Crossing Borders

As we continue to explore the challenges we face in modern logistics, and following our column in the 2024 July/August edition of CLM Magazine, “Rethinking Freight in a Changing World,” we examine the global influence of the Carmack Amendment on cross-border freight.  

Consider freight picked up in Laredo, Texas for carriage to Ontario, Canada, and the cargo arrives damaged—you might assume that American law (Carmack) will govern the dispute. Not necessarily. What if the shipment originated in Ontario and arrived damaged in Laredo, would Canadian law apply? In the U.S., Carmack Amendment governs exclusively the liability of the motor carrier for loss or damage to interstate freight of cargo.  

Federal law preempts all state law claims. A liable carrier assumes liability for actual loss or injury to the property transported. It also has authority to designate claim and lawsuit filing requirements per the bill of lading, 49 U.S.C. Section 14706(e) and has the authority to limit its liability by agreement with the shipper for an amount less than the value of the goods in exchange for a lower freight charge, 49 U.S.C. section 14706(c) and (f). Carmack establishes concurrent jurisdiction in both state and federal courts, but federal jurisdiction requires the loss to exceed $10,000, and Carmack requires a carrier to issue a bill of lading or receipt for property it receives. Failure to do so will not affect liability, 49 U.S.C. Section 14706(a)(1).  

When cases are filed in the U.S., courts can take different approaches when deciding which law governs. Carmack will not always apply if the shipment originated in Canada. Carmack will apply to shipments from the U.S. to adjacent foreign countries on a through bill of lading. It becomes more complex for the courts when shipments originate in Canada and are transported to the U.S. on a through bill of lading.  

Several approaches to consider are: 

•Carmack does not apply to shipments from Canada to the U.S., but rather Canadian law would apply to the cross-border shipment.  

•Carmack will apply to a shipment from Canada to the U.S. if the damage occurred while the goods were being transported within the U.S. on a separate bill of lading issued for the U.S. leg of the transport. 

•An alternate view could be that Carmack does not apply based on its language necessitating an analysis of the law—Canadian, federal common law, or state law.    

Carmack appears silent when considering shipments from a foreign country to the U.S., but does apply from a place in the U.S. to a foreign country. Many discussions and attempts have been made to reconcile Carmack with the Interstate Commerce Act (general jurisdiction). The dilemma often exists with the perception of Carmack’s use of “from” the U.S. “to” an adjacent country, and the silence conflicts with the general jurisdiction provisions of “between” a place in the U.S. and a place in a foreign country. There is much discussion in this arena of shipments between the U.S. and Canada; courts do not always agree on the interpretation.  

It is understood that motor carriers have the freedom to contract which law applies if they waive the application of Carmack under U.S.C. Section 14101(b). The benefits of a negotiated contract are many and come with a certain business model to define which law will apply to a dispute as it relates to the interpretation and application of the written contract between the parties.  

There are many challenges to consider when facing cross-border shipments such as liability ambiguities, documentation, customs regulations, potential insurance gaps, and claims-processing delays. When working with cross-border freight shipments there are strategies that can help motor carriers that will ultimately impact the claims process and the adjuster role, such as: maintaining thorough documentation with standardized forms, which can reduce discrepancies; understanding the international agreements (NAFTA/USMCA) that could impact freight transportation; remaining current with regulatory changes; reviewing insurance coverage for adequacy to include exploring additional coverages, if needed; collaborating with freight brokers to alleviate the unknown; and promoting clear communications. Helping motor carriers understand the importance of proactive strategies they can use to navigate the complexities of the Carmack Amendment will support enhanced efficiency and security of cross-border freight.  

The rise of e-commerce, the expansion of supply chain management, and the growth of global trade, to name a few, have created much change in recent years. These changes trigger debate and proposal for the revision of the Carmack Amendment to adapt to new realities that might include scope of liability, the role of intermediaries, remedies, and harmony with international conventions.  

Alternative dispute resolution (ADR) offers additional methods of conflict resolution outside of the traditional governmental authority. ADR can be an alternative to settling freight claim disputes using mediation, arbitration, conciliation, negotiation, and transaction. These methods, when used, can result in equitable resolution for all parties without the associated costs of litigation. This approach is collaborative and consensual for the many parties often affected by a loss. The collaborative efforts could further preserve an ongoing business relationship.  

Claims adjusters play a crucial role in managing cross-border freight claims and can adopt strategies like data analytics that can identify patterns in claims, anticipateissues, and streamline the process. Defining workflow and timelines for each step can improve the outcome and include an escalation process that will benefit the more complex claims and ensure timely resolution. 

Knowledge is valuable, especially in freight where the landscape continues to evolve. Creating a resource hub for not only the adjusters, but also motor carriers, that contains cross-border regulations, claim precedents, and best practices will generate valued discussions and effective problem solving. These tools will help empower the claims adjusters as well as their clients and customers for a more productive and efficient process that builds stronger partnerships while developing confidence in your role as an insurance professional.

About the Author: 

Valorie Steinbeck is team manager – inland marine/cargo, Commercial Transportation Unit, at Crawford & Company. valorie.steinbeck@us.crawco.com