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COGSA and the Himalaya Clause… Reconsidering Ocean Door-to-Door Shipments

When organizing ocean transports, some people may prefer to tender a shipment as ‘door-to-door’ (from the door where cargo is shipping to the door of the final consignee) to a steamship line (SSL) or a
forwarder because this would make things easier. After all, dealing with one party only sounds a lot easier than dealing with three (door to port carrier + ocean carrier + port to door carrier); however,
‘easier’ sometimes comes at unexpected risks and costs.

Taking US rules as the base: Imagine you are in the US and you set up a door-to-door shipment with a SSL to bring your cargo from somewhere in Europe to somewhere in the US. All goes fine, until the
final transport segment from the port in the US to the final door. An accident occurs and all your cargo is lost in a wreck. You may think you can file a claim against the motor carrier and move on, but you
may be in for a surprise.

Technically, for US motor carriers, the Carmak Amendment would dictate the liability the ground carrier would have to cover the loss; however, since the load was set as door-to-door with the SSL from
an overseas location, the cargo is moving under an international bill of lading governed by the Carriage of Goods by Sea Act (COGSA). Because of the Himalaya Clause, even if the damage was not caused by
the SSL, you will need to file the claim directly with the SSL and not the motor carrier. Here is where the bad news comes in: Unless you made arrangements for additional insurance, the SSL’s liability will
be limited to the rules established by COGSA, and will very likely be a lot less than what your cargo was worth.

The Himalaya Clause is a contractual provision (part of your ocean bill of lading) intended to benefit a third party that is not part of the contract, i.e., Stevedores or motor carriers, or other “agents” utilized
one way or another by the SSL to provide the agreed upon service. A bill of lading with a ‘Himalaya Clause’ may contractually expand COGSA coverage to these third parties.

So whereas motor carriers in the US would normally be under the Carmak Amendment, our sample transaction would actually be covered under a different act: COGSA. COGSA rules will also apply to any
bill of lading with a Himalaya Clause. In general, COGSA has a lower liability limit than Carmack, so if you are moving freight from overseas to the US via ocean, you may want to reconsider your door-todoor
approach or simply ensure you have enough additional insurance coverage for your cargo.

And in case you were curious: The Himalaya Clause has really nothing to do with the mountain range in Asia, but was named after a historic legal case that involved a vessel of this name.

 

Contributor: Amparo Elizondo, Allyn Logistics, Florida. 

Allyn Logistics experts can help you with freight management and cargo claims. Let us create a customized solution for you! AllynLogisticsConsulting@allynintl.com
 

 

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