International Cargo Loss Prevention, Inc.
  The Managed Care Facility for Comprehensive Claim Expertise
COGSA98
Testimony of
Curtis W. Keyes, President
International Cargo Loss Prevention, Inc.
before the
Subcommittee on surface Transportation and
Merchant Marine

 Committee on Commerce, Science and Transportation

United States Senate

April 21, 1998

          To Senator Hutchison and Members of the Subcommittee:

I want to thank you for the opportunity to express my views, and those held by many small and larger shippers alike, about the Carriage of Goods by Sea Act of 1998 (COGSA 98) as drafted and proposed by the Maritime Law Association of the United States (MLA)

I have had the opportunity to review the written testimony of Mr. Chester D. Hooper, Immediate Past President of the MLA, and applaud the MLA for it's extraordinary effort in forging a compromise between the many sectors of the maritime industry in our country.

As President and founder of International Cargo Loss Prevention, Inc., our firm represents cargo insurers and shippers of all persuasions. We work with U.S. domiciled importers and exporters, and are involved in cargo losses from first notice of loss up to and including the management of the litigation effort conducted on behalf of insured and non-insured shippers.

I started ICLP fifteen years ago, and prior to that time I was Vice-President of International Adjusters (Western) Ltd., a California based company which also acted in the capacity as a claim-settling agency.

ICLP was conceived in order to apply risk management principles to the areas of cargo loss prevention, loss mitigation, and in particular, to introduce a high level of product knowledge and legal expertise at the inception of loss so that cargo claim settlements among divergent parties could be amicably settled and recoveries against carriers could be expedited.

During my (23) years in the maritime industry I have worked exclusively in the area of cargo claim resolution and recovery. I have met with more then (250) marine insurers, specifically, cargo underwriters and their claim managers, in their place of business in more then (20) countries. During this same period I have worked on cases involving every conceivable type of cargo damage; from multi-million dollar shipments of industrial products, such as steel, forest products, grains, liquid bulk shipments, product, containerized shipments of seafood, meat, other foodstuffs, and electronic goods, to containerized movements of personal effects.

The revisions in COGSA 98, as proposed by the MLA, address many of the inequities which have evolved as a result of the changes and advances in technology and communication experienced during the past 60 years. In addition, we propose two revisions which we believe would serve to benefit all American shippers, and in particular, shippers of high valued cargo.


Our first proposed addition will create an obligation on the "carrier" to weigh full containerized shipments when they accept delivery of the container and to weigh the container again when the container is delivered at the port of discharge


Our firm has investigated many cargo loss cases involving the theft of partial shipments from a properly sealed full container loads (FCL), when original shipping seals affixed by the shipper or carrier remained intact. A number of investigations by our firm and others have shown various means by which the doors of an FCL or it's locking handle mechanism could be removed thus allowing the goods to be removed, and the doors to be re-secured with the original shipping seal remaining intact. In short, criminal elements have learned how to compromise sealed container integrity.

The Weighing of a FCL is not a laborious or strange task for the "carrier" or their subagents to accomplish. The face of the bill of landing is often inscribed with the FCL's net and gross weights, because the "carriers" will often charge fright based on weight determinations. Furthermore, the passage of the "National Transportation Safety Board Authorization Act of 1996" included a requirement that the first inter-modal carrier weigh FCL's and to certify that such are not overweight, this being an important requirement for safeguarding the public interest and the transportation infrastructure of the United States.

Our proposed revision will not subject the "carrier" to any shortage claims which are not fully documented. If a shipper presents a FCL "said to contain" 25,000 pounds, and such is inscribed on the Bill of Landing, and the carrier's weight determination may show the FCL weighs only 23,000 pounds of goods. Obviously, if the "carrier" takes delivery of 23,000 pounds, and delivers 18,000 pounds, such discrepancies would represent prima facie evidence that the "carrier" is responsible for the loss. In the initial example, the weight documentation would show the original shipper to be responsible for the shortage, or the shipper's agent, as long as the "carrier" did not take delivery at an inland destination.

COGSA 98, as presently drafted by the MLA, would permit the "carrier" to exonerate itself from liability to US importers and exporters for product losses involving shortages of partial and full container contents when the container seal "appears" to have been intact at the time of delivery.

The second provision we recommend is to create an obligation of the "carrier" or the carriers agent to promptly and thoroughly investigate all claims submitted by all claimants suffering cargo loss or damage, to respond in writing within a reasonable period of time, stating the facts and conclusions of their investigation, and to make a good faith effort to resolve the claim.

The resolution of cargo claims lodged against "carriers" relies upon a good faith dialogue between parties where evidence of the facts, COGSA and case law are earnestly debated. It is common knowledge among cargo and carrier interests that less than two percent of all cargo claims lodged culminate in the filing of a lawsuit. Moreover, of the two percent which enter the litigation process, only a very small fraction move through trial.

