WINTER 2010 InterConnectCOUNSEL FOR THE ROAD AHEAD® A PUBLICATION OF BENESCH FRIEDLANDER COPLAN & ARONOFF LLP’S TRANSPORTATION & LOGISTICS GROUP

Update on Cargo Liability for (3) an act of war or an armed conflict; or International Air Freight (4) an act of public authority carried out in connection with the entry, exit or International air freight limitations of Who has responsibility for preparing air transit of the cargo. liability under the Montreal Convention waybills and what if they do it wrong? The carrier is exonerated in whole or increase, effective December 30, 2009. Under the Convention, the consignor in part if it can prove the damage was (not the carrier) is required to prepare Liability of air carriers for cargo lost or caused or contributed to by the claimant. an air waybill or cargo receipt showing: damaged during transit has been limited (1) the places of departure and Exactly what are the limits of liability since the dawn of air transportation. destination; (2) at least one stopping and why have they changed? The For instance, the original Warsaw place (if departure and destination are Convention maintained the limitation Convention limited liability to 250 within the same country, but carriage of liability for cargo of 17 SDRs per French gold Francs per kilogram. The includes a stopping place in another kilogram as was contained in Montreal Montreal Protocol to the Warsaw country); and (3) the weight of the Protocol No. 4, subject to the same Convention set the limitation at shipment. proviso, unless the consignor has 17 Special Drawing Rights (SDRs).1 made, at the time when the package However, on December 30, 2009, the The consignor, when necessary, must was handed over to the carrier, a limitation of liability for cargo that is comply with the requirements of special declaration of interest in lost or damaged during international , the police and similar public delivery at destination and has paid air transportation between countries authorities regarding documentation. a supplementary sum if the case so who are signatories to the Montreal No duty, obligation or liability on the requires. In that case the carrier will be Convention increased from 17 SDRs part of the carrier is created by this liable to pay a sum not exceeding the to 19 SDRs per kilogram, based on the Article of the Convention. declared sum, unless it proves that the weight of the package lost or damaged. The consignor is required to create three As of January 28, 2010, the value of one original parts of the air waybill. The first continued on page 2 SDR was $1.55419, thus increasing the part must be marked “for the carrier” and limitation of liability from $26.42 per be signed by the consignor. The second IN THIS ISSUE: kilogram to $29.53 per kilogram.2 part must be marked “for the consignee” Update on Cargo Liability for Which shipments are affected? and signed by the consignor and the International Air Freight The Montreal Convention (the carrier. The third part must be signed “Convention”) governs all international by the carrier who shall hand it to the Budgeting for Customs carriage of persons, , or cargo consignor after the cargo has been Compliance performed by aircraft for reward between accepted by the carrier. or within member countries. It also OMG! Texting Banned What is the carrier liable for? The governs gratuitous carriage by aircraft carrier is liable for loss or damage to the Recent Events performed by an air transport cargo if the loss or damage took place undertaking. The Convention replaces Overseas Carriage of Goods during the carriage by air. Carrier the , the Hague into : An Overview defenses to liability are: (1) inherent Protocol, the Guadalajara Convention, defect, quality or vice of that cargo; On the Horizon the City Protocol, and the (2) defective packing of that cargo Montreal Protocols in regards to air performed by a person other than transportation. the carrier or its servants or agents; Update on Cargo Liability for International Air Freight continued from page 1 sum is greater than the consignor’s actual at destination, or from the date on applicable regime, and unless a higher interest in delivery at destination. which the aircraft ought to have arrived, value is declared, liability of the or from the date on which the carriage Carrier may be limited to 19 Special The Convention requires that the stopped. Drawing Rights per kilogram under limitations of liability be reviewed