On Monday, June 21, 2010, the United States Supreme Court issued its opinion in Kawasaki Kisen Kaisha LTD. v. Regal-Beloit Corp. By a 6-to-3 vote, the court said the Carmack Amendment does not apply to a shipment originating overseas under a single through bill of lading. The terms of the through bill of lading govern the parties’ rights.
The court framed the issue as “whether the terms of a through bill of lading issued abroad by an ocean carrier can apply to the domestic part of the import’s journey by a rail carrier, despite prohibitions or limitations in another federal statute.” Relying on the text of the Carmack Amendment, the court determined that a shipment’s point of origin is critical in deciding whether a Carmack-compliant bill of lading is required. The court’s opinion states:
… for Carmack’s provisions to apply the journey must begin with a receiving rail carrier, which would have to issue a Carmack-compliant bill of lading. It follows that Carmack does not apply if the property is received at an overseas location under a through bill that covers the transport into an inland location in the United States. In such a case, there is no receiving rail carrier that “receives” the property “for [domestic rail] transportation,” § 11706(a), and thus no carrier that must issue a Carmack-compliant bill of lading. The initial carrier in that instance receives the property at the shipment’s point of origin for overseas multimodal import transport, not for domestic rail transport.
A carrier that accepts goods for further transport from another carrier in the middle of an international shipment under a through bill of lading does not become a receiving carrier under Carmack.
In this case, the court continued, the shippers or cargo owners made the decision to select “K” Line for their through transportation needs. “K” Line received the goods in China, issued through bills of lading for shipment to inland destinations in the Untied States, and subcontracted with Union Pacific for rail transportation in the United States. The through bills of lading provided the liability and venue rules for the foreseeable event that the cargo was damaged during carriage. Had the bills of lading for the overseas transportation ended at a port in the United States and the cargo owners then contracted directly with Union Pacific to complete a new journey to the inland destinations in the United States, Union Pacific would have been a receiving carrier and would have been required to issue a separate Carmack-compliant bill of lading.
In finding Carmack inapplicable to the inland portion of an international shipment under a through bill of lading, the court’s decision effectively protects carriers within the United States from the liability regime provided by the Carmack Amendment when a shipment originates overseas. Since the Carriage of Goods by Sea Act (COGSA) governs shipments traveling to or from a port in the United Sates by an ocean carrier engaged in foreign trade, a carrier’s liability under a through bill of lading could be limited under COGSA’s liability regime. COGSA permits carriers to limit their liability to $500 per package. In addition, a forum selection clause in a through bill of lading that provides for jurisdiction or arbitration in a foreign country, such as Japan, is enforceable.
When faced with a cargo loss where the shipment originated overseas, it is important to obtain a copy of any bills of lading issued by the carriers and understand the importance of their terms. Cozen O’Connor stands ready to assist you in navigating those waters.