The Carriage of Goods by Sea Act (COGSA), among its many provisions, provides a limitation of liability for damage to cargo. Specifically, COGSA allows a limitation of $500 per package for losses to cargo
The Carriage of Goods by Sea Act (COGSA), among its many provisions, provides a limitation of liability for damage to cargo. Specifically, COGSA allows a limitation of $500 per package for losses to cargo. While this is federal law, it received rare state court treatment in the recent case of Mitsui Marine & Fire Insurance Company, Ltd. v. Hanjin Shipping Company, Ltd., Fulton County Daily Report, June 21, 2006. In this case, and a companion case, Mitsui Marine & Fire Insurance Company (Mitsui) sued on behalf of its insured, Toray Carbon Fibers (Toray) for a loss that occurred during the shipping of 267 bobbins of acrylic yarn. Mitsui sued Hanjin Shipping Company, Ltd. (Hanjin) which had contracted with Mitsui’s insured to transport cargo from Japan to Decatur, Alabama. The first leg of the shipment was by ship from Japan to Savannah, Georgia. The second leg was by rail from Savannah to Decatur, Alabama. In the companion suit, Norfolk Southern Railway Company (Norfolk) was sued as well for the loss of the cargo. The damage occurred during the rail transportation part of the journey when Norfolk used a process called “humping” to join certain rail cars. The bobbins received $267,710.07 worth of damages which were paid by Mitsui to its insured, Toray.
On motion for partial summary judgment, the trial court made two significant rulings that were appealed. The first ruling related to the application of the $500 per package limitation of liability contained in COGSA to the loss. The second, and arguably more interesting ruling, related to the definition of “package” when applying a $500 limitation of liability per “package.”
Turning first to the application of the COGSA limitation of liability, the question before the Court of Appeals was whether the COGSA limitation should follow this load even to the inland portion of the claim. The shipper, Hanjin, had the benefit of the relatively recent case of Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14 (2004). The Mitsui court found Kirby to be completely dispositive of the question of whether the $500 limitation of liability per package would even apply to this loss.
Mitsui was making two arguments against the application of the $500 per package limitation. First, Mitsui argued that the ocean going portion of this transportation had clearly ceased and, as such, COGSA should no longer apply. In support of this, they quoted the COGSA language that states that a bill of lading is governed by COGSA “from the time that the goods are loaded up to the time when they are discharged from the ship.” 46 U.S.C. App. §1301(e). Unfortunately for Mitsui, the Kirby case dealt with this and found that even the inland leg of a primarily ocean voyage would be covered by COGSA. The court in Kirby, dealing with substantially similar facts, found that the bills of lading at issue were essentially a maritime contract. As the court explained:
So long as a bill of lading requires substantial carriage of goods by sea, its purpose is to effect maritime commerce – – and thus it is a maritime contract, even if it also provides for some land carriage. Maritime contracts are governed by general federal maritime law, not state law, unless it demonstrates some overriding local interest that maritime law cannot accommodate.
Kirby at 27.
As such, according to Kirby, COGSA would apply.
Mitsui also argued that Hanjin did not have the authority to enter into a contract with Norfolk that, in fact, specifically extended COGSA to the carriage. Again, the Kirby court dealt with this issue and required a holding against Hanjin. As the court explained, quoting Kirby
When an intermediary contracts with the carrier to transport goods, the cargo owner’s recovery against the carrier is limited by the liability limitation to which the intermediary and carrier agree. The intermediary is certainly not automatically empowered to be the cargo owner’s agent in every sense. That would be unsustainable. But when it comes to liability limitations for negligence resulting in damage, an intermediary can negotiate reliable and enforceable agreements with the carrier it engages.
As such, according to Kirby, Hanjin had the authority to extend the COGSA limitation of liability to the rail portion of the carriage. Relying on Kirby, the Mitsui court had no trouble finding that the COGSA $500 per package limitation would apply to this loss. That, in turn, then led to the next question of exactly what would constitute a “package.”
As the court explained, the bobbins were packed onto steel pallets holding three bobbins a piece. The pallets, in turn, were loaded into large intermodal carriers. In two of the bills of ladings, the load was described as “two containers (44 pallets: 132 bobbins);” and in another bill of lading it contained the description “one container (22 pallets: 66 bobbins).” In this phase of the case, Norfolk attempted to argue that the three large containers would constitute the package, rather than the pallets. Unfortunately, neither COGSA nor any legislative history provided any clues as to the meaning of “package” in the act. Looking for guidance, the Georgia Court of Appeals turned to the Eleventh Circuit Court of Appeals which has dealt with this issue before. The Eleventh Circuit, in the case of Hayes-Leger, Associates v. M/V Oriental Knife, 765 F.2d 1076 (11th Cir. 1985), articulated two rules for interpreting bills of lading in this situation:
- When a bill of lading discloses the number of COGSA packages in a container, the liability limitation of section 4(5) applies to those packages; but
- When a bill of lading lists the number of containers as the number of packages, and fails to disclose the number of COGSA packages within each container, the liability limitation of section 4(5) applies to the containers themselves.
Hayes-Leger at 1080.
With these rules for guidance, the Georgia Court of Appeals had little difficulty in applying the package limitation to the individual pallets rather than the larger containers.
Again, while it is rare to see a COGSA case in a Georgia Court of Appeals, it does not appear that the parties received treatment in any way different from what they would receive in the federal courts.