at the Montreal Convention, 17 Special five-year intervals, taking into account My stock of international air waybills Drawing Rights per kilogram under the rate of inflation. A review will also or the ones the carrier gives me say the Warsaw Convention as amended take place any time liability is limited by Montreal Protocol No. 4, or 250 one-third of the to “17 SDRs per French gold francs per kilogram under parties request a kilogram.” How “[L]imitation of liability for cargo that the Warsaw Convention (unamended review and the rate does the 19 SDRs is lost or damaged during by Montreal Protocol No. 4), of inflation has per kilogram converted into national currency exceeded 30 percent international air transportation become effective? under applicable law, unless a greater since the previous between countries who are signatories Although the amount is specified in the Carrier’s revision. Convention requires to the Montreal Convention conditions of carriage. the consignor to The first review of increased from 17 SDRs to 19 SDRs issue an air waybill What if I am given an old air waybill limits of liability per kilogram….” with certain without the new provisions? IATA conducted by the provisions, failure members and carriers party to the “IATA International Civil to do so does not Multilateral Interline Traffic Agreement Organization (ICAO) in change the applicability of the Rules – Cargo” are required by IATA to notify accordance with Article 24, revised of the Convention, including the any persons holding the old air waybills limits of liability, effective December 30, limitation of liability. So the 19 SDRs that there has been a change in the 2009. For cargo loss or damage, the per kilogram limitation of liability limitations of liability. That notification minimum limitation of liability is 19 applies, even if there is a flaw in the may be by a posting on a carrier’s SDRs per kilogram. air waybill. website. In determining the limits of liability, the The standard air waybill used for The limitation of liability of 19 SDRs weight to be taken into consideration international air transportation was per kilogram applies, even if outdated air is the total weight of the package or developed and is maintained by Cargo waybills are used and whether or not the packages concerned, not the total Services Conference (CSC), which new limitation is posted on the carrier’s weight of the shipment, unless the loss is made up of representatives of website. Be aware of this when you file a or damage affects the value of other International Air Transport Association claim with an air carrier or air freight packages in the shipment. (IATA). New IATA Air Waybill forwarder for cargo loss or damage. A carrier may agree to higher limits of Conditions of Contract became effective 1 An SDR is a basket of currencies consisting liability or to no limits whatsoever. December 30, 2009. The new language of the Euro, Japanese yen, pound sterling, However, any provision attempting to recognizes the increase in liability under and U.S. dollar. The U.S. dollar-value of the set a lower limit shall be null and void. the Convention for the countries who SDR is posted daily on the IMF’s website. It are parties to the Convention, as well What are the time limits for filing cargo is calculated as the sum of specific amounts as acknowledging those countries that of the four currencies valued in U.S. dollars, claims? Complaints must be filed in are not. on the basis of exchange rates quoted at writing and sent to the carrier within noon each day in the London market. the following time limits. In the case of The revised Air Waybill contains the damage, the person entitled to delivery following notice: 2 International Monetary Fund must complain to the carrier within http://www.imf.org/external/np/fin/data/rms_ If the carriage involves an ultimate fourteen days of receipt. In the case sdrv.aspx destination or stop in a country other of delay, the complaint must be made than the country of departure, the For more information contact Martha within twenty-one days from the date Warsaw Convention or the Montreal Payne at [email protected] or the cargo is delivered. Convention may be applicable and in (541) 764-2859. What are the time limits for filing most cases limit the liability of the suits? Any legal action must be brought Carrier in respect of loss of, damage within two years from the date of arrival or delay to cargo. Depending on the

