International air freight limitations ofliability under the Montreal Conventionincrease, effective December 30, 2009.

Liability of air carriers for cargo lost ordamaged during transit has been limitedsince the dawn of air transportation. For instance, the original WarsawConvention limited liability to 250French gold Francs per kilogram. TheMontreal Protocol to the WarsawConvention set the limitation at 17 Special Drawing Rights (SDRs).1

However, on December 30, 2009, thelimitation of liability for cargo that islost or damaged during international air transportation between countries who are signatories to the MontrealConvention increased from 17 SDRs to 19 SDRs per kilogram, based on theweight of the package lost or damaged.As of January 28, 2010, the value of oneSDR was $1.55419, thus increasing thelimitation of liability from $26.42 perkilogram to $29.53 per kilogram.2

Which shipments are affected?The Montreal Convention (the“Convention”) governs all internationalcarriage of persons, baggage, or cargoperformed by aircraft for reward betweenor within member countries. It alsogoverns gratuitous carriage by aircraftperformed by an air transportundertaking. The Convention replacesthe Warsaw Convention, the HagueProtocol, the Guadalajara Convention,the Guatemala City Protocol, and theMontreal Protocols in regards to airtransportation.

Who has responsibility for preparing airwaybills and what if they do it wrong?Under the Convention, the consignor(not the carrier) is required to preparean air waybill or cargo receipt showing:(1) the places of departure anddestination; (2) at least one stoppingplace (if departure and destination arewithin the same country, but carriageincludes a stopping place in anothercountry); and (3) the weight of theshipment.

The consignor, when necessary, mustcomply with the requirements ofcustoms, the police and similar publicauthorities regarding documentation. No duty, obligation or liability on thepart of the carrier is created by thisArticle of the Convention.

The consignor is required to create threeoriginal parts of the air waybill. The firstpart must be marked “for the carrier” andbe signed by the consignor. The secondpart must be marked “for the consignee”and signed by the consignor and thecarrier. The third part must be signed by the carrier who shall hand it to theconsignor after the cargo has beenaccepted by the carrier.

What is the carrier liable for? Thecarrier is liable for loss or damage to thecargo if the loss or damage took placeduring the carriage by air. Carrierdefenses to liability are: (1) inherentdefect, quality or vice of that cargo; (2) defective packing of that cargoperformed by a person other than the carrier or its servants or agents;

(3) an act of war or an armed conflict; or(4) an act of public authority carried outin connection with the entry, exit ortransit of the cargo.

The carrier is exonerated in whole or in part if it can prove the damage wascaused or contributed to by the claimant.

Exactly what are the limits of liabilityand why have they changed? TheConvention maintained the limitationof liability for cargo of 17 SDRs perkilogram as was contained in MontrealProtocol No. 4, subject to the sameproviso, unless the consignor has made, at the time when the package was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case sorequires. In that case the carrier will beliable to pay a sum not exceeding thedeclared sum, unless it proves that the

WINTER 2010

InterConnectA PUBLICATION OF BENESCH FRIEDLANDER COPLAN & ARONOFF LLP’S TRANSPORTATION & LOGISTICS GROUP

COUNSEL FOR THE ROAD AHEAD®

IN THIS ISSUE:Update on Cargo Liability for International Air Freight

Budgeting for CustomsCompliance

OMG! Texting Banned

Recent Events

Overseas Carriage of Goods into India: An Overview

On the Horizon

continued on page 2

Update on Cargo Liability for International Air Freight

2 COUNSEL FOR THE ROAD AHEAD®

Update on Cargo Liability for International Air Freightcontinued from page 1

sum is greater than the consignor’s actualinterest in delivery at destination.

The Convention requires that thelimitations of liability be reviewed atfive-year intervals, taking into accountthe rate of inflation. A review will alsotake place any timeone-third of theparties request areview and the rateof inflation hasexceeded 30 percentsince the previousrevision.

The first review oflimits of liabilityconducted by theInternational CivilAviation Organization (ICAO) inaccordance with Article 24, revisedlimits of liability, effective December 30,2009. For cargo loss or damage, theminimum limitation of liability is 19SDRs per kilogram.

In determining the limits of liability, theweight to be taken into consideration is the total weight of the package orpackages concerned, not the total weight of the shipment, unless the lossor damage affects the value of otherpackages in the shipment.

A carrier may agree to higher limits ofliability or to no limits whatsoever.However, any provision attempting toset a lower limit shall be null and void.

What are the time limits for filing cargoclaims? Complaints must be filed inwriting and sent to the carrier within the following time limits. In the case ofdamage, the person entitled to deliverymust complain to the carrier withinfourteen days of receipt. In the case of delay, the complaint must be madewithin twenty-one days from the datethe cargo is delivered.

