04/08/23 1

Prepared by: Su Thiri Khin (Cynthia)

Overview Liability of International Air Carriage

Warsaw Convention 1929 Provisions as amended in 1955 at The Hague and in 1975 in Montreal Enforcing the Warsaw Convention

Liability of Carriage of Goods by Sea Carriage of Goods by Sea Act 1924

Principles Exceptions to liability Defenses to Liability The Cargo Shortage Problem “Package” Limitation Other Provisions

Amendments to Hague Rules Liability of Transport Intermediaries

Ocean Shipping Reform Act 1998 Marine Cargo Insurance

Insurance Losses and Coverage Websites

2

Liability of International Air Carriers: Warsaw ConventionGeneral Principle: Air Carrier is presumptively

liable for all damage to cargo UNLESS the airline shows:Not at fault or negligentShipper was negligent

Air Carrier liable for death or bodily injury

resulting from accident aboard aircraft or in boarding or disembarkingAccident: event that is peculiar risk of air

travel and “external” to passengerWarsaw Convention is exclusive remedy

3

Warsaw Convention Provisions (As Amended)

Limits liability of Air CarrierFor death or bodily injury, 1999 Montreal

Convention abolished $75K limit; carrier strictly liable for 100K SDR (Subject to contributory negligence)

Carrier liable for damages beyond 100K SDR unless unless: Not due to negligence of airline, employees or

agents Due to negligence or wrongful acts of 3rd

parties

4

Warsaw Convention Provisions (As Amended)

Liability for Cargo Loss or DamageProtocol 4 of 1999: Carrier liable unless due to:

Inherent defect, quality or vice of cargo Defective packaging not by carrier Act of war or armed conflict Act of public authority Contributory negligence of shipper

Cargo: Liability limited to 17 SDR per Kg unless shipper declares higher value ( and pays additional fee if required) Limitation doesn’t apply if damage due to

intentional act or act done recklesslyBaggage: Liability limited to 1000 SDR per

passenger unless has declared higher value; can’t recover more than actual value

5

Enforcing Warsaw ConventionSuits can only be brought in countries that

are signatoriesWhere ticket purchased, final destination or where

carrier has principal place of businessMontreal Convention: suits for death or injury in

passenger’s principal residence if carrier operates there

Time LimitsMust file notice:

Cargo or baggage damage: notify within 7 days of receipt of checked luggage, 14 days from receipt of cargo

Delay of baggage or cargo: notify in writing no later than 21 days from date of actual delivery

Must file suit against air carrier within 2 years

6

Liability for Carriage of Goods by Sea

Historically, carrier absolutely liableCarriers used exculpatory clausesLegal limitations on such clausesHague Rules – 1924 Convention defines liability for

ocean carriersUS Carriage of Goods by Sea Act codifies Hague Rules

Covers liability from loading to unloading (“tackle to tackle”)

Parties can extend application beyond “tackle to tackle” by provisions in Bill of Lading (B/L)

Invalidates all exculpatory clauses in B/LForum selection and arbitration clause in B/L valid –

Vimar Seguros y Reaseguros S.A. v M/V Sky Reefer (USSC

7

COGSA PrinciplesCarrier must use due diligence in

providing seaworthy vessel at beginning of voyageCarrier liable for failure to use due

diligenceBut carrier not liable for damage due to

fire, storms, and negligence in navigating or managing ship

8

COGSA PrinciplesDelivery of damaged cargo: shipper must give written

notice to carrier at port of dischargeFor visible damage: give notice before or at time

goods taken from carrier’s custodyIf damage not apparent or visible, give written notice

within 3 days of deliveryFailure to give notice creates presumption goods

delivered in good conditionSuit must be brought within 1 yearP must show goods loaded in good condition and lost or

unloaded in damaged conditionClean B/L establishes presumption goods delivered to

carrier in good condition – shifts burden to carrierProblem with sealed containers: clean B/L only

establishes outer condition of container

9

COGSA Exceptions to LiabilityErrors in ship

navigation or management

Fire (unless carrier’s fault)

Perils of the seaAct of GodAct of warActs of public

enemiesLegal seizureQuarantine

Acts of shipperLabor strikesRiotsSaving life or

property at seaInsufficient packingInherent defect in

goodsInadequate marking

of goodsLatent (hidden)

defects in ship10

“Warranty of Seaworthiness”: ship reasonably fit to carry cargo undertaken on intended journeyCompetence of crew, suitability of equipment,

etc.Carrier responsibility for proper loading, storing

and carrying, and unloading goodsMay presume unseaworthy if breaks down shortly

after departureErrors in Navigation or Management of ship:

carrier not liable for errors of master, mariner, pilot or crew memberDepends on severity of storm and how cargo

damagedNegligence of crew may void defense 11

COGSA Defenses to Liability

Q-Clause Defense: general exception holding carrier not liable if carrier can prove it wasn’t at fault and show what was the cause of loss