2 COUNSEL FOR THE ROAD AHEAD® A PUBLICATION OF BENESCHInterConnect FRIEDLANDER COPLAN & ARONOFF LLP’S TRANSPORTATION & LOGISTICS GROUP WINTER 2010

Budgeting for Customs Compliance

Does your company have an established management software program and and Border Protection (CBP) is budget for Customs Compliance digital recordkeeping. holding your freight captive. projects? Or do compliance issues tend 4. Import counsel: Build a relationship 6. Training: Implement an internal to be more of an ad-hoc budgeting with a trusted adviser. Transactions training program for all associates who situation? Or somewhere in between? like First Sale, new products, or are involved in customs business. Proactive customs compliance budgeting country of origin qualification for 7. Binding rulings: Binding rulings will can be a valuable and important business Free Trade programs can succeed confirm key entry information prior to management function. with informed advice. The trade importation. CBP will issue rulings on community needs to be clearly and Here are some examples of compliance the appropriate Harmonized Tariff completely informed of its legal budget line items that can save time and Schedule (HTSUS) obligations by consulting with a dollars for active importers: classification, rate of duty, and other customs “expert” (e.g., lawyer, issues such as valuation, country or 1. Internal audit: Schedule an annual customs broker, or customs origin marking, and eligibility in trade internal audit by a third party. consultant). preference programs. 2. Documentation: Prepare appropriate 5. Compliance interface: Communicate How can you maximize your compliance documentation for participation in with Marketing and Product dollars? By developing and maintaining a Customs Trade Partnership Against Development at the start of the proactive compliance program. Lowering Terrorism (C-TPAT), Import Security development process. Compliance can landed costs and improving speed-to- Filing (ISF), and Importer Self- assist on the front side with input on market are valuable benefits that can be Assessment (ISA). considerations such as duty, tariff realized by utilizing these and other tips. engineering, other government agency 3. Standardized compliance programs: Worthy benefits for any business. (OGA) requirements and sourcing Maintain up-to-date compliance and from a country with trade agreements. C-TPAT procedure manuals and For more information contact Mary Better to know the issues in advance consider converting to a global trade Bianchi at [email protected] rather than learn them when Customs or (239) 985-9776.

Get to Know Teresa is of counsel in the firm’s Transportation & Logistics Practice Group. She comes to Benesch after serving as in-house transportation counsel for YRC Worldwide Inc., Teresa E. Purtiman one of the largest less-than-truckload motor carriers in North America. Teresa assists transportation companies with contract drafting, review and negotiation; shipping solutions; real estate transactions, including leases, environmental releases, liens, construction and design agreements, easements, and oil, gas and mineral rights leasing; and HR issues. She is experienced in serving as legal counsel in transportation, contractual, real estate, telecommunications/cable matters, litigation and employment matters. Additionally, Teresa has a growing practice in the entertainment industry representing independent filmmakers, drafting and negotiating agreements for all aspects of film production. Teresa received her B.A. summa cum laude from The Ohio State University, and her J.D. magna cum laude Mary L. Bianchi from the University of Akron School of Law. Mary is a paralegal and licensed customs broker (not practicing) in the firm’s Transportation & Logistics and International Trade & Supply Chain Management Practice Groups. She comes to Benesch from GEAR for Sports, Inc. where she worked as Director of Global Logistics and Customs. Prior to working at GEAR for Sports, Inc., Mary worked at Chico’s FAS, Inc. where she specialized in customs and import issues relating to wearing apparel. Mary is experienced in all phases of customs compliance, import/export and global supply chain management for specialty retailers, manufacturers and wholesalers. Mary received her B.S. cum laude from Hodges University.

