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Carriage of Goods by Sea Act – Definition

Carriage of Goods by Sea Act Definition

The Carriage of Goods by Sea Act, referred to as COGSA, is a U.S. based statute that regulates the authorities and duties allocated to cargo shippers and ship-owners with regards to sea shipments made from and to the U.S. This statute came into existence in the form of the Convention Regarding Bills of Lading, generally referred to as the Hague Rules. It was mentioned in the U.S. Code’s Title 46 Appendix, commencing at Section 1301. However, it can be found in a note in 46 U.S. Code 30701 now.

A Little more on What is the Carriage of Goods by Sea Act

The law pertaining to goods by sea act refers to an institute of law that regulates the rights and responsibilities of carriers, shippers, and consignees of sea cargo. The governing body, focusing on cargo claims, involves global commercial law and maritime law.

Cargo Claims

In case, a consignee or the person owning the bill of lading, receives inferior quality or damaged goods during sea transit, or doesn’t receive them at all can follow from any of these options:

  • He or she can receive a claim from the insurance company, or can file a suit against the shipper, carrier or the seller.
  • He or she can file a case against the seller if the seller doesn’t have sufficient title of goods, or the goods delivered don’t match the set standards, or don’t match with sample or description provided.
  • In case, the receiver finds goods in a damaged condition because of poor packing, or improper labelling, he or she can file a suit against the shipper.
  • A carrier will be liable in case the goods get damaged onboard during the sea transit. In this situation, the P&I Club cover will incur the related expenses.
  • If neither the shipper nor the carrier is at fault, the owner of cargo will be required to claim on his or her cargo related policy.

After the payment of a claim has been made, the rights of claim of the assured person are transferred to the insuring party that may choose to file a suit against the party who is responsible for damaging goods.

If a time-charterer or voyage-charterer breaches an agreement or contract, a shipowner can choose to sue him or her. For example, in case the voyage-charterer is not able to ship goods in the said laytime, he or she will have to pay demurrage. If he or she doesn’t adhere to the Notice of Readiness (NOR), the shipowner has the right to terminate the carriage contract, and seek compensation for any losses incurred.

Majority of the carriage contracts or agreements gives more negotiation privileges to a carrier than the shipper. Back in the 19th century, English judges especially created laws to safeguard the interests of weaker individuals. It started with the Hagues Rules that laid out several procedures to create and formulate common law rules by offering a consistent worldwide set of general standards that the carrier needed to comply with. Its primary purpose was to develop a global framework of legitimate rights and responsibilities. However, in reality, there was a decrease in the protection standards as the exclusive rules permitted the carrier to reduce his liability, and gave him or her a huge set of exemptions from liability. Till 1885, there was a huge strictness concerning the duties of the carrier. However, by the year 1905, the duty of a carrier was solely based on ‘reasonable care’ and ‘due diligence’.

The Hague Rules modified in 1924 created the English common law rules for preventing the carrier from exploiting the interests of the cargo owner. After almost 50 years, a few editions were noticed in the Hague-Visby update so as to ensure that the latest rules were still applicable to ‘tackle to tackle’ carriage, or sea carriage. Also, there was virtual ignorance offered to the container revolution in the 1950s. These rules didn’t include cabotage carriage, and mentioned that live animals and deck cargo should not be included in the list of goods. However, as per the Carriage of Goods by Sea Act 1971, English contracts included cabotage, deck cargo, and live animals.

As the liability included a lot of exemptions in Article IV, many perceived it as a bias in support of the carrier. Hence, the United Nations created its contemporary and transparent set of Hamburg Rules for the cargo-owners, with the richer ship-owning countries still sticking to Hague-Visby. The Rotterdam Rules were finally agreed upon at UNCITRAL in the year 2008. As compared to the 11 rules in Hague-Visby, the Rotterdam Rules were broad in nature with more than 90 Articles. Though the Rotterdam Rules are applicable for multimodal carriages, and are updated, but they still need to be implemented in an effective manner. Nobody knows if these rules will be easily adopted in today’s era. However, there is a bleak chance that the narrow version of such rules can still be accepted.

The Hague Rules are implemented by China. The United States of America tends to have its own regulations and policies including the Carriage of Goods by Sea Act, that is more of an updated act of the Hague Rules formed for goods in international trade, and the Harter Act that is mostly created for local carriage.

When Carriage of Goods by Sea Act was passed, the shipping of the majority of the cargo was done in crates, boxes, and bags. With the post-implementation of the law, cargo owners realized that the cargo, that was positioned on pallets, required more attention and concern in terms of handling. Ship owners, seeking the potential of minimizing their liability associated with the damaged cargo, argued that the pallets were considered to be packages now, and they should place a restriction on their liability to $500 for one pallet. There were a few courts that agreed to this argument.

