US COGSA and The Harter Act; the current legal position

UK Club and its New York-based correspondent Freehill Hogan & Mahar LLP have provided a useful update on the current situation regarding the US Carriage of Goods by Sea Act (COGSA) and the Harter Act (contractually or by force of law).

The Club said that its Americas members often dealt with contracts of carriage subject to COGSA and the Harter Act. Although these Acts have been in place for more than 100 years, the implication of each on an ocean carrier’s liabilities occasionally remained subject to interpretation

  • Q: When will the Harter Act or COGSA apply by force of law?
  • Q: When it applies by force of law, can it be excluded or modified, in whole or part, by clear contractual wording?

COGSA, as enacted in 1936, applies statutorily to all contracts of carriage of goods by sea to or from ports of the US in foreign trade, during the period from the time when the goods are loaded on to the time when they are discharged from the ship. This is commonly referred to as the “tackle-to-tackle” period of the voyage.

Additionally, COGSA applies to contracts of carriage covered by a bill of lading or any similar document of title, and, by its terms, is not applicable to on deck or private carriage.

The Harter Act, enacted in 1893, applies to the carriage of goods to or from any port in the US.

However, COGSA supersedes the Harter Act with respect to the “tackle-to-tackle” period for international shipments.

Although US courts recognize that COGSA sharply curtailed the applicability of the Harter Act, the Harter Act may still govern during the period prior to loading and after discharge of cargo until proper delivery is made, unless COGSA is extended contractually.

In that regard, it is very common for ocean carriers to include clauses in their bills of lading contractually extending COGSA coverage to periods before loading and after discharge.  

Another distinguishing factor is that the Harter Act is not compulsorily applicable to any inland portion of carriage pursuant to a through bill of lading. That is to say, “proper delivery” under the Harter Act does not mean delivery to the ultimate consignee at the end of intermodal transportation.  It means delivery to the inland carrier.

By contrast, when COGSA has been extended under a through bill of lading to cover the period before loading and after discharge, delivery occurs when the goods are made available to the consignee at the designated inland delivery point.

The Harter Act invalidates provisions in an ocean carrier’s bill of lading absolving the carrier for its own negligence, but the statute permits contractual provisions limiting a carrier’s liability.

For example, contractual per package limitations of liability for periods before loading and after discharge from the vessel are permissible under the Harter Act, so long as they provide for some liability and do not exculpate the carrier.

Moreover, the shoreside contractual extension of COGSA in bills of lading will permit the carrier to rely upon COGSA’s $500 per package limitation (or other limitation contractually provided).

To the extent the Harter Act or COGSA apply as a matter of law, neither statute can be excluded. They therefore “set the floor” as to required terms. However, carriers are certainly able to provide more favourable contractual terms to cargo interests than afforded by the statutes. Examples could include stripping away defences to the carrier, higher valuation for liability, and increased package limitation (or no package limitation at all).

  • Q: Where a contractual law/jurisdiction clause elects US law, does the Harter Act or COGSA automatically apply?

From a US law perspective, a US law/jurisdiction clause which is properly drafted and broad enough to cover any and all disputes arising under the bill of lading or other applicable agreement should suffice to trigger COGSA (or the Harter Act) and its defences and limitations.

Conversely, a reference to US law alone might not be sufficient to incorporate COGSA and/or the Harter Act for periods that such laws do not otherwise apply statutorily. However, there are many permutations, and these could result in different results.

  • Q: Are there obligations in the Harter Act or COGSA which are more onerous than in the Hague/Hague Visby Rules for the Carrier?
  • Q: If so, what aspects are more onerous?

Generally stated, COGSA serves as the US enactment of the Hague/Hague Visby Rules and the defences applicable are essentially the same. One exception is that COGSA’s $500 per package limitation is more favourable than the applicable limit under the Hague-Visby Rules, which is the higher of 667.67 SDR per package or other shipping unit or 2 SDR per kg of gross weight.

Liability under the Harter Act when it applies is generally more onerous than under COGSA or the Hague/Hague Visby Rules. The carrier is liable for its own negligence and the Harter Act doe not expressly provide for a limitation per package or by weight.

  • Q: Do the Harter Act and COGSA apply to all contracts of carriage, or only to bills of lading and other negotiable documents?
  • Q: What is meant by “common carriage” and “private carriage” in the Acts?

COGSA supplants the Harter Act during the period “tackle to tackle.” The Harter Act as drafted only applies to public carriers. However, parties to private contracts are free to incorporate the Harter Act by contract and are not prevented by statute from limiting liability.

COGSA by its terms:

  • only applies to bills of lading and similar documents of title, meaning that COGSA is not applicable, for example, to non-negotiable bills and seaway bills;
  •  does not apply to charter parties or other private contracts of carriage, i.e., service contracts;
  • does not apply to cargo stowed on deck.

Seaway bills and non-negotiable bills: Although COGSA does not apply statutorily to these types of bills because they are not documents of title, it is very common for the parties to incorporate COGSA contractually to both seaway bills and non-negotiable bills of lading.

Charter Parties / Private Carriage: Common carriage is the transportation of cargo for the public under bills of lading.  By contrast, private carriage is generally subject to a charter party, whether in part or for the full cargo carrying capacity of the vessel. In cases of private carriage, the parties may incorporate COGSA contractually through, for example, a US Clause Paramount. Likewise, while COGSA does not apply statutorily to service contracts, the parties are free to, and frequently do, incorporate COGSA contractually.

On Deck Cargo: The parties to a bill of lading may contractually extend COGSA to cover cargo stowed on deck and such clauses are enforceable to the extent the stowage does not expose the cargo to greater risk and/or is the custom and practice in the trade (e.g. on container ships).

  • Q: If both the Harter Act and COGSA apply by force of law, will one automatically take precedence over the other? Is the position the same if they are both incorporated by virtue of a choice of law clause?

COGSA supersedes the Harter Act with respect to the “tackle-to-tackle” period for international shipments, and thus the Harter Act applies by force of law only during the period prior to loading and after discharge of the cargo until proper delivery. COGSA can be contractually extended to the period before loading and after discharge and is generally enforceable on that basis.

However, there are some exceptions to this general statement – for example, where COGSA would serve to exonerate the carrier from liability in a manner not permitted under the Harter Act.

Michael Fernandez, Will Yost and Cody King of FHM undertook the underlying research and drafting of this article.

Note: Under UK Club Rules, members are not entitled to a recovery from the Association in respect of contractual liabilities which “would not have been incurred or sums which would not have been payable by the Owner if the cargo (including cargo on deck) had been carried under a contract incorporating terms no less favourable to the Owner than…the HVR…”.

If COGSA and/or the Harter Act apply compulsorily by law, then associated liabilities would be covered.