COUNSEL FOR THE ROAD AHEAD® 3 OMG! Texting Banned

On January 26, 2010, U.S. 3. Is designed or used to transport more However, according to the federal Transportation Secretary Ray LaHood than 15 , including the regulatory guidelines, the texting ban announced the federal ban on texting by driver, and is not used to transport does not forbid the utilization of interstate drivers of large commercial passengers for compensation; or electronic dispatching tools and fleet vehicles, including large trucks and management systems, but “[t]o the 4. Is used in transporting material found buses. Although some states and several extent that there are fleets that require by the Secretary of Transportation to cities across the U.S. have already drivers to type and read messages while be hazardous under 49 U.S.C. 5103 banned texting for all drivers, this is the they are driving, the Agency will and transported in a quantity first attempt by the consider appropriate regulatory action requiring placarding federal government to address this problem.” under regulations to crack down on “[D]rivers are no longer allowed to prescribed by the Moreover, the regulatory guidance the use of electronic transmit or receive text messages in Secretary under “should also not be construed to prohibit devices while 49 CFR, subtitle B, the use of cell phones for purposes other driving. Drivers of transit, but are still allowed to talk on chapter I, than text messaging.” In other words, commercial vehicles their cell phones while driving.” subchapter C. drivers are no longer allowed to transmit caught texting may or receive text messages in transit, but be subject to civil or 49 C.F.R. § 390.5. are still allowed to talk on their cell criminal penalties of up to $2,750. While texting is not specifically phones while driving. In addition, it mentioned in the rules, it is being Specifically, the new rules are aimed at appears that the Department of regulated under 49 C.F.R. § 390.17, all interstate drivers of commercial Transportation will issue guidelines which states: “[n]othing in this chapter motor vehicles (CMVs) subject to the regulating the use of electronic shall be construed to prohibit the use of Federal Motor Carrier Safety dispatching tools and fleet management addition equipment and accessories, not Regulations. CMVs are defined as any systems if, and when, it perceives the use inconsistent with or prohibited by this self-propelled or towed motor vehicle of these technologies as a distraction to subchapter, provided such equipment and used on a highway in interstate drivers. accessories do not decrease the safety of commerce to transport passengers or operation of the commercial motor vehicles property when the vehicle: For more information regarding the federal on which they are used.” regulatory guidelines, see Federal Register 1. Has a gross vehicle weight rating So what exactly is texting? The federal Vol. 75, No. 17. or gross combination weight rating, regulatory guidelines define texting as: or gross vehicle weight or gross For more information contact Thomas combination weight, of 4,536 kg “The review of, or preparation and Kern at [email protected] or (10,001 pounds) or more, whichever transmission of, typed messages (614) 223-9369. is greater; through any such device or the engagement in any form of electronic 2. Is designed or used to transport more data retrieval or electronic data than 8 passengers (including the communication through any driver) for compensation; such device.”

Recent Events

Marc Blubaugh presented Having a Winning Eric Zalud and Martha Payne attended the Eric Zalud attended the DRI Trucking Law Deposition Strategy at the Ohio Trucking Conference of Freight Counsel Meeting Seminar in Las Vegas, NV, on February 4–5, Association’s Safety Council Monthly in Austin, TX, on January 10-11, 2010. 2010. Meeting in Columbus, OH on November Marc Blubaugh, Bob Spira, Thomas Kern Eric Zalud attended the Trucking 12, 2009. and Teresa Purtiman attended the Chicago Industry Defense Association Bob Spira presented Carrier Qualification Regional Conference of the Advanced Seminar in Miami, FL, is for Everyone at the Transportation Transportation Lawyers Association in on February 10–11, 2010. Intermediaries Association Fall Meeting Chicago, IL, on January 21-22, 2010. in Anaheim, CA on November 15, 2009.

4 COUNSEL FOR THE ROAD AHEAD® A PUBLICATION OF BENESCHInterConnect FRIEDLANDER COPLAN & ARONOFF LLP’S TRANSPORTATION & LOGISTICS GROUP WINTER 2010

