Javascript is disabled. Please enable Javascript to log in.
Published: 2008-03-26

Loss and Damage Considerations on Intermodal Shipments Between Canada and the United States



The deregulation of various modes of freight transport in the United States and increased intermodalism can make handling of loss and damage claims complicated. Often times several modes of transport are employed to transport a shipment. Intermediaries such as agents and forwarders can also be involved in the transportation. The purpose of this article is to highlight some of the areas of importance related to loss and damage claims on shipments between Canada and the United States. It is not meant to be an exhaustive discussion of all issues facing shippers and carriers. Nor is it meant to address the actual liability of carriers and the various intermediaries. That would depend upon the circumstances surrounding the transport, the terms and conditions of any transportation agreements including bills of lading, other documents involved in the transportation and handling of the goods and any restrictions or limitations under the laws which govern the rights and obligations of the parties.

A "bill of lading" is generally regarded in the United States as a contract of carriage with the carrier and as evidence of the carrier's receipt of the goods indicating their apparent quality and condition. A shipper's or consignee's ability to recover for loss or damage to goods can change upon transfer from one carrier and mode of transport to another. Where the carriage involves more than one carrier it is critical to determine whether the bill of lading or other agreement covering the transport provides for "through transportation" or "segmented transportation". It is also important to determine whether the carriage requires intermodal transport, and whether the transport is in fact international in character.

"Through transportation" has been defined in the United States as transportation imposing an obligation on the carrier issuing the bill of lading, to deliver to destination by its own means or by the use of connecting carriers. A "through bill of lading" is generally viewed as a contract issued by the initial carrier which controls the manner of shipment to destination even though the transportation may involve connecting carriers. A carrier is regarded as providing "segmented transportation" if it is only obligated to deliver the cargo to some interim point and not to the final destination. Whether a particular bill of lading is a through bill of lading depends on various factors such as the final destination indicated on the document, the conduct of the shipper and the carriers and whether the connecting carriers were compensated by payment to the initial carrier or by separate consideration from the shipper. Capital Converting Equip., Inc. v. LEP Transp., Inc., 750 F.Supp. 862, 864 (N.D. Ill. 1990) affirmed 965 F.2d 391, 394 (7th Cir. 1992).

The word "intermodal" refers to the particular form of transportation used such as rail, motor carrier, aircraft, and vessels for transport by water. "Intermodal transport" denotes transport where goods are transferred between carriers of different modes. It has been said that an intermodal through bill of lading is one that obligates the carrier to transport the goods from origin to destination by more than one mode of transport on a single (joint rate) freight charge and by use of a single contractual document. See, Sorkin, Goods In Transit, Ch. 3 §3.15. However, a carrier's liability for loss of damage on a through shipment can depend upon other circumstances such as where the goods were picked up and where the loss or damage occurred. In addition, some courts in the United States have held that a bill of lading can cease to be a through bill of lading after partial unloading of goods during the shipment for delivery to intermediate consignees or upon transfer to a new trailer, boxcar or container for continued transport.

International bills of lading which appear on the surface to impose liability for the shipment from origin to destination must be carefully examined along with other shipping documents and agreements to determine the potential liability of each carrier, freight forwarder, broker, motor and rail carrier involved. With this in mind, let us consider how loss and damage claims on shipments between Canada and the United States have been regarded by courts.

A. Shipments from Canada to the United States.

The ICC Termination Act of 1995, which now states the liability of carriers under receipts and bills of lading (the Carmack Amendment liability provisions), does not address carrier liability on shipments from adjacent foreign countries to the United States. Nevertheless, the majority view of the courts in the United States is that U.S. law does not apply unless it can be proven that loss or damage occurred while the goods were being transported within the United States and that the original contract of carriage did not involve a through bill of lading from Canada to the United States. Leary v. Arrow Mayflower Transit Co., Inc., 207 S.E. 2d 781 (N.C. App. 1974). Also, see Kenny's Auto Parts, Inc. v. Baker, 478 F.Supp. 461 (E.D. PA 1979) (U.S. law held not to apply to damage to goods loaded in Detroit, Michigan for delivery to Pennsylvania as part of a shipment from Canada under a through bill of lading issued in Canada which directed the railroad to stop off in Detroit to pick up the goods). However, as discussed below, upon considering other court decisions, it appears that the goods loaded in Detroit should have been subject to United States law since they moved in interstate commerce.

