Carriage of Goods by Sea Act
Encyclopedia
The Carriage of Goods by Sea Act ("COGSA") is a United States
statute
governing the rights and responsibilities between shipper
s of cargo
and ship-owner
s regarding ocean shipments to and from the United States. It is the U.S. enactment of the International Convention Regarding Bills of Lading, commonly known as the "Hague Rules". It was found in Title 46
Appendix of the United States Code
, starting at Section 1301, but has been moved to a note in 46 United States Code
30701.
The United States Congress
, concerned that the Hague Rules did not offer shippers enough protection against damage to cargo by shipowners, amended the Hague Rules in a number of minor, but important, ways. It increased the amount that shipowners would have to pay cargo owners for damage in transit from GBP
100 per package to US$
500 per package or, for goods not shipped in packages, per customary freight unit. This "package limitation" has become one of the most contentious and litigious areas in the field of cargo damage, particularly as it relates to the transportation of goods by ocean shipping containers
.
s, a process that results in numerous boxes or bags of cargo being consolidated on a single pallet. Shipowners, seeing an opportunity to reduce their liability for cargo damage, argued to the courts that the pallets were now "packages" and that they were entitled to limit their liability to $500 per pallet. Some courts agreed.
Later, shipowners began offering cargo owners the opportunity to ship their cargoes in large ocean shipping container
s. The containers came 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 (12.2 m) long. The term "Twenty-foot equivalent unit
" or TEU derived from this size - a TEU was a space aboard a ship that was 8 feet (2.4 m) wide by 8 feet (2.4 m) high by 20 feet (6.1 m) long.
Shipowners, again seeing an opportunity to limit their liability, began arguing that the containers were "packages" and that they could limit their liability to $500 per container, even though the contents of a container may be valued at over $500,000. Again, some courts agreed.
It is this imbalance, both in the relative bargaining power of cargo owners, and the superior bargaining power of shipowners, and the imbalance between $500 per container and the true value of a shipment which has led to countless lawsuit
s and judicial opinions over the "package limitation" problem.
The rest of the world, seeing this as an attempt by shipowners to free themselves from responsibility for protecting cargo, amended the Hague Rules in 1968 with the Visby Amendments which eliminated the "per package" limitation and substituted a limitation per kilogram. In so doing, litigation concerning limitations on liability became virtually non-existent outside of the United States. However, Congress failed to pass the Visby Amendments to the Hague Rules.
At the time of the passage of COGSA the customary freight unit for most cargo was the "revenue ton" - the number of long tons (2240 lb, 1017 kg) or measurement tons (100 cubic feet) that would produce the most revenue for the shipowner. For example, a cargo of aluminium
ingot
s, which were not packaged for shipment, would be heavy and dense, so the customary freight unit for aluminum ingots would be the long ton
, a measurement of weight. By comparison, a shipment of canoe
s, which were not packaged for shipment, would be light but would take up a large volume, ensuring the customary freight unit would be the measurement ton of 100 cubic feet (2.8 m³). If a canoe were 2 foot (0.6096 m) wide by 2 foot (0.6096 m) high by 10 feet (3 m) long (0.6 m x 0.6 m x 3 m), its measurement would be 40 cubic feet (2 x 2 x 10) which would be one measurement ton (anything less than 100 would be 1 by default) and hence the limitation would be $500 per canoe.
The courts, possibly believing that Congress' approach was too cumbersome, jettisoned the word "customary" from the phrase "customary freight unit" and decided that whatever freight unit the shipowner applied would be the freight unit for determining the limitation on liability. Again, seeing an opportunity to limit their liability for cargo damage, shipowners began freighting all cargo by unit, rather than by units of weight or measurement. Consequently an automobile which might have a volume of 400 cubic feet (15 m3), or 4 measurement tons, which would previously entitle the carrier to a limitation of $2000, was now freighted as "one automobile" thereby reducing the shiponwer's liability from $2000 per automobile to $500.
Law of the United States
The law of the United States consists of many levels of codified and uncodified forms of law, of which the most important is the United States Constitution, the foundation of the federal government of the United States...
statute
Statute
A statute is a formal written enactment of a legislative authority that governs a state, city, or county. Typically, statutes command or prohibit something, or declare policy. The word is often used to distinguish law made by legislative bodies from case law, decided by courts, and regulations...
governing the rights and responsibilities between shipper
Shipper
A shipper can be:*Someone who sends goods for shipment, by packaging, labeling, and arranging for transit, or who coordinates the transport of goods*Shipping , someone who supports a fictional romantic relationship, usually on the Internet...
s of cargo
Cargo
Cargo is goods or produce transported, generally for commercial gain, by ship, aircraft, train, van or truck. In modern times, containers are used in most intermodal long-haul cargo transport.-Marine:...
and ship-owner
Ship-owner
A shipowner is the owner of a merchant vessel . In the commercial sense of the term, a shipowner is someone who equips and exploits a ship, usually for delivering cargo at a certain freight rate, either as a per freight rate or based on hire...
s regarding ocean shipments to and from the United States. It is the U.S. enactment of the International Convention Regarding Bills of Lading, commonly known as the "Hague Rules". It was found in Title 46
Title 46 of the Code of Federal Regulations
Title 46 is the portion of the Code of Federal Regulations that governs shipping within the United States for the United States Coast Guard, the United States Maritime Administration, and the United States Maritime Commission...
Appendix of the United States Code
United States Code
The Code of Laws of the United States of America is a compilation and codification of the general and permanent federal laws of the United States...
, starting at Section 1301, but has been moved to a note in 46 United States Code
United States Code
The Code of Laws of the United States of America is a compilation and codification of the general and permanent federal laws of the United States...
