Carmack Amendment

Carmack Amendment

Investopedia / Paige McLaughlin

What Is the Carmack Amendment?

The Carmack Amendment is a 1906 revision to the Interstate Commerce Act of 1877, which regulates the relationship between shipping companies and the owners of goods under shipment.

The Carmack Amendment limits the liabilities of these shipping companies, known as carriers, to loss or damage of the property itself.

Key Takeaways

  • The Carmack Amendment, sometimes only referred to as Carmack, was enacted in 1906, and applies to insurance coverage for cargo shipped across state lines.
  • It revised the Interstate Commerce Act of 1877 to limit the liability of shipping carriers to that of property damage only.
  • After the Great Depression, several exceptions and limitations were made to Carmack, making it today quite a convoluted piece of legislation.

Understanding the Carmack Amendment

Before the Carmack Amendment, companies involved in the transportation of goods across state borders were subject to state laws regulating the liabilities of shipping companies to their clients. Carmack was an important step in the harmonization regulations applied to interstate shippers and interstate carriers from claims made by companies in excess of the value of the goods.

The Carmack Amendment is important for shipping companies to understand because it outlines the nature of their liability to their customers. Because of the various exceptions outlined in the law, it behooves shipping companies to keep careful documentation of the nature and state of goods under their care.

One of the most important features of Carmack is that it does not require the shipper to provide proof of negligence, only that the goods were damaged. This makes the carrier liable for the damage, regardless of how the damage was caused. The shipper is required to make sure that the items being shipped are in good condition when they were picked up by the carrier, that the goods were damaged after they were received and that the amount of damages can be quantified.

The carrier is, in fact, held liable for damages to the goods it transported, without proof of negligence, unless it can prove it was not negligent or meets one of the exceptions or exemptions. The carrier may be exempt from damage claims under special circumstances, such as damage caused by an Act of God, like a tornado or earthquake, the government, burglars, or inherent vice, meaning that there is something inherently unstable about the product (e.g., highly flammable).

Carmack and Bills of Lading

A bill of lading represents proof of delivery for when goods are delivered to their destination and signed for by the receiver. The content of the bill reflects either the shipper's representations to the carrier of the terms of the service or the carrier's notes from its own inspection of the goods. If the bill of lading notes the defective condition of the goods or their packaging, it is considered "claused" or "fouled." If no defects are noted, it is considered a "clean" bill of lading.

The bill of lading states that the carrier is responsible for loss, damage, delay, and liability in the transportation of the goods for shippers from the time the carrier receives the goods until delivery is complete. The carrier is responsible for full actual loss. If the receiver finds the freight damaged or unacceptable, the bill of lading can be used as a legal document to dispute the delivery of goods in accordance with the provisions of Title 49 of the Code of Federal Regulations Section 1005, Section 14706, the Carmack Amendment.

The Carmack Amendment and the U.S. Constitution

Prior to the Great Depression, Congress adopted a very strict interpretation of the Commerce Clause, which allows it to regulate interstate commerce. Interstate shipping clearly falls into the category of interstate commerce, and so Congress was long active in promulgating regulations related to shipping companies.

In an effort to fight the Great Depression, Congress began enacting laws that didn’t strictly relate to interstate commerce, like the regulation of the securities industry. The Supreme Court at first resisted this new role, but eventually expanded its definition of what regulation of interstate commerce meant to include these new activities.