Where there is a through bill of lading from Canada to the United States, it has been held that the domestic United States segment does not fall under U.S. law unless a separate bill of lading is issued in the United States. Capital Converting Equipment, Inc. v. LEP Transport, Inc., 965 F.2d, 391 (7 Cir.1992). Yet, where a through bill of lading has not been issued in Canada for a shipment to the United States, United States law should apply to loss or damage occurring in the United States. The reason for this is that the lack of a through bill of lading is evidence that the parties did not intend Canadian law to apply to the United States domestic move. Carriers providing transportation or service subject to the jurisdiction of the Surface Transportation Board (the successor to the Interstate Commerce Commission) have a duty to issue a bill of lading. However, the statute also states that failure to issue such a bill of lading does not affect their liability. For this reason, the Court in Kenny's Auto Parts should have applied U.S. law to the goods loaded in Michigan for delivery to Pennsylvania.

This issue was recently illustrated in the case of Interamerican Logistics, Inc. v. CSX Intermodal, Inc. and Burlington Northern Railroad Company, Case No. 95 C 6472 (N.D. Ill. 1996), in which this writer represented Interamerican Logistics, Inc., a Canadian corporation. The case involved alleged freezing damage to a shipment of beer from Canada to Seattle, Washington. The shipment was transported via the Canadian National Railroad from Canada to Chicago, Illinois where the shipment was interchanged with the Burlington Northern Railroad Company ("BN") for delivery to Seattle. There was no evidence that a through bill of lading had been issued from Canada to Washington. Interamerican alleged a cause of action against BN as delivering carrier under the Carmack Amendment. BN moved to dismiss the complaint arguing among other things that United States law did not apply to the shipment as it had originated in Canada. Upon reconsidering its initial ruling, the Court held that Interamerican had alleged sufficiently to show that the rail movement by BN was subject to jurisdiction of the former ICC and came under the Carmack Amendment based upon the lack of evidence of a through bill of lading issued from Canada to the United States.

B. Shipments from the United States to Canada

The Carmack Amendment, as amended in Title 49 United States Code by the ICC Termination Act of 1995, is now stated separately for rail carriers (Sec. 11706), motor carriers and freight forwarders (Sec. 14706), and pipeline carriers (Sec. 15906). Although some Carmack provisions were changed, the provisions concerning rail carriers, motor carriers, freight forwarders and pipeline carriers are similar to the former statute in that they all apply to loss or damage during transport from the United States to a place in an adjacent foreign country under a through bill of lading. They therefore apply to export shipments to Canada and Mexico. When a lawsuit is brought in the United States for loss or damage to such a shipment, a court in the United States can be expected to apply United States law. Courts in Canada would also probably determine liability under the Carmack provisions for such shipments from the United States to Canada absent any applicable "conflict of law" rules which might dictate application of Canadian law. One might also have to consider applicability of Canada's National Transportation Law, and relevant Provincial laws which regulate carriers and their bills of lading, including limitations of liability.

With certain restrictions in the law, shippers and carriers may negotiate the terms of U.S. domestic transportation agreements. However, problems can arise where agreements are vague or they are contrary to legal requirements. The parties' intent at the time of or prior to shipment has long been regarded as an important factor under U.S. law for determining whether transportation is interstate or international. Disputes can surface where the parties' apparent intent under an agreement is obscured as a result of the use of a form bill of lading as a matter of convenience without considering the terms and conditions stated in or incorporated into the bill of lading. Intermodal carrier liability can be complicated when care is not used in drafting agreements or considering the potential impact of the laws of the countries through which the shipment will move. For instance, at least one court in Canada has held that the law of the jurisdiction in which the bill of lading is issued, (which will usually be the point of origin of the shipment), shall apply. See Sorkin, Goods In Transit, Ch. 13 §13.06 [b], citing Bausch & Lomb Optical Corp vs. Maislin Transport, Ltd. (1975) 100.R.(2d) 533(Ont. H.C.).

There are many pitfalls for those who do not carefully consider the laws affecting the international transport of their goods. Among others dangers, shippers could be faced with unanticipated limitations of carrier liability and shortened claim and lawsuit time periods. Parties should take a proactive approach to protect themselves by obtaining legal advice to review their shipping and transport practices and prepare proper transportation agreements. Clearly, the best time to consider these issues is before tendering freight to a carrier or intermediary, and not after the freight is unloaded at the consignee's dock in a damaged condition.