Goodbye COGSA, Hello Rotterdam Rules

By passing the Carriage of Goods by Sea Act of 1936 (COGSA), the United States adopted as domestic legislation the Hague Rules, which govern liability for loss in ocean carriage. At that time, ocean cargo was transported largely by barrel and crate, and bills of lading covered cargo from port to port. Today, cargo is containerized and may travel long distances by rail or truck before or after ocean transport on through bills of lading. Despite the advent of multimodal transportation, COGSA, and the domestic law of most nations, has remained largely unchanged and grounded in the transportation realities of more than a half century ago.

The United Nations sought to bring transportation law into the modern era by promulgating the Rotterdam Rules. The Rotterdam Rules are an international convention that was adopted by the United Nations General Assembly on September 23, 2009. Twenty-one countries, including the United States, have signed the Rotterdam Rules, although the United States and many other countries have yet to ratify them. If and when they go into effect following ratification by 20 countries, the new Rules would replace the substance of COGSA as U.S. law as well as other countries’ Hague Visby-based legislation.

If the Rotterdam Rules go into effect, how will the law change? Below, we discuss several substantive changes concerning the rules’ broader scope, period of responsibility and limitation of liability.

The Rotterdam Rules’ scope of application is broader than COGSA in that the Rules would cover carriage of goods where no bill of lading or electronic record has been issued. COGSA, on the other hand, applies only to documents of title. The Rotterdam Rules mirror COGSA in that they would apply to all shipments to or from the United States.

COGSA applies from “rail to rail,” which means from the time of vessel loading to the time of discharge. Because modern multimodal shipping is door-to-door, the Rotterdam Rules would make the carrier responsible for goods from the time it receives them for carriage, and end the period of responsibility only when the goods are delivered. Thus, the period of a carrier’s responsibility would be broader under the Rotterdam Rules than COGSA.

The Rotterdam Rules would additionally modify COGSA’s package liability limitation of $500, instead imposing a limitation based upon a “unit of account” per package that would be tied to the Special Drawing Right of the International Monetary Fund. This converts to approximately $1,400 per package. While raising the liability figure, the Rotterdam Rules would at the same time make it more difficult for a claimant to avoid its limiting effect, meaning that the package limitation would be unenforceable only when the loss at issue was caused by a personal act or omission that was done with the intent to cause such loss, or done recklessly and with knowledge that such loss would probably result. In other words, unless a cargo claimant can show that a loss was caused by a carrier’s bad intent or by a carrier’s reckless actions, the limitation provision would be effective. The Rotterdam Rules would extend its limitation of liability to all “maritime performing parties,” which would include terminal operators and stevedores. Inland carriers, however, would not be automatically protected under the Rotterdam Rules, and they would remain subject to legislation covering inland transport, such as the Carmack Amendment.

Substantively, many of the changes that would be brought about by the Rotterdam Rules are minor departures from COGSA. Accordingly, federal courts can be expected to look to existing case law interpreting COGSA in applying the Rotterdam Rules, were they to become the law of the land. Forwarders have spoken out against the Rotterdam Rules because, in their view, the regime is too complex. This is true, but it is also true that multimodal transportation has become increasingly complex since the era when COGSA was enacted, and the Rotterdam Rules are an admirable, multilateral proposal meant to bring transportation law up to date.

Advertisements

Leave a comment

Filed under Law

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s