Does the Carmack Amendment help shippers? Definitely maybe.
What is the Carmack Amendment and what does it mean to shippers?
While the Carmack Amendment may sound like a law regulating used automobile dealerships, it’s not. The Carmack Amendment is a law applied to motor carriers and shippers governing interstate shipments. In basic summary, Carmack states interstate carriers, with some exceptions, are liable for the cargo they carry but cannot be held liable to the shipper for any more liability than the cargo value itself. The amendment also dictates shippers do not have to prove carrier negligence, but only prove the goods were tendered to the carrier in good condition and arrived at the destination damaged, or did not arrive at all, and the cargo loss can be quantified. However, carriers do have the opportunity to prove themselves 'not negligent', especially if the carrier believes, and can prove, it was the shippers actions that caused the loss. All claims must be within nine months of the shipment delivery. Carmack provides some additional relief for carriers by exempting some losses such as acts of God, acts of public office (the government), burglars, or inherent vice of the commodity.
Why was the Carmack Amendment created?
The Interstate Commerce Act of 1877 was created to regulate the relationships of freight owners and shipping companies. While interstate freight transportation was a fairly common occurrence in 1877, most shipments were by rail and horse-drawn wagon. Just a handful of years later Alexander Winton of Cleveland Ohio changed things.
Mr. Alexander Winton was a budding horseless carriage (automobile manufacturer) in Cleveland in 1896. In that year he sold 22 cars under the name Winton Motor Carriage Company. It wasn’t long before Alexander Winton ran into a problem. Not all of his car buyers were local. Some buyers could be across the country. How would he deliver his horseless carriages to his faraway buyers? Driving the cars to buyers was out of the question due to wear and tear and asking car buyers to make the trip to Cleveland wasn’t reasonable. Winton Motor Carriage Company needed a delivery system. It wasn’t long before they had it.
In 1898 Alexander Winton invented the semi-truck to carry horseless carriages to his customers. That’s right; the first semi was a car carrier. Mr. Winton called it the ‘automobile hauler’. The design was a modified Winton Carriage Company automobile pulling a two-wheeled flatbed cart behind it attached at the trunk by a primitive RGN set up. New automobiles were loaded and secured to the flatbed cart which was then pulled by car to the buyers. By 1899 not only did Winton manufacture automobile haulers for his own needs, but he was also manufacturing them and selling automobile haulers to other horseless carriage manufacturers. That’s right like Chuck Berry was the ‘Father of Rock & Roll’ Alexander Winton was the ‘Father of the Semi Truck’. It wasn’t long before other manufacturers got in on making semi-trucks and refining and improving the vehicles along the way. (Thanks to Getloaded.com for the photo.)
As each year passed much more and various types of cargo was being hauled interstate by truck. As a byproduct of greater amounts of freight transported by truck more and more freight got damaged while in transit. Since each state had independent laws regulating freight transportation, including freight liability, who was held liable for the damages often depended on what state the truck was in when the freight was damaged or lost. This situation often left shipping companies, as well as shippers, not knowing what freight risk they held for interstate transit. To remedy the problem, in 1935 Congress revised the Interstate Commerce Act to include the Carmack Amendment for motor vehicle interstate transit. (Thanks to Metro Times - Detroit Metro Times for the photo.)
Who does the Carmack Amendment apply to?
The amendment does not apply to ocean or air cargo whatsoever. Carmack applies to interstate motor carriers and shippers; this may include rail depending on circumstances and bill of lading wording. In the case of domestic rail intermodal as a part of a transoceanic shipment under a single bill of lading, the Carriage of Goods at Sea Act (COGSA) may replace Carmack.
While Carmack applies to interstate motor carriers, it does not apply to all interstate carriers. Carmack does not include common motor carriers that operate on a tariff. In these cases, the carrier’s tariff sets the rules of engagement, including limiting the carrier’s cargo liability. Some truck-load common carriers operate by tariff, but it is most common for ‘less than truckload’ (LTL) carriers to be the mode of transportation that limits carrier cargo liability through tariffs. In most cases, LTL carriers limit their cargo liability in their tariff by stating a specific liability amount per pound of freight carried. The higher the freight class (cost to ship) the higher the carrier liability. Although normally the LTL carrier freight liability is a small fraction of the actual value so in the case of LTL transport, cargo insurance is the responsibility of the shipper.
While the Carmack Agreement does afford shippers some comfort, it is still up to shippers to perform due diligence to ensure cargo insurance protects them. Along with LTL, even some truckload common carriers can be uncertain. In 2011 the Federal Motor Carrier Safety Administration (FMCSA) lifted the requirement to carry cargo insurance for ‘for hire’ motor common carriers. That doesn’t mean every truckload common carrier dropped their cargo insurance, but it means they can. It’s worth asking when you are hiring a carrier. Even the Carmack Amendment won’t give a shipper too much comfort in the event $100,000USD worth of cargo is lost aboard a carrier with little assets and no adequate cargo coverage.
More About Alexander Winton
Largely forgotten by popular history, Mr. Alexander Winton lived to his seventies. Starting Winton Motor Carriage Company, arguably being the first to sell automobiles commercially to the public, and inventing the semi truck, were just a few of Winton’s accomplishments. Before his passing in 1932, he also produced the first American diesel engine, supplied Henry Ford with Winton’s own ‘steering wheel’ design helping Ford become a major name in automobiles, started Winton Engine Corporation in 1912 (Later bought by GM), and registered over 100 patents. Want to feel like an underachiever? You can read more about Alexander Winton at the Automotive Hall of Fame. https://www.automotivehalloffame.org/honoree/alexander-winton/ Thanks to the Automotive Hall of Fame for the photo.