Second Circuit Court of Appeals Rules that the Carmack Amendment No Longer Applies to Shipments Originating Overseas under a Single Through Bill of Lading
In Kisen Kaishe v. Regal-Beloit Corp., __ U.S. ___ (June 21, 2010), the U.S. Supreme Court held that the Carmack Amendment no longer applies to shipments originating overseas under a single through bill of lading. The Second Circuit Court of Appeals had previously held otherwise. See Sompo Japan Ins. Co. of Am. v. Union Pac. R.R. Co., 456 F.3d 54, 60-69 (2d Cir. 2006). In Royal & Sun Alliance Insurance. PLC v. Ocean World Lines, Inc., No. 08-4324-cv, 08-4481-cv (2d Cir. July 20, 2010), the Second Circuit followed the recent mandatory authority from the Supreme Court, and affirmed the District Court's decision rejecting Royal & Sun's arguments for Carmack liability.
In Royal & Sun, a printing press was shipped from Germany to Indiana, and was damaged on the last leg of the journey when the truck carrying it crashed into an overpass. Id. The shipment was made pursuant to a bill of lading issued by the NVOCC to the shipper in Germany. Id. The NVOCC's bill of lading provided that the shipment would arrive in Norfolk, Virginia on the M/V Yang Ming Milano and final delivery was to be made thereafter in Bourbon, Indiana. Id. The carrier then issued a bill of lading to the NVOCC that similarly indicated the press will be shipped from Germany to Indiana by way of Virginia. Id. The carrier then arranged with a trucking company for pick up of the packages from Virginia and their final delivery in Indiana. Id.
Both bills of lading contained a Clause Paramount, which provided that the transportation would be subject to the $500 per-package liability limitation of COGSA, and extends this limitation beyond the tackle-to-tackle period. Id. The bills of lading also included a Himalaya Clause, thereby extending contractual protections to the subcontractors of the issuing entity as well. Id.
The Southern District of New York held that the NVOCC's liability was not governed by the Carmack Amendment, but rather by COGSA. This decision was consistent with the subsequent holding in Regal-Beloit, which held that the Carmack Amendment "does not apply to a shipment originating overseas under a single through bill of lading." Id. citing Regal-Beloit, ___ U.S. at ____. Instead, Carmack applies only to "the transport of property for which Carmack requires a receiving carrier to issue a bill of lading, regardless of whether that carrier erroneously fails to issue such a bill." Id. Under Regal-Beloit, there is a two-part test to determine whether a Carmack bill of lading must be issued: First, the rail carrier must provide transportation or service subject to the jurisdiction of the Surface Transportation Board. Id. Second, that carrier must receive the property in an area subject to the Surface Transportation Board's jurisdiction. Id.
The court in Regal-Beloit interpreted the second part of the test to mean that, for the Cormack Amendment to apply, the "journey must begin with a receiving rail carrier, which would have to issue a Cormack-compliant bill of lading." Id. Therefore, the Carmack Amendment "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 U.S." Id.
In this case, the Court applied the Regal-Beloit principles and held that Carmack was inapplicable and, therefore, the Plaintiff's recovery was limited to COGSA's $500 package limitation. Id. The Court further extended the principals of Regal-Beloit to motor carriers and freight forwarder, since the language in each of these sections of the Carmack Amendment are substantially the same, and "a contrary result would in effect outlaw through shipments under a single bill of lading" and would undermine COGSA and international, container-based multimodal transport. Id.
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