Prepared by: Su Thiri Khin (Cynthia)

11/20/09 1
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

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Liability of International Air Carriers:
Warsaw Convention
General Principle: Air Carrier is presumptively liable
for all damage to cargo UNLESS the airline shows:
Not at fault or negligent
Shipper was negligent

Air Carrier liable for death or bodily injury resulting

from accident aboard aircraft or in boarding or
disembarking
Accident: event that is peculiar risk of air travel
and “external” to passenger
Warsaw Convention is exclusive remedy

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Warsaw Convention Provisions (As
Amended)
Limits liability of Air Carrier
For 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

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Warsaw Convention Provisions (As
Amended)
Liability for Cargo Loss or Damage
 Protocol 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 recklessly
 Baggage: Liability limited to 1000 SDR per passenger
unless has declared higher value; can’t recover more
than actual value

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Enforcing Warsaw Convention
Suits can only be brought in countries that are
signatories
 Where ticket purchased, final destination or where
carrier has principal place of business
 Montreal Convention: suits for death or injury in
passenger’s principal residence if carrier operates there
Time Limits
 Must 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

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Liability for Carriage of Goods by Sea
 Historically, carrier absolutely liable
 Carriers used exculpatory clauses
 Legal limitations on such clauses
 Hague Rules – 1924 Convention defines liability for
ocean carriers
 US 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/L
 Forum selection and arbitration clause in B/L valid –
Vimar Seguros y Reaseguros S.A. v M/V Sky Reefer
(USSC
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COGSA Principles
Carrier must use due diligence in
providing seaworthy vessel at beginning
of voyage
Carrier liable for failure to use due
diligence
But carrier not liable for damage due to
fire, storms, and negligence in navigating
or managing ship

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COGSA Principles
 Delivery of damaged cargo: shipper must give written
notice to carrier at port of discharge
 For visible damage: give notice before or at time
goods taken from carrier’s custody
 If damage not apparent or visible, give written notice
within 3 days of delivery
 Failure to give notice creates presumption goods
delivered in good condition
 Suit must be brought within 1 year
 P must show goods loaded in good condition and lost or
unloaded in damaged condition
 Clean B/L establishes presumption goods delivered to
carrier in good condition – shifts burden to carrier
 Problem with sealed containers: clean B/L only
establishes outer condition of container

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COGSA Exceptions to Liability
Errors in ship Acts of shipper
navigation or Labor strikes
management Riots
Fire (unless carrier’s Saving life or property
fault) at sea
Perils of the sea Insufficient packing
Act of God Inherent defect in
goods
Act of war
Inadequate marking of
Acts of public goods
enemies Latent (hidden) defects
Legal seizure in ship
Quarantine
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COGSA Defenses to Liability
 “Warranty of Seaworthiness”: ship reasonably fit to carry
cargo undertaken on intended journey
 Competence of crew, suitability of equipment, etc.
 Carrier responsibility for proper loading, storing and
carrying, and unloading goods
 May presume unseaworthy if breaks down shortly after
departure
 Errors in Navigation or Management of ship: carrier not liable
for errors of master, mariner, pilot or crew member
 Depends on severity of storm and how cargo damaged
 Negligence of crew may void defense

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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. Sunway
Line, Inc. (2nd Cir. 2002)
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The Cargo Shortage Problem
Carrier may be responsible unless can use
Q clause defense
P 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/L
Disclaimer – “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)

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COGSA “Package” Limitation
Limits carrier liability to $500 per package or
customary freight unit unless shipper declares
(and pays for) higher value
Container not package under COGSA if contents and
number of units disclosed on B/L
Z.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)

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Other COGSA Provisions
COGSA holds carrier liable for a material
deviation unless necessary to save lives or
property at sea
Material deviation from terms of B/L causes carrier to
lose protection under COGSA
Stowage 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 US
Not recognized in UK and Canada

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Amendments to Hague Rules
Hamburg Rules: 1978 Convention
 Not adopted by US
 Would hold carrier liable for negligence and errors of
navigation or management of ship
 Rules opposed by insurance companies and carriers
 So far, most of endorsing states have been developing
countries
Visby Amendments to Hague Rules
 Not adopted by US
 Raised liability per package to approx. $1000
 Carrier liable for losses from recklessness in operation and
navigation
 Adopted by UK, Canada, Singapore, Japan, Western European
Countries

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Liability of Transport Intermediaries
Freight Forwarders: act as agent of shippers
 US: must be licensed to operate; regulated by US Fed.
Maritime Comm. and Int. Air Transport Assoc.
 May also act as Customs Brokers
 Must post bond and have power of attorney
 Prima 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 shippers
 Issue B/L
 Liable for loss or damage to goods during transport

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Ocean Shipping Reform Act 1998
Amends Shipping Act of 1984 to allow carriers
greater flexibility in contracting
 Carriers 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 laws
 Carriers must treat FF’s and NVOCC’s as shippers
 Carriers may not unreasonably refuse to deal or
negotiate with shippers or intermediaries

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Marine Cargo Insurance
Large volume shippers maintain open cargo
policies
Exporter authorized by insurer to issue certificate of
insurance
Used under CIF contracts
US: 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

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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

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Web Sites

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