Revision of the U.S. Carriage of Goods by Sea Act

June 1999

In 1996, the Maritime Law Association of the United States voted to revise the U.S. Carriage of Goods by Sea Act. It is expected that the amendments will be passed and become law some time during 1999.

The proposed new Act is built on the current Carriage of Goods by Sea Act and the cases decided under it. In many respects it is unchanged from the existing COGSA but in others it attempts to rationalise inconsistencies. Although the new Act is intended to be better suited to the modern world, it will not result in international uniformity and will not put an end to litigation.

Tackle to Tackle Rule

When the Hague Rules originally came into force in the US under the current COGSA, it was deemed to be unnecessary for them to apply to pre-loading and post-discharge operations. The law applicable to the load and discharge ports were intended to apply. Consequently, goods shipped out of the U.S. were subject to both the Harter Act, and COGSA and if delivered inland, to a different set of laws in the receiving country. Many carriers attempted to avoid the potential inconsistencies which could result in these circumstances by applying the bill of lading terms beyond COGSA’s tackle to tackle provisions. The new COGSA proposal eliminates tackle to tackle clauses and applies from the time the goods were received by the carrier, or any person authorised by the carrier, to the time they are delivered to the person authorised to receive them.

The proposal expands the scope of COGSA so that it applies to all domestic shipment involving carriage by sea, for some or all of the journey, regardless of whether or not the bill of lading explicitly invokes COGSA. The intention is that the new Act will apply to operations whenever ocean-going services are included as part of the transport and therefore, the Harter Act will become virtually irrelevant to the carriage of goods by sea.

Bills of Lading

Under the current COGSA, there is a degree of uncertainty as to what is meant by a "bill of lading" or any similar document of title. The new proposals are intended to apply to all contracts concerning the carriage of goods by sea except for charterparties. This is achieved by amending the definition of what constitutes a "Contract of Carriage". Therefore, sea weighbills and electronic data interchanges will fall within the new definition of a bill of lading. Charterparties are excluded under the proposed Act just as they are now under the Hague Rules. The parties can, of course, still stipulate that COGSA will apply to a charterparty if they so wish and COGSA will apply to any bill of lading issued under a charterparty that passes into the hands of a third party whose rights are governed by that bill of lading.

Deck Carriage and Live Animals

Deck cargo is included within the scope of the new Act as it is now recognised that carriage of cargo on deck is not as risky as it was when the Hague Rules originally came into force. However the shipment of live animals remains an exclusion under the new COGSA and such shipments are the only remaining area which will still be governed by the Harter Act.

Navigational Fault Exceptions

The current position is that the carrier is not responsible for loss or damage to cargo due to the "act, neglect, or default of the Master, mariner, pilot or the servants of the carrier in the navigation or management of the ship". The new Act disposes of this exception but requires the cargo claimant to prove negligence in the navigation or management of the vessel in cases where negligence is an issue.

The Fire Exception

Unless actual fault or privity are found on the part of the carrier, it is protected by the fire exception in the existing COGSA provisions. However these provisions did not give the same protection to other parties performing the Contract of Carriage. Those parties are now included in the new COGSA’s broader definition of the word carrier. The proposals extend the fire exception to all parties included in the broader definition of carrier. Therefore, the contracting carrier will have a defence in respect of loss of or damage to cargo caused by fire resulting from the fault of independent contractors, even though the contracting carrier generally assumes responsibility for the performance of all other performing carriers.

Package Limitation

The existing COGSA allows the carrier a $500 per package limitation. This is very much contrary to the development in many other parts of the world where, under the Hague-Visby Rules, rights of limitation (based on Special Drawing Rights, SDR) have increased the carrier’s exposure.

Therefore, the new proposals adopt the limitation amounts of the Visby amendments to the Hague Rules under which there is a limitation for packages weighing less than approximately 735 lbs. of 666.67 SDRs per package ( roughly $955).

Under the new proposals, a shipper may still declare a higher value for the goods on the bill of lading to escape the limitation and the proposals also provide that the shipper and the carrier can establish a different limitation amount by separate agreement. Importantly, and contrary to current COGSA provisions, the new proposals will allow shippers and carriers to reduce the carrier’s liability below the new COGSA levels. This is in response to the increased competitive market among carriers and the fact that some shippers can now negotiate from equal, if not superior, bargaining positions. However, such agreement will only bind the contracting parties and not to any third party holder of the bill of lading.

The new proposals attempt to introduce a measure of predictability and certainty with regard to the package limitation provisions. Under current provisions, some ports have denied the carrier the right to limit liability if it committed an "unreasonable deviation" or failed to give the shipper a "fair opportunity" to declare a higher value. Under the new proposals, the carrier will only loose its right to limit liability when the claimant proves either that the carrier caused the damage intentionally or acted recklessly and with knowledge that such damage or loss might occur, or that the carrier knew or should have known that an unreasonable deviation would result in loss or damage.