The U.S. District Court for the District of Maryland recently took a look at two issues that frequently come up in ocean cargo disputes. COGSA, the U.S. Carriage of Goods by Sea Act, at 46 USC §30701, requires shippers to provide ocean carriers timely notice of claim of cargo damage in order to pursue recovery. That notice must be given “at the port of discharge before or at the time of the removal of the goods into the custody of the person entitled to delivery” of any “apparent” damage to cargo. If the damage is not apparent, “the notice must be given within three days of the delivery.” Failure to give timely notice can be a complete defense to the claim.
But what constitutes delivery? And when an ocean freight forwarder books freight with a carrier, is it the agent of the shipper? Of the carrier? Both? And what difference does it make?
Christopher Aniedobe hired forwarder Cartainer Ocean Line to arrange transport of his Toyota Sequoia from Baltimore to a town in Nigeria. Cartainer booked the shipment with Hoegh Autoliners, an ocean carrier that specializes in automobile transportation. Apparently, the car was vandalized en route. Its radio, navigation system and computer were stolen, and it suffered body damage.
Hoegh’s vessel arrived and was offloaded on November 19, 2008, but the car remained under the carrier’s control during the succeeding two days. The customs clearing agents first accessed the car on November 21st. Aniedobe emailed Cartainer about the damage that day, and was directed to take it up with Hoegh. He did on November 24th, and tried to get the claim paid over the succeeding months. When that failed, he brought suit against the carrier and forwarder.
Both defendants moved to dismiss. First, Hoegh claimed the shipper gave it untimely notice, as over three days had elapsed from the time of offload. To decide that issue, the court looked to the plain meanings of the terms “discharge” and “delivery,” as COGSA contains no definitions of them. While the cargo was “discharged” from the vessel five days before Aniedobe gave notice of claim, “delivery,” or what Webster’s Dictionary defines as “the act of transferring from one to another,” was not made until November 21st, which was only three days before notice was given. Until then, Hoegh’s agents had the car, and Aniedobe couldn’t touch it. Because the shipper had presented a prima facie COGSA case (tender in good condition; delivery in damaged condition; and timely notice), the motion to dismiss was denied.
Next, Hoegh argued that its liability should be limited to the COGSA-blessed minimum of $500/package. The statutory criteria a carrier must demonstrate to enjoy this umbrella include providing the shipper with a reasonable opportunity to declare his freight’s value, typically by filling in a space on the bill of lading. If no value is supplied, the carrier’s liability can be limited to relative peanuts. Cartainer left that space blank.
The shipper argued such creative and legally unfounded points as (1) the damage was “far removed from maritime activities; and (2) that the Carmack Amendment, which governs surface carrier liability should displace COGSA. Those arguments didn’t hold water. While Hoegh might be liable for the loss, its liability is capped at five hundred bucks.
Foreseeing that possible outcome, Aniedobe argued that Cartainer was negligent in failing to declare the car’s full value without apprizing him of the consequences of its doing so. Cartainer sought dismissal on the ground it was Aniedobe’s “agent” in all its activities, such that it can’t be liable for Hoegh’s alleged screw up.
Whether or not ocean freight forwarders are agents of anyone has long been the subject of discussion and disagreement within industry and law. In some senses, they clearly perform tasks on behalf of their shipper customers, providing expertise and resources to service the customers’ needs. But in other significant ways, forwarders are service providers themselves, marketing and receiving compensation for their own tangible and intangible products as part of arms-length transactions. They also arguably perform agent-esque tasks on behalf of carriers.
The court ruled that Cartainer was acting as a go-between, but its efforts were primarily for Aniedobe, such that it was the shipper’s agent. Principal-agency law in this contexts precludes an entity from being the agent for two entities. In any event, the U.S. Supreme Court, in its 2004 landmark decision of Norfolk Southern Ry. v. Kirby, ruled that forwarders are indeed shippers’ agents for the “single limited purpose” of contracting with carriers for limitation of liability.” The court determined that Cartainer didn’t “stray from standard practices when opting for the default limited liability,” although there’s no discussion of what the forwarder might have done to ensure Aniedobe was apprized of the consequences and had an opportunity to purchase cargo insurance coverage.
The times of discharge and delivery frequently are issues of fact that courts won’t decide on summary judgment, but offloading freight from a vessel alone clearly doesn’t start COGSA’s notice-of-claim clock running. Delivery involves a consignee actually taking possession. Forwarders are empowered to waive a carrier’s full liability for cargo damage. However, an intermediary’s best practices include advising shippers – preferably in writing – about the considerations (freight charge savings in exchange for reduced remedies), and educating them about cargo insurance options.
Ref: Aniedobe v. Hoegh Autoliners, Inc., et al., 2011 WL 829139 (D. Md. 2011).
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