What are the time limits for filingsuits? Any legal action must be broughtwithin two years from the date of arrival

at destination, or from the date onwhich the aircraft ought to have arrived,or from the date on which the carriagestopped.

My stock of international air waybillsor the ones the carrier gives me say

liability is limitedto “17 SDRs perkilogram.” Howdoes the 19 SDRsper kilogrambecome effective?Although theConvention requiresthe consignor toissue an air waybillwith certainprovisions, failure to do so does not

change the applicability of the Rules of the Convention, including thelimitation of liability. So the 19 SDRsper kilogram limitation of liabilityapplies, even if there is a flaw in the air waybill.

The standard air waybill used forinternational air transportation wasdeveloped and is maintained by CargoServices Conference (CSC), which is made up of representatives ofInternational Air Transport Association(IATA). New IATA Air WaybillConditions of Contract became effectiveDecember 30, 2009. The new languagerecognizes the increase in liability underthe Convention for the countries whoare parties to the Convention, as well as acknowledging those countries thatare not.

The revised Air Waybill contains thefollowing notice:

If the carriage involves an ultimatedestination or stop in a country otherthan the country of departure, theWarsaw Convention or the MontrealConvention may be applicable and inmost cases limit the liability of theCarrier in respect of loss of, damageor delay to cargo. Depending on the

applicable regime, and unless a highervalue is declared, liability of theCarrier may be limited to 19 SpecialDrawing Rights per kilogram underthe Montreal Convention, 17 SpecialDrawing Rights per kilogram underthe Warsaw Convention as amendedby Montreal Protocol No. 4, or 250French gold francs per kilogram underthe Warsaw Convention (unamendedby Montreal Protocol No. 4),converted into national currencyunder applicable law, unless a greateramount is specified in the Carrier’sconditions of carriage.

What if I am given an old air waybillwithout the new provisions? IATAmembers and carriers party to the “IATAMultilateral Interline Traffic Agreement– Cargo” are required by IATA to notifyany persons holding the old air waybillsthat there has been a change in thelimitations of liability. That notificationmay be by a posting on a carrier’swebsite.

The limitation of liability of 19 SDRsper kilogram applies, even if outdated airwaybills are used and whether or not thenew limitation is posted on the carrier’swebsite. Be aware of this when you file aclaim with an air carrier or air freightforwarder for cargo loss or damage.1 An SDR is a basket of currencies consistingof the Euro, Japanese yen, pound sterling,and U.S. dollar. The U.S. dollar-value of theSDR is posted daily on the IMF’s website. Itis calculated as the sum of specific amountsof the four currencies valued in U.S. dollars,on the basis of exchange rates quoted atnoon each day in the London market.

2 International Monetary Fundhttp://www.imf.org/external/np/fin/data/rms_sdrv.aspx

For more information contact MarthaPayne at mpayne@beneschlaw.com or(541) 764-2859.

“[L]imitation of liability for cargo thatis lost or damaged duringinternational air transportationbetween countries who are signatoriesto the Montreal Conventionincreased from 17 SDRs to 19 SDRsper kilogram….”

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., one of the largest less-than-truckload motor carriers in North America. Teresa assiststransportation companies with contract drafting, review and negotiation; shipping solutions;real estate transactions, including leases, environmental releases, liens, construction anddesign 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, Teresahas a growing practice in the entertainment industry representing independent filmmakers,drafting and negotiating agreements for all aspects of film production. Teresa received herB.A. summa cum laude from The Ohio State University, and her J.D. magna cum laudefrom 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. Shecomes to Benesch from GEAR for Sports, Inc. where she worked as Director of GlobalLogistics and Customs. Prior to working at GEAR for Sports, Inc., Mary worked at Chico’sFAS, 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 supplychain management for specialty retailers, manufacturers and wholesalers. Mary received herB.S. cum laude from Hodges University.

Mary L. Bianchi

Does your company have an establishedbudget for Customs Complianceprojects? Or do compliance issues tendto be more of an ad-hoc budgetingsituation? Or somewhere in between?

Proactive customs compliance budgetingcan be a valuable and important businessmanagement function.

Here are some examples of compliancebudget line items that can save time anddollars for active importers:

1. Internal audit: Schedule an annualinternal audit by a third party.

2. Documentation: Prepare appropriatedocumentation for participation in Customs Trade Partnership AgainstTerrorism (C-TPAT), Import SecurityFiling (ISF), and Importer Self-Assessment (ISA).

