The Pitfalls of Global Logistics
By Henry E. Seaton

August 2000
Reprinted from

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.
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