The Carriage of Goods by Sea Act or COGSA for short is the statute in the United States that governs the rights and responsibilities between shipowners and shippers of cargo. The statute covers ocean shipments to and from the United States. It states that the vessel is not liable as long as the carrier took the reasonable steps to handle goods.
It limits liability to $500 per package or customary freight unit unless another amount is specifically mentioned in the bill of lading, however, the amount can never be greater than the actual loss incurred. It is the U.S. enactment of the International Convention Regarding Bills of Lading also known as the Hague Rules. Initially at the time of passage, most cargo was shipped in crates, boxes and bags.
Later cargo owners discovered that cargo could be handled more efficiently if placed on pallets. This is the process of combining numerous boxes, bags or cargo on a single pallet. After this process was created shipowners wanted to reduce their liability for cargo damage and argued that pallets were now packages.
Hague Rule was later amended because Congress believed that it did not offer shippers enough protection against damage to cargo by ship-owners. Originally they only had to pay $100. The amendment increased the amount of money that shipowners would have to pay to cargo owners for damage in transits. For cargo not shipped in packages such as cars, cranes and heavy equipment Congress placed the limitation on liability for shipowners to $500 per 100 cubic feet.