo interests to pay twice for the same coverage. And to the extent that additional litigation is spawned, in shifting the cargo losses from cargo to p. and i. underwriters, the legal expenses (on both sides) would seriously inflate the cargo losses. In short, since cargo risks are covered by cargo insurance in most trades, the Proposal would simply saddle most ocean shipping with increased cost without any corresponding commercial benefit. This is not to say that the containership owners should be denied what they want for themselves. They should get it, but only without sacrificing the interests of others. [88] The Visby Amendments were, for the most part, an attempt to meet the then discernible needs of the container trade by clarifying what constituted a package, raising package limitation, and strengthening owners' rights to limit. The rest of the industry was unaffected and did not object. A similar result could be achieved here by leaving in place the defense of error in navigation and management, but adding in a new Section 17 to COGSA, that if owners voluntarily waived the defense, they would be entitled to contract out of their obligation to weigh containers before loading. By restructuring the Proposal in this way, the entire industry could unite behind it and support its enactment. Such a restructured proposal would also offer a vehicle for restoring greater uniformity worldwide. It would adhere to the concept of the shared adventure under the Hague-Visby Rules and yet open up the liability regime of the Hamburg Rules for voluntary adoption in those trades for which they might be appropriate. We thank you for your letter of 22nd January and for the opportunity of commenting on the proposals to be considered by your Carriage of Goods Committee. Regardless of the merits of the proposals to be put forward to your Committee we consider that the timing is most unfortunate. The international regimes are in disarray: the Hague/Visby Rules are in need of revision, the Hamburg Rules are unlikely ever to achieve wide-scale acceptance. The matter is under |