Carriage of Cargo on Deck: Carriers Be Aware
Carriage of cargo on deck has always been problematic for vessel owners and operators. In addition to the typical risks associated with carrying cargo on deck, such as exposure to the elements and lashing and stability issues, carriers are also exposed to uncertainties regarding their potential liability for damages to such cargo. In fact, many carriers believe that cargo carried on deck is carried at the shipper’s risk and that the carrier is not liable for damage to deck cargo, as long as cargo owners agreed to on deck carriage and the bill of lading states this on the front.
Complicating Legal Factors
A complicating factor is that neither the Hague Rules nor the United States Carriage of Goods by Sea Act (hereinafter referred to as “COGSA” or the “Statute”) apply to deck cargo. As for the latter, COGSA expressly defines “goods” as to exclude “cargo which by the contract of carriage is stated as being carried on deck and is so carried.”
While in practice many bills of lading extend the application of COGSA to deck cargo by including what it is known as a “paramount clause,” sometimes the language used in the bill of lading is insufficient to effectively incorporate the Statute. In fact, courts in the United States have consistently held that, to incorporate COGSA, the contract of carriage must employ sufficiently express language. This requirement, however, is frequently overlooked. For example, in Atwood Oceanics, Inc. v. M/V PAC Altair,[1] the bill of lading did not expressly state that COGSA applied to deck carriage, prompting the district court to grant the cargo claimant’s motion for partial summary judgment and ruling that COGSA and its $500-per-package limitation of liability did not apply.
In addition to the unintentional failure by some carriers to incorporate COGSA, the exclusion of deck cargo from the Statute has led them to conclude that there is total freedom of contract with respect to allocating the risk of damage to deck cargo being carried under a bill of lading. As a result, carriers often include very broad “shipper’s risk” clauses to avoid liability for damage to cargo carried on deck no matter how such damage may have been caused or whether the carrier was at fault.
However, the enforceability of the “shipper’s risk” clauses in the absence of a specified applicable legal regime has not been fully addressed by courts in the United States. Therefore, instead of attempting to fully eliminate liability for damage to cargo carried on deck, carriers should consider making COGSA applicable to such carriage. The application of COGSA to cargo carried on deck will provide carriers with valuable defenses, such as the $500 package limitation, the one-year statute of limitations, and the error in navigation and management defense, which may otherwise be unavailable to carriers.
The Harter Act and COGSA
There are two main legal regimes in the United Stated regulating contracts of carriage to/from ports in the United States: the Harter Act and COGSA.
The Harter Act was enacted in 1893 and applies to the carriage of goods to or from any port in the United States. While the Harter Act excludes from its coverage the carriage of “live animals,” it is nonetheless silent about deck cargo. The Act further states: “Any and all words or clauses of such import [i.e., relieving carriers for liability for their own negligence] inserted in bills of lading or shipping receipts shall be null and void and of no effect.” Further it prohibits clauses relieving the carrier from liability for its failure to exercise due diligence to provide a seaworthy ship.
Similarly, COGSA was enacted in 1936 and applies statutorily to all contracts of carriage of goods by sea to or from ports of the United States 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 only 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. Furthermore, COGSA supersedes the Harter Act with respect to the “tackle-to-tackle” period for international shipments.
The Role of the U.S. Courts
Although U.S. courts recognize that COGSA sharply curtailed the applicability of the Harter Act, the Harter Act may still govern during periods outside of COGSA’s express ambit, unless COGSA is extended contractually. In fact, some courts in the United States have held that the provisions of the Harter Act, in making no distinction between on deck and under deck cargo, apply to cargo carried on deck.
For example, in Saudi Pearl Insurance Co. v. M.V. ADITYA KHANTI,[2] the court had to interpret the meaning of the following clause stamped on the face of the bill of lading: “LOADED ON DECK AT SHIPPERS RISK.” Saudi Pearl involved the carriage of creosote poles on deck, some of which went overboard during the voyage. The court found that such a clause is null and void under the Harter Act “to the extent that it purports to exculpate a carrier from negligence or lessen its duty of care with regard to the cargo,” but was “valid to shift the risk of the loss to the shipper in other circumstances.” The court concluded that “[p]rovided a carrier is able to show proper stowage of the cargo, a ‘shippers risk’ clause places on the shipper ‘the customary and predictable risks of deck carriage.’” Such risks are “the risk of cargo damage by the elements” and the “usual expected hazards to an on-deck shipment.” In sum, Saudi Pearl shows that any case involving damage to deck cargo under a “shipper’s risk” clause will involve a fact-intensive inquiry and will further require evidence as to the stowage of the cargo, the weather throughout the voyage, as well as navigational matters.
The fact that COGSA does not by its terms apply to deck cargo, should not discourage carriers from including a clause in the bill of lading making COGSA applicable to cargo carried on deck. In fact, courts in the United States have held that a clause making COGSA applicable to on-deck carriage does not violate the Harter Act and will be enforced. If the carrier contractually incorporates COGSA, it will have the benefit of the Statute’s defenses and limitation of liability, such as the one-year statute of limitation, the error in navigation defense, and the $500-per-package limitation. In particular, U.S. courts have consistently applied COGSA’s $500-per-package limitation in numerous cases involving yachts, project cargo, and other large pieces of machinery carried on deck. The application of COGSA to deck cargo should simplify any dispute between carriers and cargo owners, as well as streamline the cargo claim process.
Final Analysis and Recommendations
Therefore, when an “on-deck” bill of lading is used for the carriage of cargo to or from the United States, carriers should consider inserting express language on the face of the bill of lading leaving no doubt regarding the parties’ intent for COGSA to apply to such cargo. For example, carriers could state: “CARRIED ON DECK. Risk of loss or damage inherent to on deck carriage is borne by the shipper/consignee but in all other respects risk of loss or damage is governed by the provisions of the Carriage of Goods by Sea Act of the United States, 1936 (“COGSA”) (notwithstanding Section 1(c) of COGSA) and, to the extent not inconsistent with such provisions of COGSA, by the terms of this bill of lading.” Reference to COGSA’s $500-per-package limitation is also recommended.
This article concerns carriage of deck cargo to and from ports in the United States under bills of lading in trades other than the container trade. Issues regarding “custom of the trade” arise with respect to the container trade, which are outside the scope of this article. Additionally, parties remain free to allocate risk as they wish in charter parties.
This article is one in a series of articles written for Blank Rome's MAINBRACE: March 2022 edition.