Shipper Liability for Hazardous Cargo: shipper strictly liable for shipping inherently dangerous goods when neither shipper nor carrier had actual knowledge or danger, Senator Linie GmbH & Co. Kg. V. SunwayLine, Inc. (2nd Cir. 2002)

12

COGSA Defenses to Liability

The Cargo Shortage ProblemCarrier may be responsible unless can

use Q clause defenseP must establish that shortage

occurred while goods in carrier’s custody:P can show weight or quantity at

destination less than that listed on B/LDisclaimer – “shipper’s weight”- on B/L

not recognized by court Westway Coffee Corp. v. M.V. Netuno (SDNY ’81) But Plastique Tags, Inc. v. Asia Trans Line, Inc.

(11th Cir. 1996)13

COGSA “Package” LimitationLimits carrier liability to $500 per

package or customary freight unit unless shipper declares (and pays for) higher valueContainer not package under COGSA if

contents and number of units disclosed on B/LZ.K. Marine v. M/V Archigetis (SDFl 1991): is

yacht a “package”?COGSA limitations generally don’t apply

to goods carried above deck – but parties can provide for coverage in B/L (clause paramount)

14

Other COGSA ProvisionsCOGSA holds carrier liable for a

material deviation unless necessary to save lives or property at seaMaterial deviation from terms of B/L causes

carrier to lose protection under COGSAStowage of cargo above deck unless B/L so

provides is material deviation – but not for sealed container

Himalaya Clauses: clause in B/L extending Hague Rules protection to agents, indpt. contractors, etc.Recognized in USNot recognized in UK and Canada

15

Amendments to Hague RulesHamburg Rules: 1978 Convention

Not adopted by USWould hold carrier liable for negligence and errors of

navigation or management of shipRules opposed by insurance companies and carriersSo far, most of endorsing states have been developing

countries Visby Amendments to Hague Rules

Not adopted by USRaised liability per package to approx. $1000Carrier liable for losses from recklessness in operation

and navigationAdopted by UK, Canada, Singapore, Japan, Western

European Countries

16

Liability of Transport Intermediaries

Freight Forwarders: act as agent of shippersUS: must be licensed to operate; regulated by US

Fed. Maritime Comm. and Int. Air Transport Assoc.May also act as Customs BrokersMust post bond and have power of attorneyPrima US Inc. v. Panalpina, Inc. (2nd Cir. 2000): FF

not liable for cargo during shipment

Non-Vessel Operating Common Carriers: act as freight consolidators for smaller shippersIssue B/L Liable for loss or damage to goods during transport

17

Ocean Shipping Reform Act 1998Amends Shipping Act of 1984 to allow

carriers greater flexibility in contractingCarriers can enter “service contracts”: confidential

bargained freight rates instead of posted tariff schedules

Service contracts function as contracts of carriage – no need to issue B/L

Carriers not acting as common carriers, so not subject to COGSA; can negotiate own liability terms

Ocean carriers exempted from antitrust lawsCarriers must treat FF’s and NVOCC’s as shippersCarriers may not unreasonably refuse to deal or

negotiate with shippers or intermediaries

18

Marine Cargo Insurance

Large volume shippers maintain open cargo policiesExporter authorized by insurer to issue

certificate of insuranceUsed under CIF contractsUS: certificate of insurance acceptable

substitute for insurance policy; incorporated in UCC

UK: certificate of insurance not substitute General average ( average means loss): loss

that results when extraordinary expenses or losses result in saving the cargo or vessel at sea

19

Insurance Losses and Coverage Policies cover total loss of all or part of shipment General average loss: incur loss or extraordinary expenses in

saving vessel or cargo from real and substantial danger at sea York-Antwerp Rules of 1950: accepted principles of general

average – incorporated into B/L’s Particular average loss: partial loss to cargo

Depends on policy provisions: “free of particular average” (FPA) means no coverage for partial losses

Coverage: Perils Clause: covers basic risks of ocean voyage; fortuitous

losses only All Risks Coverage: covers risks except those particularly

excluded War Risks: typically not covered but available for ocean

shipments Shaver Trans. Co. v. The Travelers Indemnity Co. (S. Ore. 1979):

FPA and standard perils coverage, shore coverage clause, Inchmaree clause 20

Web Sites

21