d. Liability exposure for negligent Overseas Carriage of Goods into India: management of those facilities An Overview and warehouses, including hiring incompetent laborers, mostly in cases of goods of high value. Indian Logistics special permission, license or permit for Industry bringing goods into India. However, any Under common law primarily there are vessel/aircraft or any other carrier carrying four obligations imposed on the carrier, Sound economic which are as follows: growth in India goods destined to Indian ports would need is increasingly to comply with specific requirements 1. The carrier must deliver the goods in supported by robust under various enactments governing the same condition as when they were industrial growth. vessels and aircrafts entering Indian ports. shipped and such duty cannot be One of the The burden of complying with the delegated. Sunil Kumar, Partner comparatively abovementioned requirements would 2. It is the absolute duty of the carrier to Singhania & Partners LLP* lesser known but fall on the person-in-charge of the vessel, provide a seaworthy ship. important sectors aircraft, etc. 3. The carrier is expected to undertake that support almost all industrial activities Broadly, he shall be responsible for the to proceed on the voyage without is the logistics sector. Keeping pace with the following: unjustifiable deviation. demands of the economic progress, the 4. The carrier must complete the voyage sector has arranged and consolidated itself 1. Submitting the Import Manifest. without any delay and it is subject to as a highly professional and competitive 2. To ensure that the conveyance comes liability in case of damages for any industry supported by foreign investment. through the approved route and lands loss caused by the delay. Regulation of Carriage of Goods at the approved place only. Limitation on Liability Primarily, the overseas carriage of goods 3. To ensure that goods are unloaded The absolute liability of a logistics is governed as between the consignor after written order at the proper place. company/carrier is subject to the and the carrier by way of Contract of 4. To ensure that the conveyance shall following exceptions, namely: Carriage of Goods. It is a contract of not leave without written order of the bailment for reward. However, the custom authorities. 1. Act of God. contract of bailment is modified by the Liabilities of the Carriers 2. Special Contract, i.e. on waiver of different statutes governing carriage of any such liability under the contract goods by land, sea or air. The liability of the logistics companies between the parties concerned. are discussed under various enactments In India, the laws governing carriage in the form of the liabilities of the 3. In addition to the above, the liability of goods into Indian territory are: carriers. The burden of such obligations would be governed by the exceptions given under the various enactments 1. In case of carriage of goods by land: and liabilities would further depend mentioned above. • The Carriers Act, 1865. upon the terms of the Contract of Carriage or any such agreement between 2. In case of carriage of goods by sea: Briefly, while considering the liability of the parties involved. • The (Indian) Bills of Lading Act, the carrier for loss of damage to goods in 1856. A logistics company may get exposed to one’s custody, the terms of the contract, effect of statutory provisions and the 3. In case of carriage of goods by air: liabilities in the following cases: common law must be referred. • The Carriage by Air Act, 1972. a. Any loss caused due to his own negligence or criminal act of his However, The Carriers Act, 1865 is *Singhania & Partners LLP is a full service servant or agent wherein, it is not uniformly applicable to all the modes national law firm with a successful necessary for the claimant to of carriage. international law practice out of its establish negligence. offices at New Delhi, Noida, Bangalore, In case no provision in the specific b. On failure to properly manage the Hyderabad and Mumbai with a team regulations is provided, then the Indian load of shipments, they are liable of over 70 attorneys including lawyers courts refer to the principles of English for their negligence. with dual qualification of Chartered Common Law. c. Liability exposure to their customer Accountancy or Company Secretaryship Procedures to be Followed for negligence in failing to timely supported by paralegals. Singhania is Benesch’s Terralex affiliate in India. by the Carrier and appropriately file the necessary The two firms partner together to The logistics companies/carriers involved proof of claim while acting as an intermediary for resolving any loss. service clients with bilateral interests in transporting goods do not require any in the U.S. and India.