3. Standardized compliance programs:Maintain up-to-date compliance andC-TPAT procedure manuals andconsider converting to a global trade

management software program anddigital recordkeeping.

4. Import counsel: Build a relationshipwith a trusted adviser. Transactionslike First Sale, new products, orcountry of origin qualification for Free Trade programs can succeed with informed advice. The tradecommunity needs to be clearly andcompletely informed of its legalobligations by consulting with acustoms “expert” (e.g., lawyer, customs broker, or customsconsultant).

5. Compliance interface: Communicatewith Marketing and ProductDevelopment at the start of thedevelopment process. Compliance canassist on the front side with input onconsiderations such as duty, tariffengineering, other government agency(OGA) requirements and sourcingfrom a country with trade agreements.Better to know the issues in advancerather than learn them when Customs

and Border Protection (CBP) isholding your freight captive.

6. Training: Implement an internaltraining program for all associates whoare involved in customs business.

7. Binding rulings: Binding rulings willconfirm key entry information prior toimportation. CBP will issue rulings onthe appropriate Harmonized TariffSchedule United States (HTSUS)classification, rate of duty, and otherissues such as valuation, country ororigin marking, and eligibility in tradepreference programs.

How can you maximize your compliancedollars? By developing and maintaining aproactive compliance program. Loweringlanded costs and improving speed-to-market are valuable benefits that can berealized by utilizing these and other tips.Worthy benefits for any business.

For more information contact MaryBianchi at mbianchi@beneschlaw.com or (239) 985-9776.

Budgeting for Customs Compliance

InterConnectA PUBLICATION OF BENESCH FRIEDLANDER COPLAN & ARONOFF LLP’S TRANSPORTATION & LOGISTICS GROUP WINTER 2010

COUNSEL FOR THE ROAD AHEAD® 3

Get to Know Teresa E. Purtiman

Marc Blubaugh presented Having a WinningDeposition Strategy at the Ohio TruckingAssociation’s Safety Council MonthlyMeeting in Columbus, OH on November12, 2009.

Bob Spira presented Carrier Qualification is for Everyone at the TransportationIntermediaries Association Fall Meetingin Anaheim, CA on November 15, 2009.

Eric Zalud and Martha Payne attended theConference of Freight Counsel Meetingin Austin, TX, on January 10-11, 2010.

Marc Blubaugh, Bob Spira, Thomas Kernand Teresa Purtiman attended the ChicagoRegional Conference of theTransportation Lawyers Association inChicago, IL, on January 21-22, 2010.

Eric Zalud attended the DRI Trucking LawSeminar in Las Vegas, NV, on February 4–5,2010.

Eric Zalud attended the Trucking Industry Defense AssociationAdvanced Seminar in Miami, FL, on February 10–11, 2010.

4 COUNSEL FOR THE ROAD AHEAD®

On January 26, 2010, U.S.Transportation Secretary Ray LaHoodannounced the federal ban on texting byinterstate drivers of large commercialvehicles, including large trucks andbuses. Although some states and severalcities across the U.S. have alreadybanned texting for all drivers, this is thefirst attempt by thefederal governmentto crack down onthe use of electronicdevices whiledriving. Drivers ofcommercial vehiclescaught texting maybe subject to civil orcriminal penalties of up to $2,750.

Specifically, the new rules are aimed atall interstate drivers of commercialmotor vehicles (CMVs) subject to theFederal Motor Carrier SafetyRegulations. CMVs are defined as anyself-propelled or towed motor vehicleused on a highway in interstatecommerce to transport passengers orproperty when the vehicle:

1. Has a gross vehicle weight rating or gross combination weight rating, or gross vehicle weight or grosscombination weight, of 4,536 kg(10,001 pounds) or more, whichever is greater;

2. Is designed or used to transport morethan 8 passengers (including thedriver) for compensation;

3. Is designed or used to transport morethan 15 passengers, including thedriver, and is not used to transportpassengers for compensation; or

4. Is used in transporting material foundby the Secretary of Transportation tobe hazardous under 49 U.S.C. 5103and transported in a quantity

requiring placardingunder regulationsprescribed by theSecretary under 49 CFR, subtitle B,chapter I,subchapter C.

49 C.F.R. § 390.5.While texting is not specificallymentioned in the rules, it is beingregulated under 49 C.F.R. § 390.17,which states: “[n]othing in this chaptershall be construed to prohibit the use ofaddition equipment and accessories, notinconsistent with or prohibited by thissubchapter, provided such equipment andaccessories do not decrease the safety ofoperation of the commercial motor vehicleson which they are used.”

