On December 1, 2010, Kore A Corporationshipped from South Korea to LT Corporation in Manila some 300,000 sheets of high-grade special steel. The shipment was insured against all risks by NA Insurance(NA). The carrying vessel arrived at the Portof Manila on January 10, 2011. When the shipment was discharged, it was noted that 25,000 sheets were damaged and in bad order. The entire shipment was turned over to the custody of ATI, the arrastre operator, on January 21, 2011 for storage and safekeeping, pending its withdrawal by the consignee’s authorized customs broker, RVM.
On January 26 and 29, 2011, the subject shipment was withdrawn by RVM from the custody of ATI. On January 29, 2011, prior to the withdrawal of the last batch of the shipment, a joint inspection of the cargo was conducted per the Request for Bad Order Survey (RBO) dated January 28, 2011. The examination report showed that 30,000 sheets of steel were damaged and in bad order.
NA Insurance paid LT Corporationthe amount of P30,000,000.00 for the 30,000 sheets that were damaged, as shown in the Subrogation Receipt dated January 13, 2013. Thereafter, NA Insurance demanded reparation against ATI for the goods damaged in its custody, in the amount of P5,000,00.00. ATI refused to pay claiming that the claim was already barred by the statute of limitations. ATI alleged that the Carriage of Goods by Sea Act (COGSA) applies in this case since the goods were shipped from a foreign port to the Philippines. NA Insurance claims that the COGSA does not apply, since ATIis not a shipper or carrier. Who is correct? (5%)
Suggested answer only. Not an official answer and not legal advice.
NA Insurance is correct. Under Philippine law and jurisprudence, the Carriage of Goods by Sea Act (COGSA) applies exclusively to carriers or ships in foreign trade. Under Section 1 of COGSA, a carrier is defined as an owner or charterer entering
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Quick check
Does the one-year prescriptive period under the Carriage of Goods by Sea Act apply to damage claims against an arrastre operator?
COGSA's one-year prescription applies exclusively to sea carriers and ships, not arrastre operators.
What is the legal relationship between an arrastre operator and a consignee regarding discharged cargo?
The relationship between an arrastre operator and a consignee is akin to that of a warehouseman or depositary.
Under Section 1 of the Carriage of Goods by Sea Act, how is a 'carrier' defined?
COGSA defines a carrier as an owner or charterer entering into a contract of carriage with a shipper.
What legal right entitles an insurer to recover from an arrastre operator after paying cargo damage indemnity to the consignee?
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Which primary statute governs the one-year prescriptive period for lost or damaged goods in foreign sea trade in the Philippines?
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Learn more about these topics
1. Arrastre Operator Status
Under Philippine commercial law and maritime jurisprudence, an arrastre operator is not a sea carrier or ship contemplated under the Carriage of Goods by Sea Act (Commonwealth Act Number 65). The legal relationship between an arrastre operator and a consignee is akin to that of a warehouseman or depositary. An arrastre operator's duty is to receive, handle, store, and safekeep cargo discharged from vessels at the port of destination, rather than to transport goods across international waters.
2. COGSA Prescription Inapplicability
Under Section 3(6) of the Carriage of Goods by Sea Act, the one-year prescriptive period for bringing suit for loss or damage applies exclusively to ocean carriers, ships, and charterers engaged in foreign trade. Because an arrastre operator is neither a carrier nor a party to the contract of carriage by sea, it cannot invoke the one-year statute of limitations under COGSA to defeat a damage claim filed by a consignee or an insurer subrogated to the consignee's rights.
3. Insurer Subrogation Rights
Under Article 2207 of the Civil Code of the Philippines (Republic Act Number 386), an insurer that pays indemnity to the insured for loss or damage to cargo becomes subrogated to all rights and remedies of the insured against the wrongdoer. Upon paying the consignee for damaged goods, the marine insurer steps into the shoes of the consignee and may maintain an action against the depositary or arrastre operator under general rules on obligations and contracts or torts, governed by standard statutory prescriptive periods.