Kaufman, Chief Judge, and Anderson and Oakes, Circuit Judges.
This is a suit in admiralty by a consignee to recover damages for the loss of 350 cartons of adding machines shipped in a container. It raises in a somewhat different context from that of previously decided cases the question whether the limitation of $500 damages "per package" in the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. §§ 1300, 1304(5), applies only to the overall container itself, thus limiting the carrier's liability, cf. Encyclopaedia Britannica, Inc. v. S.S. Hong Kong Producer, 422 F.2d 7, 20 (2d Cir. 1969) (Hays, J., dissenting) (the majority decided the case on a basis which precluded the use of the $500 package limitation), cert. denied sub nom. Universal Marine Corp. v. Encyclopedia Britannica, Inc., 397 U.S. 964, 90 S. Ct. 998, 25 L. Ed. 2d 255 (1970); Standard Electrica, S.A. v. Hamburg Sudamerikanische Dampfschiffahrts-Gesellschaft, 375 F.2d 943 (2d Cir.), cert. denied, 389 U.S. 831, 88 S. Ct. 97, 19 L. Ed. 2d 89 (1967), or to each of the individual cartons so as to warrant recovery by the shipper for the loss of all its cartons. Cf. Leather's Best, Inc. v. S. S. Mormaclynx, 451 F.2d 800, 814-816 (2d Cir. 1971). Judge Tyler below in a thoroughly reasoned opinion held that the entire container was the "package" in this case so that absent a declaration by the shipper of "the nature and value" of the goods therein, 46 U.S.C. § 1304(5), with payment of the accompanying higher transportation charge, the $500 package limitation was applicable. 346 F. Supp. 1019 (S.D.N.Y.1972). We agree, on a slightly different basis, and, since a brief statement of the facts is necessary to analysis of the question presented, proceed to that statement.
The adding machines in question, worth approximately $29,000, were ordered and paid for by the consignee, Royal Typewriter Co. ("Royal"), from a Berlin manufacturer, Willi Feiler, GmbH ("Feiler"). Feiler delivered the 350 machines, together with 700 other machines, in single-wall corrugated cartons each approximately 15inchx10inchx10inch in dimension, 12 1/4 pounds in weight, and sealed with thin paper tape, to a freight forwarder in West Berlin. There was evidence that shipment overseas of the machines in the individual cartons would have been totally impracticable and that before containers came into use the cartons were shipped overseas in lots of 12, 18 or 24 cartons packed in crates or wooden cases secured by metal bands.
Following Feiler's delivery to the freight forwarder, the latter pursuant to direction from the shipper placed the cartons in three Contrans containers, each containing 350 cartons, weighing about 4200 pounds and with sealed doors. These containers were loaded aboard the S. S. Kulmerland. This vessel was owned by Hamburg-Amerika Linie, which was the predecessor of appellee Hapag/Lloyd A.G. ("Lloyd"), a West German corporation and appellee here.
An ocean bill of lading was issued for all three containers including the one in question, No. 89. Under the heading "Number and kind of packages; description of goods" there is typed on the bill of lading as to each numbered container "1 Container said to contain Machinery," without any reference to the number of cartons of adding machines or to the fact that the "Machinery" consisted of adding machines. There is also the notation "Shipped on board and stowed under deck." The ocean freight chargeable for the shipping of Container 89 was $324.
While stored on arrival in New York in a "farm area" at a terminal at the foot of 17th Street, Container 89 was rifled of its contents. It is conceded on this appeal that the carrier is liable for the loss, Leather's Best, Inc., supra, 451 F.2d at 807; David Crystal, Inc. v. Cunard Steam-Ship Co., 339 F.2d 295, 297-298 (2d Cir. 1964), cert. denied, 380 U.S. 976, 85 S. Ct. 1339, 14 L. Ed. 2d 271 (1965), the only question being the amount of the loss in light of the COGSA damage limitation. For purpose of this appeal also the parties have agreed to dispose of the third party claims involving the terminal operator, its subcontractor and a protection service, among themselves so that the only issue to which we need direct our attention is the "package" one.