So what exactly is texting? The federalregulatory guidelines define texting as:

“The review of, or preparation andtransmission of, typed messagesthrough any such device or theengagement in any form of electronicdata retrieval or electronic datacommunication through any such device.”

However, according to the federalregulatory guidelines, the texting bandoes not forbid the utilization ofelectronic dispatching tools and fleetmanagement systems, but “[t]o theextent that there are fleets that requiredrivers to type and read messages whilethey are driving, the Agency willconsider appropriate regulatory action to address this problem.”

Moreover, the regulatory guidance“should also not be construed to prohibitthe use of cell phones for purposes otherthan text messaging.” In other words,drivers are no longer allowed to transmitor receive text messages in transit, butare still allowed to talk on their cellphones while driving. In addition, itappears that the Department ofTransportation will issue guidelinesregulating the use of electronicdispatching tools and fleet managementsystems if, and when, it perceives the useof these technologies as a distraction todrivers.

For more information regarding the federalregulatory guidelines, see Federal RegisterVol. 75, No. 17.

For more information contact Thomas Kern at tkern@beneschlaw.com or (614) 223-9369.

OMG! Texting Banned

“[D]rivers are no longer allowed totransmit or receive text messages intransit, but are still allowed to talk ontheir cell phones while driving.”

Recent Events

Indian LogisticsIndustry

Sound economicgrowth in India is increasinglysupported by robustindustrial growth.One of thecomparatively lesser known butimportant sectors

that support almost all industrial activitiesis the logistics sector. Keeping pace with thedemands of the economic progress, thesector has arranged and consolidated itselfas a highly professional and competitiveindustry supported by foreign investment.

Regulation of Carriage of Goods

Primarily, the overseas carriage of goodsis governed as between the consignorand the carrier by way of Contract ofCarriage of Goods. It is a contract ofbailment for reward. However, thecontract of bailment is modified by thedifferent statutes governing carriage ofgoods by land, sea or air.

In India, the laws governing carriage of goods into Indian territory are:

1. In case of carriage of goods by land:• The Carriers Act, 1865.

2. In case of carriage of goods by sea:• The (Indian) Bills of Lading Act,

1856.3. In case of carriage of goods by air:

• The Carriage by Air Act, 1972.

However, The Carriers Act, 1865 isuniformly applicable to all the modes of carriage.

In case no provision in the specificregulations is provided, then the Indiancourts refer to the principles of EnglishCommon Law.

Procedures to be Followed by the Carrier

The logistics companies/carriers involvedin transporting goods do not require any

special permission, license or permit forbringing goods into India. However, anyvessel/aircraft or any other carrier carryinggoods destined to Indian ports would needto comply with specific requirementsunder various enactments governingvessels and aircrafts entering Indian ports.

The burden of complying with theabovementioned requirements would fall on the person-in-charge of the vessel, aircraft, etc.

Broadly, he shall be responsible for thefollowing:

1. Submitting the Import Manifest.2. To ensure that the conveyance comes

through the approved route and landsat the approved place only.

3. To ensure that goods are unloadedafter written order at the proper place.

4. To ensure that the conveyance shallnot leave without written order of thecustom authorities.

Liabilities of the Carriers

The liability of the logistics companiesare discussed under various enactmentsin the form of the liabilities of thecarriers. The burden of such obligationsand liabilities would further dependupon the terms of the Contract ofCarriage or any such agreement betweenthe parties involved.

A logistics company may get exposed toliabilities in the following cases:

a. Any loss caused due to his ownnegligence or criminal act of hisservant or agent wherein, it is notnecessary for the claimant toestablish negligence.

b. On failure to properly manage theload of shipments, they are liablefor their negligence.

c. Liability exposure to their customerfor negligence in failing to timelyand appropriately file the necessaryproof of claim while acting as anintermediary for resolving any loss.

d. Liability exposure for negligentmanagement of those facilities and warehouses, including hiringincompetent laborers, mostly incases of goods of high value.

Under common law primarily there arefour obligations imposed on the carrier,which are as follows:

1. The carrier must deliver the goods inthe same condition as when they wereshipped and such duty cannot bedelegated.

2. It is the absolute duty of the carrier toprovide a seaworthy ship.

3. The carrier is expected to undertaketo proceed on the voyage withoutunjustifiable deviation.

4. The carrier must complete the voyagewithout any delay and it is subject toliability in case of damages for anyloss caused by the delay.

Limitation on Liability

The absolute liability of a logisticscompany/carrier is subject to thefollowing exceptions, namely:

1. Act of God.2. Special Contract, i.e. on waiver of

any such liability under the contractbetween the parties concerned.

