International Through Bill of Lading
and
Inland Transit
Kawasaki Kisen Kaisha Ltd. V. Regal-Beloit Corp.
Supreme Court of the United States

Central Analysis Bureau - Bits& Pieces Volume 13, Edition 6

Yet again the issue of whether an inland carrier can access/use/circumvent the terms and conditions of the international through Bill of Lading has surfaced and been adjudicated, this time by the U.S. Supreme Court with Justice Kennedy delivering the opinion of the Court.

    Note: Recall the Court addressed similar factual circumstances in Norfolk Southern R. Co. v. James N. Kirby, a topic of an IMUA annual meeting presentation in 2005 in Monterey, CA and the subject matter of a prior IMUA Newsroom Article.
CASE OVERVIEW

Respondents [cargo owners or insurance firms] shipped/insured the goods from China to final destination in the Midwest via "K" Line using four through Bills of Lading covering the entire course of shipment.

The BofLs contained five (5) relevant provisions -

  1. The "Himalaya Clause" - extends the BofL defenses and limitations to parties that sign subcontracts to perform services contemplated
  2. The BofL permits "K" Line "...to sub-contract on any terms whatsoever..."
  3. The BofL provide that COGSA’s terms govern the entire journey.
  4. Any dispute will be governed by Japanese law
  5. Any action relating to the carriage must be brought in "Tokyo District Court in Japan"
This latter point - forum selection clause - gives rise to the dispute.

"K" Line accepted four separate container shipments at Chinese ports; "K" Line safely transported the cargo to California; containers were loaded onto a Union Pacific train; the train derailed in Tyrone, OK destroying the cargo.

The cargo owner filed four separate lawsuits in California which dismissed the suits based on the BofL clauses, and in particular point 5) above. The U.S. Court of Appeals for the Ninth Circuit reversed and remanded. That Court concluded that the Carmack Amendment applied to the inland transit portion of the international shipment.

The Supreme Court rejected the plaintiff’s position that the Carmack Amendment applied to the inland transportation and that the foreign selection clause was a violation of the rights and remedies afforded under Carmack.

Writing for the dissenting three judges, Justice Sotomayor [formerly of the 2nd Circuit which led the attack on the above BofL clauses using the Carmack Amendment] cited "... in my view, the Carmack Amendment ... plainly applies to the inland leg of a multimodal shipment traveling on an international through bill of lading. ... Unless [the parties] have permissively contracted around Carmack’s requirements ..."

IMPLICATIONS

Quoting from Bits & Pieces "... This decision has serious consequences for shippers and carriers as it would appear that the forum selection clause, and clauses extending limitations of liability to inland carriers, will not be subject to attack any longer."

A full reading of the 20 page decision is certainly prudent for the informed underwriter/claims professional, and provides an excellent history lesson about COGSA and the Carmack Amendment.

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