Third Party Protection in Shipping

Carlo Corcione

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CHAPTER 8 Third party protection under United States law

8.1 The political role of transportation in the United States differs substantially from its political role in England, courtesy of its deep involvement with multimodalism.1 The ‘intermodal system’ of the United States is a transport network that links the transfer of cargo from one side of the country to the other.2 Its aim is to reduce costs as much as possible, and to do this, it requires economies of scale (for terminal operators) and economies of scope (for carriers and port workers).3 All of which gives different context to third party protection in the United States. 8.2 United States law understands third parties rather differently to English law, and its willingness to grant them protection correspondingly different.4 The United States has a completely different historical background to England in the carriage of goods by sea. Curiously, Sturley notes that ‘England is a leading carrier nation, but the House of Lords’ initial response to the Himalaya clause problem was strongly pro-cargo. The United States is a cargo nation, but its Himalaya clause jurisprudence favours the carrier’.5 With the exception of Himalaya clauses, Courts in the United States are generally more open to third party protection.6

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8.3 United States law has two unique features that impact on the carriage of goods by sea:

1. The conflicts between COGSA and state law, and the enactment of the Harter Act.
2. United States law is federal in nature; thus third party protection varies from state to state. According to Zawitosky, the laws of some states provide that an agent of the carrier acting within the scope of its authority is entitled to the benefit of any contractual limit upon the liability of its principal, including any limitation under COGSA or the bill of lading.7

8.4 Zawitosky also reports that there exist two other sources of authority under state law for the extension to stevedores and terminal operators of limitation provisions in the carrier’s bill of lading: Sections 7-20429 and 7-3093 of the Uniform Commercial Code (UCC), which together allow contractual limitation of liability under specific conditions for warehousemen and carriers.8 8.5 Under Section 7-204(2) of the UCC, a warehouseman may validly contract to limit their liability to a specific amount per package. This section states:

Damages may be limited by a term in the warehouse receipt or storage agreement limiting the amount of liability in case of loss or damage, and setting forth a specific liability per article or item, or value per unit of weight beyond which the warehouseman shall not be liable; provided, however, that such liability may on written request of the bailor at the time of signing such storage agreement or within a reasonable time after receipt of the warehouse receipt be increased on part or all of the goods thereunder, in which event increased rates may be charged based on such increased valuation, but that no such increase shall be permitted contrary to the lawful limitation of liability contained in the warehouseman’s tariff, if any. No such limitation is effective with respect to the warehouseman’s liability for conversion to his own use.9

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