3. In addition to the above, the liabilitywould be governed by the exceptionsgiven under the various enactmentsmentioned above.

Briefly, while considering the liability ofthe carrier for loss of damage to goods inone’s custody, the terms of the contract,effect of statutory provisions and thecommon law must be referred.

*Singhania & Partners LLP is a full servicenational law firm with a successfulinternational law practice out of its offices at New Delhi, Noida, Bangalore,Hyderabad and Mumbai with a team of over 70 attorneys including lawyerswith dual qualification of CharteredAccountancy or Company Secretaryshipsupported by paralegals. Singhania isBenesch’s Terralex affiliate in India. The two firms partner together to service clients with bilateral interests in the U.S. and India.

Overseas Carriage of Goods into India: An Overview

Sunil Kumar, PartnerSinghania & Partners LLP*

InterConnectA PUBLICATION OF BENESCH FRIEDLANDER COPLAN & ARONOFF LLP’S TRANSPORTATION & LOGISTICS GROUP WINTER 2010

COUNSEL FOR THE ROAD AHEAD® 5

For more information about theTransportation & Logistics Group,please contact one of the following:

Eric Zalud, Chair | (216) 363-4178ezalud@beneschlaw.comMary Bianchi | (239) 985-9776mbianchi@beneschlaw.comMarc Blubaugh | (614) 223-9382mblubaugh@beneschlaw.comMariann Butch | (216) 363-4198mbutch@beneschlaw.comRyan Hatch | (614) 223-9347rhatch@beneschlaw.comThomas Kern | (614) 223-9369tkern@beneschlaw.comPeter Kirsanow | (216) 363-4481pkirsanow@beneschlaw.comDavid Neumann | (216) 363-4584dneumann@beneschlaw.comMartha Payne | (541) 764-2859mpayne@beneschlaw.comTeresa Purtiman | (614) 223-9380tpurtiman@beneschlaw.comNicole Schaefer | (216) 363-4593nschaefer@beneschlaw.comRobert Spira | (216) 363-4413rspira@beneschlaw.comClare Taft | (216) 363-4435ctaft@beneschlaw.comYanping Wang | (216) 363-4664ywang@beneschlaw.comThomas Washbush | (614) 223-9317twashbush@beneschlaw.comE. Mark Young | (216) 363-4518myoung@beneschlaw.com

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

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On the Horizon

Jim Hill, Eric Zalud and Marc Blubaugh will be attending the 2010 TruckloadCarriers Association’s Annual Convention in Las Vegas, NV on February 28–March3, 2010.

Marc Blubaugh and Eric Zalud will be attending the International Warehouse LogisticsAssociation 2010 Annual Convention and Expo in San Diego, CA on March 7–9, 2010.

Martha Payne and Eric Zalud will be attending the Air Cargo Conference in Orlando, FLon March 14–15, 2010.

Marc Blubaugh will be presenting a Webinar for the Transportation LawyersAssociation on Bulletproof or Brittle? A Primer Regarding Motor Carrier Limitations of Liabilityin Columbus, OH on March 26, 2010.

Bob Spira will be presenting Legally Speaking and Eric Zalud will be presenting on Lessons forCEO’s in the Logistics Industry at the Transportation Intermediaries Association (TIA)Conference in Tucson, AZ on April 8–10, 2010. Martha Payne will also be attending thisconference.

Mary Bianchi will be attending the National Customs Brokers & ForwardersAssociation’s 36th Annual Conference in San Antonio, TX on April 11–14, 2010.

Marc Blubaugh will be moderating a panel on Loss and Damage Claims – Best Practices, EricZalud will be speaking on Food Imports/The Bioterrorism Act and Martha Payne will be on thepanel: Transportation & Logistics Contracts Best Practices at the Transportation & LogisticsCouncil’s 36th Annual Conference in San Diego, CA on April 18–21, 2010.

Marc Blubaugh, who will be serving as the Educational Program Chair, and Eric Zalud, BobSpira and Martha Payne will be attending the Transportation Lawyers Association (TLA)Conference in Hilton Head Island, SC on April 27–May 1, 2010. Eric Zalud will beattending the TLA Executive Committee Meeting there, and Yanping Wang, of Benesch’sChina office will be speaking on international transportation issues.

Mary Bianchi will be attending the 2010 American Apparel and FootwearAssociation Annual Sourcing, Customs, & Logistics Integration Conferencein Miami, FL on May 5–7, 2010.

Eric Zalud will be attending the Terralex European Meeting in Rome, Italy, on June 9–12, 2010.

For further information and registration, please contact Megan Thomas, Client ServicesManager at mthomas@beneschlaw.com or (216) 363-4639.