Sompo Japan v Union Pacific
The United States Court of Appeals of the Second Circuit held that the Carmack Amendment to the Interstate Commerce Act of 1887 applies to the domestic rail portion of a continuous intermodal shipment originating in a foreign country, thus denying the rail carrier the benefit of the limitation per freight unit under the US Carriage of Goods by Sea Act, 1935 ("COGSA") to which he claimed entitlement under the "Himalaya Clause" in the ocean bill of lading.
DMC Category Rating: Developed
This case note was
originally prepared by Michael P. Smith, an attorney with the firm of Healy
& Baillie LLP in
The district court granted partial summary judgment in favor of the defendant, giving effect to the contract of carriage incorporating the COGSA limitation of US$500 per tractor, for a total amount of US$16,000. Plaintiff argued on appeal that the Carmack Amendment governed defendant’s liability and, accordingly, that defendant was liable "for the actual loss or injury" to the tractors (US$479,500). The Interstate Commerce Act ("ICA") applicable to railroads did not initially address liability for cargo damage. The Carmack Amendment to the ICA imposed a strict liability standard upon rail carriers. Regarding limitation of liability, the ICA permits a carrier to limit its liability only to a value established by written declaration of the shipper or by a written agreement between the shipper and the carrier.
Recognizing that both the Carmack Amendment and COGSA applied to the domestic interstate leg of the shipment, the Court ruled that the Carmack Amendment superseded COGSA. The Court cited well-established Second Circuit precedent holding that since COGSA applied to the rail carriage as a matter of contract (period of responsibility and Himalaya clauses), it did not have the force of a statute. Therefore, the Court determined that COGSA must yield to the Carmack Amendment, which was a federal statute. Accordingly, the rail carrier’s liability was governed not by COGSA but by the Carmack Amendment.
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