FREIGHT LOSS / Shipment of plasma from Baxter Healthcare in Kentucky to Vienna, Austria. Shipper/Baxter (through contractor) issued “sea waybill between Baxter and [ocean carrier] for shipment from Kentucky to Vienna, Austria. Freight destroyed in motor carrier accident en route to ocean port and ocean carrier in Port of Norfolk, Virginia for transit by sea. Held: COGSA, not Carmack, governed.

Royal & sun Alliance Insurance, PLC v. Service Transfer, Inc., 2012 WL 6028991 (U.S. District Court for the Southern District of New York, December 4, 2012. Free copy available here.

Who is affected? Shippers and carriers of freight by ocean ship where the load is lost or damaged during motor carrier leg to ocean port where bill of lading is a “through” one to foreign, trans-ocean destination.

Procedural Context

“Defendant Service Transfer, Inc. (“STI”) moves for partial summary judgment in this maritime case, arguing that this action, filed by plaintiff Royal & Sun Alliance Insurance, PLC (“RSA”), acting as subrogee for a shipper, is governed by the United States Shipping Act of 1984, 46 U.S.C. § 40101 et seq., and the United States Carriage of Goods by Sea Act of 1936, 46 U.S.C. § 1300 et seq. (“COGSA”). The parties dispute whether the domestic leg of an international transportation contract is governed by COGSA or the Carmack Amendment, 46 U.S.C. § 14706. For the following reasons, the defendant’s motion is granted; COGSA will be applied to the journey at issue here.”

Freight Factual Background

“STI is an interstate motor carrier which provides services to ocean carrier American President Lines, Ltd. (“APL”). In April 2011, BioLife Plasma Services LLC (“BioLife”) delivered a shipment of frozen human plasma to STI at a warehouse in Erlanger, Kentucky, operated by RxCrossroads Acquisition Company (“RxCrossroads/MDI”). Rx Crossroads/MDI acts as the warehousing and distribution logistics contractor for Baxter Healthcare Corporation (“Baxter”). It was intended that STI would transport and deliver the plasma from Kentucky to APL in Norfolk, Virginia for further shipment by sea to Bremerhaven, Germany en route to its ultimate destination in Vienna, Austria. BioLife is a part of Baxter, and the plasma was to be delivered to a European affiliate of Baxter, Baxter Healthcare Switzerland.

“While driving between Kentucky and Virginia, STI’s truck driver fell asleep and drove the truck off the road. The truck burned and the shipment was lost. RSA commenced this action as Baxter’s subrogee.

“The shipment of plasma was subject to a sea waybill between Baxter and APL (“Waybill”).The Waybill provided for the through intermodal transport of the goods from Erlanger, Kentucky to Vienna, Austria. For the purposes of the Waybill, APL is the “Carrier” and Baxter is the “Merchant” shipper. STI acted on this shipment as a sub-contractor of APL. As such, STI is not a party to the Waybill but seeks protection under its terms.

“The Waybill included a Clause Paramount and a Himalaya Clause. The clauses in relevant part extend APL’s liability under COGSA to the period prior to loading goods onto APL’s ocean vessel and permit APL’s subcontractors to invoke COGSA’s liability limitations, respectively. The parties do not dispute that the Hague Rules as referenced in the Waybill include their 1936 adaptations in COGSA.

“When STI’s truck driver picked up the shipment from RxCrossroads/MDI on April 11, 2011, the STI driver signed an RxCrossroads/MDI Uniform Straight Bill of Lading dated April 9, 2011 (“Bill of Lading”). The Bill of Lading states that the subject shipment is “From” MDI in Kentucky “To” Baxter AG in Vienna, Austria.”

Legal Conclusion

“COGSA governs “the terms of bills of lading issued by ocean carriers engaged in foreign trade.” Regal–Beloit, 130 S.Ct at 2440; see also 46 U.S.C. § 30701 at Sec. 13. Although COGSA “only applies to shipments from United States ports to ports of foreign countries and vice versa … [it] allows parties the option of extending certain COGSA terms by contract to cover the entire period in which the goods would be under a carrier’s responsibility, including a period of inland transport.” Regal–Beloit, 130 S.Ct at 2440 (citation omitted).

The Carmack Amdendment, by contrast, governs the terms of bills of lading issued by domestic motor carriers providing transportation or service subject to the jurisdiction of the Surface Transportation Board (“STB”). See 49 U.S.C. § 14706(a)(1).It imposes liability for damage caused during motor carriage under the STB’s jurisdiction against (A) the receiving carrier, (B) the delivering carrier, or (C) another carrier over whose line or route the property is transported in the United States or from a place in the United States to a place in an adjacent foreign country when transported under a through bill of lading. Id. (emphasis supplied). “Carmack’s purpose is to relieve cargo owners of the burden of searching out a particular negligent carrier from among the often numerous carriers handling an interstate shipment of goods.” Regal–Beloit, 130 S.Ct at 2441. Parties may agree to waive the rights and remedies provided under the Carmack Amendment by express waiver. See 49 U.S.C. § 14101(b)(1).

“The clear terms of the Waybill indicate that COGSA governs this action. The Ocean Freight Services Agreement between Baxter and APL provides that liability for any freight claims shall be determined pursuant to the terms and conditions of the Waybill. The Waybill specifies that APL is responsible for the performance of the Carriage from the Place of Receipt … to the … Place of Delivery” of the combined carriage indicated on the Waybill, namely the shipment of goods from Erlanger, Kentucky to Vienna, Austria via the ports of Norfolk, Virginia and Bremerhaven, Germany. It contains a Clause Paramount which specifically extends COGSA’s application to the inland portion of the shipment by stating in relevant part that, “[p]rior to loading onto the [overseas] Vessel … the Carrier’s liability shall be governed under the Hague Rules,” which the parties do not dispute includes COGSA. The Himalaya Clause extends COGSA’s application to STI as APL’s sub-contractor on the Waybill. STI did not issue its own bill of lading and it had no privity with Baxter. Indeed, no bill of lading was issued by any party to cover solely the domestic leg of this international shipment. Thus, claims arising during STI’s transport of the goods from the Waybill’s “place of receipt,” Erlanger, Kentucky, to the “port of loading,” Norfolk, Virginia, are covered by COGSA.”