The starting point in understanding international cargo claims is that a claim is based upon a breach of contract by the carrier, not whether the carrier was negligent. This arises out of the fact that the essence of the transportation contract is that the carrier agrees to move cargo from point A to point B. In return, the shipper agrees to pay the carrier.
Implicit in this arrangement is that the cargo will arrive at destination undamaged. When the cargo is lost or damaged, the basic contract for carriage has been breached, giving rise to the shipper’s claim.
The contract for carriage can either be an individually negotiated contract between the shipper and the carrier; or, if none, the bill of lading, air bill, ocean bill, or other document issued by the carrier. These bills will typically incorporate by reference the terms of the carrier’s tariff or other terms and conditions.
Basics of Motor Carrier Liability
For domestic ground shipments, the governing statute is called the Carmack Amendment. This statute imposes monetary liability for the actual loss. However, carriers are allowed to limit this liability in exchange for a lower rate, and most do. Carmack also sets a minimum time period of nine months from the date of delivery for filing a claim and a minimum time period of two years from the date the claim is denied for initiating lawsuits.
Shipments between the United States and Canada
An underlying principle relating to cargo liability for ground shipments moving between the United States and Canada is that the law of the country of origin applies. Thus, for northbound shipments from the United States into Canada, Carmack liability will apply; for southbound shipments, Canadian law will apply.
In Canada, there is no federal law governing loss & damage. Rather, there is something known as the Uniform Bill of Lading Act (UBLA), which has been adopted by some, but not all, of the Provinces. These Provinces include Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Quebec, and Saskatchewan.
Pursuant to the UBLA, carriers are liable for any loss of or damage to the goods while they are in the custody of the carrier, subject to certain exceptions. Generally speaking, the Canadian carriers are not liable for delay “unless by agreement that is specifically endorsed in the contract of carriage and signed by the parties.”
Although the basic principles of liability are very similar to those of the United States, a crucial distinction relates to the amount of the liability. As stated above, under Carmack the starting point is “actual loss or injury.” However, in Canada, the UBLA provides that the liability:
“Shall be the lesser of (i) the value of the goods at the place and time of shipment, including the freight and other charges if paid, and (ii) $4.41 per kilogram computed on the total weight of the shipment.”
However, the consignor can declare a value on the bill of lading higher than the UBLA minimum.
Another very critical distinction relates to much shorter time limits. Notices of claims are to be given “within 60 days after delivery of the goods or, in the case of failure to make delivery, within nine months after the date of shipment.” The “final statement of the claim must be filed within nine months after the date of shipment, together with a copy of the paid freight bill.”
Shipments Between the United States and Mexico
The principle that the law of the country of origin will govern a transborder shipment also applies to shipments between the United States and Mexico. The Mexican federal law governing carrier liability provides that when the user of the service does not declare the value of the goods, liability will be limited to an amount equivalent to 15 days of the minimum daily wage then current in the Federal District per ton.
At the current exchange rate, this is approximately 6¢ per pound. This is drastically lower than in the United States or Canada. Because of this, the best practice is for shippers to obtain their own shipper’s interest cargo insurance to protect their interests.
There is also a critical operational difference between Canadian cross-border shipments and Mexican cross-border shipments. Generally speaking, US-based carriers will pick up in the United States and deliver to Canada, and Canadian carriers will pick up in Canada and deliver to the United States. However, for a multitude of reasons, US carriers picking up in the United States usually will only carry the cargo to the Mexican border where it is then turned over to a Mexican carrier to deliver to destination. The opposite applies with respect to northbound shipments, with Mexican carriers only transporting cargo to the United States border.
Because US carriers so rarely cross into Mexico to deliver to destination, Carmack liability will hardly ever apply to the portion of the transport in Mexico. This underscores the need for shippers to obtain their own cargo insurance for loss & damage occurring in Mexico.
International Air Cargo Liability
For domestic air shipments, the air carrier’s tariff sets the time limits and limits of liability. For international air shipments, the Montreal Convention, an international treaty, sets the time limits and limits of liability. A claim must be filed within 14 days of delivery for damage and within 21 days for delay.
The statute of limitations for filing a lawsuit is two years. Under the Convention, the limit of liability is 22 Standard Drawing Rights (SDRs) per kilo, which currently translates to approximately $12.90 per pound.
Ocean Cargo Liability
While individual small packages are not transported by ocean carriers, many parcel shippers import their inventory from overseas or export their product. Rather than small individual packages, these will typically be shipped in intermodal containers.
Ocean shipments to and from the United States are usually governed by the Carriage of Goods by Sea Act (COGSA). Under COGSA, an ocean carrier has 17 defenses. As with Carmack, even when the facts establish such a defense, the carrier must also show that its negligence did not contribute to the loss.
For ocean shipments, the timeline to file a notice of claim is only three days from delivery — much shorter than the nine months allowed under Carmack. Similarly, the timeline to file suit is one year from the date of delivery — as opposed to two years from the date of declination of a claim under Carmack.
Originally, COGSA was understood to apply tackle-to-tackle, meaning from the time that loading the shipment began to the completion of unloading the shipment. However, over time, the ocean carriers have been allowed to extend the COGSA liability regime to the inland portion of the movement by a motor or rail carrier.
Another significant difference between COGSA and Carmack is that whereas Carmack imposes liability for the actual loss, the liability of an ocean carrier under COGSA is limited to $500 per package or customary shipping unit. It’s for this reason that most shippers obtain shippers’ interest cargo insurance for ocean movements rather than to rely on the liability of the carrier
Caveat
The above discussion of the legal principles relating to loss & damage to cargo when moving internationally is a short summary of a very complex area. There are other principles and other laws and regulations that could well come into play with regard to any particular situation.
Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found in the “Content Library” on PARCELindustry.com. Your questions are welcome at brent@primuslawoffice.com.
This article originally appeared in the 2022 Cross-Border and Global issue of PARCEL.
