The
Pitfalls of Global Logistics
By Henry E. Seaton
August 2000
Reprinted from etrucker.com
Hauling freight today
means participating in global logistics. Your drivers might only carry
goods from on state to another, but at some point before or after your
involvement, that traffic may have been carried by water, rail or air.
In addition, that freight may have originated in or may continue to
another country. Unfortunately, there is no uniform standard for determining
cargo liability without taking into account the specifics of transportation
mode or geography.
The statutes involved are extremely complex, but it's essential that
you recognize the potential problems. In a federal appeals court case
decided just this May, for example, a U.S. carrier quoted an Illinois
to Mexico movement, issued a through bill and attempted to limit its
liability in accordance with the Carmack Amendment. Although a Mexican
carrier lost the shipment and Mexican law provides for a minimal recovery,
the Illinois court held the U.S. carrier liable for the entire loss
under U.S. law.
This case, which I believe is flawed for several reasons, shows why
you need to examine thoroughly the nature of all your loads and consider
the liability assumptions pertaining to other modes or jurisdictions
in which that freight may move before or after you touch it.
Motor carriers often either pickup or deliver shipments that have movements
by water, air or rail. Under international treaty, the liability for
loss or damage to shipments moving by water may be as little as $500
"per package" or "customary freight unit".
International air shipments may be subject to a maximum liability of
$9.07 per pound, but you might need to comply with the requirements
strictly to rely on this limitation. Domestic air shipments aren't governed
by statue, and airway bills may provide limits as low as 50 cents per
pound. But your ground transportation of that load still could expose
you to unlimited liability under Carmack unless you protect yourself
through language in the bill of lading, tariff or contract.
Statutory liability for rail shipments is quite similar to that for
motor carrier shipments. Rail freight moves under uniform bills of lading.
Rail carriers have strict liability and are liable for the destination
market value in the absence of properly executed release rates. But
beware. Containers or trailers on flat car operations are exempt under
the Staggers Rail Act. Unless the shipper has a "smoking gun,"
railroads resist paying damages for the contents of sealed containers
or trailers. Motor carriers and intermodal customers should watch the
fragility of the traffic and shippers' packaging standards carefully.
Shipments originating in Canada ordinarily are subject to a release
rate of CDN$2 per pound. Shipments originating in the United States
and moving to Canada are subject to the unlimited liability imposed
of U.S. law. Mexican cargo liability law isn't so simple. Recovery is
based upon a formula involving the average daily wage of a Mexican worker.
The bottom line: Don't expect the Mexican carrier to contribute significantly
to payment of damages if it loses a through shipment.
Multimodal and international shipments often pass through multiple intermediaries,
and bills of lading can join you with partners you might not even know.
You can't expect to know what liability representations were made to
the beneficial owner of the goods, and you can't rely on often-undisclosed
third parties or intermodal partners to protect your interests.
How do you protect yourself? When dealing with multimodal or international
traffic, you should:
* Effectively
limit your liability through release rates in compliance with regulated
domestic statutes;
* Require your contracting parties to indemnify you against any cargo
claim that exceeds the agreed release rate;
* Issue your own bill of lading, showing just the origin and destination
of your portion of the freight; and
* Provide that your liability may not be extended by the prior or subsequent
nature of the movement.