After some time, ship owners started offering the provision of big ocean ship containers to cargo owners. These containers were typically found in two sizes: 8 feet (2.4 m) high x 8 feet (2.4 m) wide x 20 feet (6.1 m) long (2.4 m x 2.4 m x 6 m) or 8 x 8 x 40 feet (12 m) long. The term “20-foot equivalent unit” or TEU got its origin from the dimensions: 8 feet (2.4 m) wide by 8 feet (2.4 m) high by 20 feet (6.1 m) long.

Ship owners again sought to exploit the opportunity for minimizing their liability, and started arguing that those containers were nothing but packages and then, in case of damage, they could be liable for an amount up to $500 for each container, irrespective of the value of goods that the container carried. A few courts agreed to this argument as well. Because of so many inconsistencies, for example, more negotiation power in the hands of ship owners, and less power in the hands of cargo owners, and inconsistency between $500 for every container v/s the actual value of shipped goods, there has been infinite court cases filed on the grounds of ‘package limitation’ issue.

However, most of the individuals identified it as a smart move taken by ship owners to be less responsible in terms of cargo safety. As a result, the Hague Rules in 1968 modified it with the Visby Amendments that replaced the issue of ‘per package’ with ‘per kilogram’. This ultimately reduced the number of lawsuits associated with liability to zero, particularly outside the boundaries of the U.S. However, Congress was unable to implement the Visby Amendments to the Hague Act.

Cargoes such as automobiles, cranes, yachts, or bulky manufacturing equipment, cannot be shipped in the package form. These cargoes place the liability of $500 for every 100 cubic feet on the ship owner.

When COGSA was passed, the revenue ton was considered to be the customary freight unit for a majority of the cargo. Revenue ton refers to the quantum of long tons weighing 1017 kg, or measurement tons of 100 cubic feet, that would help the shipowner in making more profits. For instance, if a cargo comprising of aluminium ingots was not packaged for shipment purposes, it would feel bulky. Hence, the customary freight unit for such cargo would fall in the long ton category, that means determining how much it weighs. In case, there was shipment of unpacked, bulky yet light-weighted canoes, the customary freight unit will be the measurement ton of 100 cubic feet. If the dimensions of the canoe were 0.6m * 0.6m * 3m, it would be measured for 40 cubic feet, that is 2 * 2 * 10. As it is less than the standard 100 cubic feet, it would be translated to one measurement ton, and therefore, it will cause a limitation of $500 for every canoe.

The courts knew that the Congress’ outlook was very complicated, and hence, they converted the phrase ‘customary freight unit’ to ‘freight unit’. They further stated that the freight unit used by the ship owner would be the basis for ascertaining their restriction on liability. Here, the ship owners again tried to minimize their cargo-based liability, and started following the cargo by unit approach instead of units of weight at the time of freight. As a result, a vehicle that had a volume of 400 cubic feet, would make the ship owner liable for $500 for one automobile instead of $2,000.

References for Carriage of Goods by Sea Act 

http://www.businessdictionary.com/definition/Carriage-of-Goods-by-Sea-Act.html

https://en.wikipedia.org/wiki/Carriage_of_Goods_by_Sea_Act

Academic Research for Carriage of Goods by Sea Act 

The Fair Opportunity Requirement Under COGSA Section 4 (5): A Case Study in the Misinterpretation of the Carriage of Goods by Sea Act, Sturley, M. F. (1988). J. Mar. L. & Com., 19, 1. In this paper, the authors describe the COGSA (Carriage of Goods by Sea Act) which is the domestic enactment of the global convention called The Hague Rules, assigns the risk of loss for damage of cargo. The authors provide details on the fair opportunity requirement under section 4(5) of this Act. They illustrate it with the help of a case study related to the misinterpretation of the COGSA.

Proposed Amendments to the Carriage of Goods by Sea Act, Sturley, M. F. (1995). Hous. J. Int’l L., 18, 609. The research has been carried out to evaluate the Act, related to the goods’ carriage by sea commonly known as the COGSA (Carriage of Goods by Sea Act). It was amended a few times. The author throws light on the sections for which the amendments were proposed. Why these sections were amended and what kind of changes were introduced? The authors describe the important concepts in this regard, i.e. Tackle-to-Tackle limitation, bills of lading, domestic trade, the deck carriage & live animals. In the end, they mention the exception of the navigational fault and also, the fire exception.

The Carriage of Goods by Sea Act 1992, Howard, T. (1993). J. Mar. L. & Com., 24, 181. There is no contract signed between the shipowner and the cargo owner for the carriage of goods on the international level by the sea. Every shipment has a complex web of agreements, e.g. contracts of carriage, sale, banking and insurance. The bill of lading has central importance. It contains 3 main functions. Carrier issues this receipt for the good. To the goods, it serves as a title document so that the finance houses and banks can take it as loan security, they finance the goods purchased. The protection is ensured for the shipowner from claims of misdelivery, in case, someone else holding the receipt presents it to the master while the delivery of goods at the discharging port.