COUNSEL FOR THE ROAD AHEAD® 5 For more information about the On the Horizon Transportation & Logistics Group, please contact one of the following: Eric Zalud, Chair | (216) 363-4178 Jim Hill, Eric Zalud and Marc Blubaugh will be attending the 2010 Truckload [email protected] Carriers Association’s Annual Convention in Las Vegas, NV on February 28–March Mary Bianchi | (239) 985-9776 3, 2010. [email protected] Marc Blubaugh and Eric Zalud will be attending the International Warehouse Logistics Marc Blubaugh | (614) 223-9382 [email protected] Association 2010 Annual Convention and Expo in San Diego, CA on March 7–9, 2010. Mariann Butch | (216) 363-4198 Martha Payne and Eric Zalud will be attending the Air Cargo Conference in Orlando, FL [email protected] on March 14–15, 2010. Ryan Hatch | (614) 223-9347 [email protected] Marc Blubaugh will be presenting a Webinar for the Transportation Lawyers Thomas Kern | (614) 223-9369 Association on Bulletproof or Brittle? A Primer Regarding Motor Carrier Limitations of Liability [email protected] in Columbus, OH on March 26, 2010. Peter Kirsanow | (216) 363-4481 [email protected] Bob Spira will be presenting Legally Speaking and Eric Zalud will be presenting on Lessons for David Neumann | (216) 363-4584 CEO’s in the Logistics Industry at the Transportation Intermediaries Association (TIA) [email protected] Conference in Tucson, AZ on April 8–10, 2010. Martha Payne will also be attending this Martha Payne | (541) 764-2859 conference. [email protected] Mary Bianchi will be attending the National Customs Brokers & Forwarders Teresa Purtiman | (614) 223-9380 Association’s 36th Annual Conference in San Antonio, TX on April 11–14, 2010. [email protected] Nicole Schaefer | (216) 363-4593 Marc Blubaugh will be moderating a panel on Loss and Damage Claims – Best Practices, Eric [email protected] Zalud will be speaking on Food Imports/The Bioterrorism Act and Martha Payne will be on the Robert Spira | (216) 363-4413 panel: Transportation & Logistics Contracts Best Practices at the Transportation & Logistics [email protected] Council’s 36th Annual Conference in San Diego, CA on April 18–21, 2010. Clare Taft | (216) 363-4435 [email protected] Marc Blubaugh, who will be serving as the Educational Program Chair, and Eric Zalud, Bob Yanping Wang | (216) 363-4664 Spira and Martha Payne will be attending the Transportation Lawyers Association (TLA) [email protected] Conference in Hilton Head Island, SC on April 27–May 1, 2010. Eric Zalud will be Thomas Washbush | (614) 223-9317 attending the TLA Executive Committee Meeting there, and Yanping Wang, of Benesch’s [email protected] office will be speaking on international transportation issues. E. Mark Young | (216) 363-4518 [email protected] Mary Bianchi will be attending the 2010 American Apparel and Footwear Association Annual Sourcing, Customs, & Logistics Integration Conference Pass this copy of InterConnect on to a in Miami, FL on May 5–7, 2010. colleague, or e-mail Ellen Mellott at Eric Zalud will be attending the Terralex European Meeting in Rome, , on [email protected] to add June 9–12, 2010. someone to the mailing list. For further information and registration, please contact Megan Thomas, Client Services Help us do our part in Manager at [email protected] or (216) 363-4639. protecting the environment. If you would like to receive future issues of this newsletter electronically, please e-mail Sam Daher at [email protected].

Cleveland Philadelphia White Plains 200 Public Square, Suite 2300 One Liberty Place White Plains Center Cleveland, OH 44114-2378 1650 Market Street, 36th Floor 50 Main Street, Suite 1000 Phone: (216) 363-4500 Philadelphia, PA 19103-7301 White Plains, NY 10606 Fax: (216) 363-4588 Phone: (267) 207-2947 Phone: (216) 363-4500 Fax: (267) 207-2949 Fax: (216) 363-4588 Columbus 41 South High Street, Suite 2600 Shanghai Wilmington Columbus, OH 43215-6150 Kerry Centre Suite 1802 222 Delaware Avenue, Suite 801 Phone: (614) 223-9300 1515 W. Nanjing Road Wilmington, DE 19801-1611 Fax: (614) 223-9330 Shanghai, P.R. China 200040 Phone: (302) 442-7010 Phone: (86) 21-3222-0388 Fax: (302) 442-7012 Fax: (86) 21-5298-5955 www.beneschlaw.com

The content of the Benesch, Friedlander, Coplan & Aronoff LLP InterConnect Newsletter is for general information purposes only. It does not constitute legal advice or create an attorney-client relationship. Any use of this newsletter is for personal use only. All other uses are prohibited. ©2010 Benesch, Friedlander, Coplan & Aronoff LLP. All rights reserved. To obtain permission to reprint articles contained within this newsletter, contact Ellen Mellott at (216) 363-4197.