COGSA’s Gotcha's

William Augello | January 30, 2005 | Import Basics, Export Basics
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Every law governing the carriage of goods contains many exculpatory clauses and “traps for the unwary.” The Carriage of Goods by Sea Act (COGSA) is no exception.

Cargo_Ship_at_port-blue_sky_backgroundEvery law governing the carriage of goods contains many exculpatory clauses and “traps for the unwary.” The Carriage of Goods by Sea Act (COGSA) is no exception.

Importers and exporters should study COGSA in its present form and watch for modifications that have been discussed and debated since 1980, but have not yet been implemented. However, some progress has been made in modernizing and making COGSA more shipper-friendly.

Unless derailed by ship-owners and their cargo insurers, the current discussions in UNCITRAL could result in revolutionary changes within the next few years. (Readers should know, however, that this writer has been predicting this for the past 24 years.)

In the interim, importers and exporters, carriers and intermediaries government officials and trade organizations representing all of these interests should be fully aware of the intimate details of COGSA, and the cargo-owners’ need for changes therein.

Following is a summary of the most important provisions of COGSA. Due to space restrictions, only the highlights of these provisions are stated. For a more detailed discussion of these issues, with appropriate citations to the decisions, laws, regulations and treaties, see Transportation, Logistics and the Law, Second Edition, pages 195-203.

Briefly stated, COGSA:

  1. Governs ocean cargo moving to or from U.S. ports in foreign commerce.
  2. Is often incorporated into other bills of lading, such as those used by inland waterway, barge and tugboat operations, etc.
  3. Applies from “tackle-to-tackle” unless extended beyond by contract.
  4. Requires a ship owner to provide a seaworthy ship, properly manned, equipped and supplied, including holds that are fit and safe for the type of cargo being held therein.
  5. Requires the carrier to properly and safely load, handle, stow, keep, care for and discharge the goods carried.
  6. Requires the carrier to issue a bill of lading identifying the goods, pieces, quantity or weight, and apparent order and condition.
  7. Requires notice to the carrier within three days of delivery, of any loss or damage that is not apparent at the time of discharge.
  8. Requires the filing of a suit within one year of delivery unless an extension is obtained in writing within one year of discharge.
  9. Voids any limitation of liability inconsistent with its provisions.
  10. Limits carriers’ liability to $500 per package or customary freight unit (the unit upon which the rate is based, i.e.; one tractor, one automobile, a bale, a carton, a ton, etc.)
  11. Permits increases in liability, but not reductions below $500 per package.
  12. Provides for 17 defenses, including the negligent navigation or mismanagement of the ship, act of God, war, or public enemy, act or omission of shipper, strikes, riots or civil commotions, attempts to save life or property at sea, inherent vices, insufficiency of packaging or marks, latent defects and “any other cause arising without the actual fault or 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.”
  13. Creates a prima facie case when the claimant proves tender of goods in good condition and carrier’s failure to deliver in the same condition and count.
  14. Shifts the burden of proof to the carrier to show that the cause of the loss falls within one of the 17 defenses.
  15. Requires carriers to prove due diligence in making the ship seaworthy, properly manned, etc.
  16. Permits carriers to extend the provisions of COGSA to their agents and contractors under a “Himalaya” clause.
  17. Permits the use of a “General Average” clause, which permits carriers to charge all cargo owners whose cargo is in a vessel, for a pro-rata share of any losses that are incurred for the purpose of saving the ship or its cargo.
  18. Permits recovery of full value when a loss is caused by the carrier’s unreasonable deviation from its scheduled route or agreed stowage (stowing on deck when carrier agreed to stow below deck, for instance.)

I detailed some of the pitfalls in describing the smallest unit of packaging for the goods on the bill of lading in my November 2004 article. Other problems confronted with multimodal carriage will be discussed in a future issue.

The most effective way for cargo owners to avoid unrecoverable losses is to learn how others have suffered such losses. The best way to learn these lessons is to read the texts and court decisions on ocean carrier liability claims.

One will discover that most losses occur as a result of cargo owners and their agents not fully understanding the fine print in ocean cargo liners’ bills of ladings and contracts.

In the words of an unknown author:

Education is what you get when you read the fine print.
Experience is what you get when you don’t.

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