Appellant consignee strenuously urges that this case is governed by Leather's Best, supra, although the bill of lading there specifically referred to "1 container s.t.c. 99 bales of leather";*fn1 the container there was 40 feet x 8 feet x 8 feet in dimension and weighed about 10 tons, and the agent furnishing the container was the ocean carrier's rather than the shipper's and the agent gave a receipt specifically covering the 99 bales. Appellant argues that these are distinctions without a difference. It urges that containers vary in size.*fn2 Appellant claims that it is immaterial whose agent obtains the container since the container is not an integral part of the shipment and does not become the property of the consignee.*fn3 And, appellant suggests, whether the bill of lading specifies the number of cartons contained is of no importance, because the applicable freight rate is the same whether or not the bill of lading refers to the number of bales or cartons in the container.*fn4 We incline to agree that these distinctions do not create as great a difference as the district court thought,*fn5 although we recognize that the district court was steering a difficult course between Standard Electrica on the one hand and Leather's Best on the other, with Judge Hays' dissent in Encyclopedia Britannica, supra, thrown in for good measure, all in a field crying for new legislative action*fn6 in the light of economic and transportation developments.*fn7 We also realize that the learned district judge has changed his own position on the law somewhat: as his subsequent opinion in Rosenbruch v. American Export Isbrandtsen Lines, Inc., 357 F. Supp. 982 (S.D.N.Y.1973), explicates, he now seeks a test with ease of predictability in litigation involving shipper-packed containers -- calling a container a § 4(5) "package" when it contains the goods of a single shipper, without regard to "the accident of notations on the bill of lading." He does this on the basis of the underlying policy that COGSA was intended to let the shipper obtain at his option marine insurance coverage, if he prefers the cheaper freight rates of larger packages. But we think this approach tends to beg the statutory question of what is a "package."*fn8 Moreover, the real parties in interest in this kind of case may be the marine insurers themselves, so that it is no answer to say that the availability of marine insurance is the determinative factor. As Chief Judge Friendly points out in Leather's Best, 451 F.2d at 815: ". . . for all we know, a ruling that each bale constituted a 'package' may simply be conferring a windfall on the cargo insurer . . . if it based its premium on the assumption that [the carrier's] liability was limited to $500."
The statutory purpose here leads us to suggest what for want of a better term we will call the functional economics test. In this regard, the first question in any container case is whether the contents of the container could have feasibly been shipped overseas in the individual packages or cartons in which they were packed by the shipper.*fn9 Here it is plain that they could not feasibly have been shipped in those individual cartons; adding machines are a delicate product -- their little cardboard cartons, stapled and paper-taped, had never been shipped as such; in the days before containers they were shipped in wooden crates or cases containing 12 to 24 each. The metal containers in which the cartons were shipped in lots of 350 per container are essentially to be likened to the wooden crates or cases of days past; the use of the metal container of convenience to shipper and carrier alike was selected by the shipper and used without carrier objection. This court, in a different factual context in Nichimen Co. v. M.V. Farland, 462 F.2d 319, 334 (2d Cir. 1972), referred to Black's Law Dictionary 1262 (4th ed. 1951), which defines a package as a "bundle put up for transportation or commercial handling . . . . a thing in form suitable for transportation or handling." Until the adding machine cartons were packed in the container in question they were not suitable for ocean transportation or handling.
We suggest that underlying Leather's Best, supra, is the concept that the "bales" there could have been shipped individually rather than in the container ultimately held not to be a "package." See note 9 supra. Here, however, the individual cartons containing one adding machine each were simply not packing units suitable for overseas shipment. We view Leather's Best as holding that, where the shipper's own packing units are functional, a presumption is created that a container is not a "package" which must be overcome by evidence supplied by the carrier that the parties intended to treat it as such. Thus, this case is clearly distinguishable from Leather's Best. When, as here, the shipper's own individual units are not functional or usable for overseas shipment the burden shifts to the shipper to show why the container should not be treated as the "package." The shipper has not met that burden here. While in Standard Electrica it is unclear whether or not the cartons could have been shipped as a practical matter in the absence of pallets, note 9 supra, we treat that case in its own language as one in which the parties' apparent intent was given "considerable weight," 375 F.2d at 946: the pallets there were characterized by the parties as packages.
Absent shipment in a functional packing unit, the burden is on the shipper to show by other evidence that his units are themselves "packages." Only then does custom and usage in the trade, the parties' own characterization or treatment of the items being shipped in supporting documentation or otherwise, and any other factor bearing on the parties' intent become relevant, as in Standard Electrica or Leather's Best.
The "functional package unit" test we propound today is designed to provide in a case where the shipper has chosen the container a "common sense test" under which all parties concerned can allocate responsibility for loss at the time of contract, purchase additional insurance if necessary, and thus "avoid the pains of litigation." Standard Electrica, supra, 375 F.2d at 945.