U.S. Supreme Court upholds Himalaya Clause

Wednesday, November 10, 2004
In a unanimous decision, the U.S. Supreme Court upheld the validity of the Himalaya Clause for in inland carrier.

In the instant case, an Australian manufacturer shipped cargo from Australia to Huntsville, Alabama, via Savannah, Georgia. The shipper contracted with a freight forwarder for the shipment and the bill of lading issued by the NVOCC included a Himalaya Clause extending the COGSA liability limitations to downstream parties. The freight forwarder contracted with a vessel operator for actual carriage of the cargo. The bill of lading issued by the vessel operator likewise included a Himalaya Clause. The vessel operator contracted with a railroad company for carriage of the cargo from Savannah to Huntsville. En route, the train derailed and the cargo was damaged. The shipper brought suit against the railroad, among others. The railroad contended that its liability was limited under COGSA by means of the Himalaya Clauses. The trial court agreed with the railroad, but this was overturned by the appellate court, which held that there was no privity of contract between the shipper and the railroad as required by state law. On review, the U.S. Supreme Court ruled that the contract was maritime in nature and the need for a uniform maritime approach is not affected by the fact that this damage was incurred during the inland portion of the transit. State interests in this matter cannot be accommodated without defeating the more important federal interest in efficient maritime commerce. The court held that the railroad was entitled to avail itself of the COGSA limits of liability by means of the two Himalaya Clauses. Norfolk Southern Railway Co. v. James N. Kirby, Pty Ltd., No. 02-1028.

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