Cargo Liability in Mexico – What should your Transportation Contract Say?

As everyone knows, many manufacturers of goods have moved from the United States to Mexico in recent years. This has created some serious issues for Shippers, Carriers, and Logistics companies. Some of the problems stem from the inability of Carriers to purchase cargo liability coverage to cover shipments travelling in Mexico. Simply stated – the insurance companies find the risk of writing such coverage to be very high. Therefore, there is no market for Carriers to purchase coverage. So, Carriers must either self-insure for losses in Mexico and roll the dice, or just refuse to offer loss and damage coverage. However, not offering any coverage for loss and damage in Mexico is generally not a viable legal option.

“Carriers can’t set cargo liability assumed in Mexico to zero, and must follow strict criteria to impose limits…….”

So – how does liability in cross border transportation typically work? Typically the liability regime of the origin country controls. Therefore, if a shipment being transported from the United States to Mexico under a through Bill of Lading, such shipment is subject to cargo liability under the American regime. In the U.S., the carrier’s liability would generally be subject to the terms of 49 U.S.C. 14706 (the current version of the Carmack Amendment to the Interstate Commerce Act). This statute generally sets carriers liability at the full actual value of the freight. Many Carriers will attempt to limit their liability in carriage contracts or self published rules tariffs. Many Carriers will also attempt to set their liability for carriage from the U.S. to Mexico to zero. There have not been many published cases involving cargo loss and damage claims in Mexico, but the few cases that have been published have indicated that if a Carrier tries to limit its liability for shipments in Mexico to zero, that such attempts will fail, and the Carrier will be responsible for the full actual value of the goods. In doing so the Courts have set forth a specific set of rules and procedures for limiting liability for shipments in Mexico. If Carriers do not heed the direction from these decisions, then they may be assuming full liability for loss and damage to shipments in Mexico AND these losses will not be covered by their U.S. cargo liability policies.

Therefore, Shippers and third party logistics companies should also be concerned about this, as they may be left holding the bag for uninsured losses. There is certainly a reason that insurance companies don’t want to insure the carriage of freight in Mexico.