The Proposed Amendments to the Carriage of Goods by Sea Act: An Update, Sturley, M. F. (2000). USF Mar. LJ, 13, 1. This paper is an extension of the previous research done by the author 5 years ago. He throws light on the COGSA (Carriage of Goods by Sea Act) and updated information on the proposed amendments to this act from time to time. This act was passed in 1936 by the United States to assign financial responsibility for cargo damage or loss which is faced during ocean transportation. The drafting amendments include the changes in language & structure and changes to refine the proposal while the substantive amendments are in forum selection clauses and some other substantive changes. Finally, the author describes the impacts of US proposals on the international community and vice versa.

Carriage of Goods: Hague, Cogsa, Visby, and Hamburg, Yancey, B. W. (1982). Tul. L. Rev., 57, 1238. The story of The Hague Rules was, first time, told in 1929. Since then, it has been repeated several times. The significant difference in the Harter Act-Hague Rules philosophy and the one advanced today in specific areas remained a focus in studies. This article is an introduction to the present phenomenon surrounding the Hamburg and Visby Rules. The classical attitudes of the US and the UK to be the ability of the common carrier to contract for liability for its own ignorance in cargo damage situations were on the surface, very different. However, they were the same as at common law, the public carrier liability was strict and the British public carrier was fully responsible for the protection of goods until they are in his hands.

Carriage of Goods by Sea, Sturley, M. F. (2000). J. Mar. L. & Com., 31, 241. This paper discusses the unresolved issues in maritime law that can only be corrected by the federal courts. Also, the problems related to the carriage of goods by sea have been addressed. The author has devoted 8 years in resolving these issues and shares the improvements in the Law field. Any consideration of the power of the federal courts to reform cargo Law is subject to basically governed by the statute. The field is, really, important and frequently litigated statute in the AIT (American International Trade).

Liability for the International Carriage of Goods by Sea, Land and Air: Some Comparisons, Sassoon, D. M. (1971). J. Mar. L. & Com., 3, 759. This research highlights the discrepancies between the obligations and rights of carriers running different modes of transport, i.e. land, sea and air and the different regulations regarding their liability for damage or loss to cargo, they use in international trade. The use of cargo is significantly a disadvantage because it is transported by sea. The sea carriers enjoy immunities and rights. In particular jurisdictions, the stipulations have been declared invalid by the United States. In specific countries, the regime governing national carriage may differ from the international one whether the mode of transport is the same.

The limited scope of the cargo liability regime covering carriage of goods by sea: the multimodal problem, Crowley, M. E. (2004). Tul. L. Rev., 79, 1461. This study is based on the examination of the multimodal issue. It starts from the overview of the regimes of cargo liability governing land, air and sea transport. The author addresses the unique issues arising because of the limited scope of the COGSA regime and Hague Rules. He also examines the latest US Supreme Court decision in a railway case and its effects on the multimodal issue. Lastly, he provides a brief overview of the national and international efforts made to resolve the multimodal issues. The findings are that until a real multimodal convention is introduced, the sector can expect temporary court decisions to implement the rules of transportation.

Waybills: The Modern Contract of Carriage of Goods by Sea, Tetley, W. (1983). J. Mar. L. & Com., 14, 465. This study contains suggestions by the author that shipping countries, especially Canada, must not ratify or sign the Rotterdam Rules. This is because they do not harmonize and improve the international carriage of goods Law. Instead, the shipping countries should reconvene for drafting a really binding and uniform multimodal convention. The US does not adopt the Hamburg Rules and Visby Rules. These are a part of the law of carriage of goods for most of the shipping countries. The Rotterdam Rules, most probably, fit for the US that only adopts The Hague Rules but retrograde for the shipping nations of the world including Canada that uses the law of carriage of goods by sea in much more advanced way.

New International Regime for Carriage of Goods by Sea: Contemporary, Certain, Inclusive and Efficient, or Just Another One for the Shelves, Nikaki, T., & Soyer, B. (2012). Berkeley J. Int’l L., 30, 303. The sea carriers have insisted on the addition of clauses into the contract of damages which exempt them from law liability. National legislation strives to curtail this unlimited liberty of contract but it was not sufficient. So, at the end of the 20th century, the international community realized that it is necessary to build an international regime for global trade to develop. It has 2 objectives. Flexibility to control risks with the commercial needs, abuse prevention and parties protection who will be in a weaker bargaining position. It caused the implementation and drafting of The Hague Rules in 1920. It was the 1st ever international convention to apply specific rules universally.

Defining Package in the Carriage of Goods by Sea Act, Toedt III, D. C. (1981). Tex. L. Rev., 60, 961. This paper provides a detailed overview of the COGSA (Carriage of Goods by Sea Act) which is the domestic enactment of the global convention called The Hague Rules, assigns the risk of loss for damage of cargo. The author defines the package in this act and why the need to make amendments arises. What are the advantages and disadvantages of this law for the transporters of sea, land and air?

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