30701.
The United States Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
, concerned that the Hague Rules did not offer shippers enough protection against damage to cargo by shipowners, amended the Hague Rules in a number of minor, but important, ways. It increased the amount that shipowners would have to pay cargo owners for damage in transit from GBP
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...
100 per package to US$
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
500 per package or, for goods not shipped in packages, per customary freight unit. This "package limitation" has become one of the most contentious and litigious areas in the field of cargo damage, particularly as it relates to the transportation of goods by ocean shipping containers
Intermodal container
An intermodal container is a standardized reusable steel box used for the safe, efficient and secure storage and movement of materials and products within a global containerized intermodal freight transport system...
.
History of Limitation of Liability for Cargo Damage
At the time of the passage of COGSA most cargo was shipped in boxes, crates, and bags. Shortly after its passage, cargo owners determined that cargo could be handled more efficiently if placed on palletPallet
A pallet , sometimes called a skid, is a flat transport structure that supports goods in a stable fashion while being lifted by a forklift, pallet jack, front loader or other jacking device. A pallet is the structural foundation of a unit load which allows handling and storage efficiencies...
s, a process that results in numerous boxes or bags of cargo being consolidated on a single pallet. Shipowners, seeing an opportunity to reduce their liability for cargo damage, argued to the courts that the pallets were now "packages" and that they were entitled to limit their liability to $500 per pallet. Some courts agreed.
Later, shipowners began offering cargo owners the opportunity to ship their cargoes in large ocean shipping container
Containerization
Containerization is a system of freight transport based on a range of steel intermodal containers...
s. The containers came 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 (12.2 m) long. The term "Twenty-foot equivalent unit
Twenty-foot equivalent unit
The twenty-foot equivalent unit is an inexact unit of cargo capacity often used to describe the capacity of container ships and container terminals...
" or TEU derived from this size - a TEU was a space aboard a ship that was 8 feet (2.4 m) wide by 8 feet (2.4 m) high by 20 feet (6.1 m) long.
Shipowners, again seeing an opportunity to limit their liability, began arguing that the containers were "packages" and that they could limit their liability to $500 per container, even though the contents of a container may be valued at over $500,000. Again, some courts agreed.
It is this imbalance, both in the relative bargaining power of cargo owners, and the superior bargaining power of shipowners, and the imbalance between $500 per container and the true value of a shipment which has led to countless lawsuit
Lawsuit
A lawsuit or "suit in law" is a civil action brought in a court of law in which a plaintiff, a party who claims to have incurred loss as a result of a defendant's actions, demands a legal or equitable remedy. The defendant is required to respond to the plaintiff's complaint...
s and judicial opinions over the "package limitation" problem.
The rest of the world, seeing this as an attempt by shipowners to free themselves from responsibility for protecting cargo, amended the Hague Rules in 1968 with the Visby Amendments which eliminated the "per package" limitation and substituted a limitation per kilogram. In so doing, litigation concerning limitations on liability became virtually non-existent outside of the United States. However, Congress failed to pass the Visby Amendments to the Hague Rules.
Limitation of Liability for Cargo not shipped in Packages
Many types of cargo are not shipped in packages such as automobiles, yachts, cranes, and heavy construction equipment. For those cargoes, Congress had intended the limitation on liability for shipowners to be $500 per 100 cubic feet (3.7 m3).At the time of the passage of COGSA the customary freight unit for most cargo was the "revenue ton" - the number of long tons (2240 lb, 1017 kg) or measurement tons (100 cubic feet) that would produce the most revenue for the shipowner. For example, a cargo of aluminium
Aluminium
Aluminium or aluminum is a silvery white member of the boron group of chemical elements. It has the symbol Al, and its atomic number is 13. It is not soluble in water under normal circumstances....
ingot
Ingot
An ingot is a material, usually metal, that is cast into a shape suitable for further processing. Non-metallic and semiconductor materials prepared in bulk form may also be referred to as ingots, particularly when cast by mold based methods.-Uses:...
s, which were not packaged for shipment, would be heavy and dense, so the customary freight unit for aluminum ingots would be the long ton
Long ton
Long ton is the name for the unit called the "ton" in the avoirdupois or Imperial system of measurements, as used in the United Kingdom and several other Commonwealth countries. It has been mostly replaced by the tonne, and in the United States by the short ton...
, a measurement of weight. By comparison, a shipment of canoe
Canoe
A canoe or Canadian canoe is a small narrow boat, typically human-powered, though it may also be powered by sails or small electric or gas motors. Canoes are usually pointed at both bow and stern and are normally open on top, but can be decked over A canoe (North American English) or Canadian...
s, which were not packaged for shipment, would be light but would take up a large volume, ensuring the customary freight unit would be the measurement ton of 100 cubic feet (2.8 m³). If a canoe were 2 foot (0.6096 m) wide by 2 foot (0.6096 m) high by 10 feet (3 m) long (0.6 m x 0.6 m x 3 m), its measurement would be 40 cubic feet (2 x 2 x 10) which would be one measurement ton (anything less than 100 would be 1 by default) and hence the limitation would be $500 per canoe.
The courts, possibly believing that Congress' approach was too cumbersome, jettisoned the word "customary" from the phrase "customary freight unit" and decided that whatever freight unit the shipowner applied would be the freight unit for determining the limitation on liability. Again, seeing an opportunity to limit their liability for cargo damage, shipowners began freighting all cargo by unit, rather than by units of weight or measurement. Consequently an automobile which might have a volume of 400 cubic feet (15 m3), or 4 measurement tons, which would previously entitle the carrier to a limitation of $2000, was now freighted as "one automobile" thereby reducing the shiponwer's liability from $2000 per automobile to $500.