Unfortunately, it is our experience that the "carrier" and their agents appointed to investigate and defend claims are notorious for placing extraordinary barriers on the path of substantive discussions concerning the merits of the claim, in the hopes an unsophisticated claimant will overlook a time-statue deadline and inadvertently allow the claim to be "time barred." The barriers put into place represent absolute silence on the part of the "carrier" or it's agents, the delegating of the claim defense from the "carriers" claim department to their insurer (P & I Club), to the insurer's North American and / or foreign correspondent.

The shuttling of the claim and the documentation creates a labyrinth of obstacles which inexcusably delays a substantive dialogue and places the cargo claimant in greater jeopardy of falling, unwittingly, into a time-bar situation or forces the cargo claimant to file suit.

In light of the volume cargo claims processed in this "out of court" arena and the rapid growth of international trade we believe it is imperative that the COGSA 98 recognize the duty of the "carrier" to respond reasonably and promptly to all claims.

Cargo damage or loss stemming from either importation or exportation of a shipment from or to the United States places a substantial financial burden on the cargo claimant, even when the claimant is free to litigate the claim in the United States. One current case comes to mind, a very detailed and well documented loss in the amount of USD207,000 was presented to the carrier on January 21, 1998. The carrier was advised of the damages to the cargo within two days after delivery of the goods on June 20, 1997 and actively participated in the findings of loss through their appointed surveyor. The carrier had a full survey report and photographs detailing the character and extent of loss as completed by their appointed surveyor, in their possession by September 1997.

Other than acknowledging receipt of the claim with a standard form indicating their claim reference number, and despite more than (15) attempts by cargo interests to enter into a substantive dialogue, the carrier, it's P & I Club, and the law firm appointed to represent the "carrier", ignored all written and oral attempts to commence a substantive dialogue. It was not until cargo interests agreed to travel two thousand miles to meet with the counsel representing the law firm did the law firm first examine the case file.

This case also illustrates the financial burdens involved with entering into litigation process and seeking a court ruling on a genuine dispute. Our example involves the shipment of seafood from a mainland China seafood processing facility via a Hong Kong supplier to an American joint venture partner, who also acted as the importer. Thousands of dollars of laboratory costs were incurred by cargo interests to demonstrate the product arrived spoiled because of sustained temperature abuse experienced during the (52) day period the carrier provided care and custody. If cargo interests were forced into litigation with a trial scenario, no less than (6) parties on Mainland China and in Hong Kong would have to be deposed. Obviously, witnesses would have to be brought to the USA at considerable costs and more than (12) parties would have to be deposed and summoned as witnesses on the US side of the transaction and demonstration of loss phase of the investigation. When one combines expert testimony of food technologists and micro-biologists to this entourage, it is apparent that litigation costs could easily exceed the amount of the claim. When one considers the many thousands of smaller claims filed by cargo interests, it is understandable why 98% of cargo claims filed direct with carriers are financially closed out of the judicial process.

We recommend that the draft bill to revise the Carriage of Goods By Sea Act, as recommended by the MLA, be amended as follows to incorporate the two proposals we have detailed:

Section 5(a)
1. In line three, after the word ""receiving" add the word "weighing and in line four, after the word "discharge" add the word "discharge weight"

Section 6(b)
2. After the word "receive" in line three, add the word "weigh," In line four, after the word "discharge" add the word "weigh"

Section 7(c)(1)(C)
3. In line two, after the word "quantity" add a comma, delete the word "or" and add the words "and the" before the word "weight"

Section 7(c)(2)
4. In line two, after the word "number", delete the comma and add the word "or" and after the word "quantity" delete the words "or weight"

Section 7(e)(1)(A)
5. In line three, after the word "Number," add the word "or" and after the word "quantity" delete the words "or weight"

Section 7(e)(1)(C)
6. In line three, after the word "Number," add the word "or" and after the word "quantity" delete the words "or weight"

Section 7(g)
7. Delete this sub-section (g) in it's entirety and re-letter the remaining subsections accordingly.

Section 12

8. Add a new subsection (e) as follows:

"(e) TIME FOR RESPONSE -- When a claim for loss or damage and the general nature of the loss or damage is presented in writing to the contracting carrier or it's agent, or the performing carrier making the delivery or it's agent, the recipient of the claim shall promptly and thoroughly investigate the claim with all parties involved in the transit and shall respond to the claimant in writing within a reasonable period of time, stating the facts and conclusions of their investigation, and shall make a good faith effort to resolve the claim."



I thank you for this opportunity to provide a shipper's perspective into the real world cargo claim process and encourage you to create an equitable COGSA 98 that will be accessible to shippers of varying financial strength.

 
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Last modified: 12/08/98