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ST. PAUL FIRE & MARINE v. SEA-LAND SERV.

April 24, 1990

ST. PAUL FIRE & MARINE INSURANCE COMPANY, PLAINTIFF,
v.
SEA-LAND SERVICE, INC., DEFENDANT.



The opinion of the court was delivered by: Robert P. Patterson, Jr., District Judge.

OPINION AND ORDER

This case raises the recurring question of what is a "package" for purposes of § 4(5) of the Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C.A.App. § 1304(5), which limits the liability of a carrier to $500 per package unless the shipper declares on the bill of lading the value of the goods and pays additional freight.*fn1 The issue presented is whether the container in which the shipper's goods are shipped is the COGSA package, such that the carrier's liability is limited to $500 total, or whether each of 150 items packed in the container are COGSA packages for the purpose of the $500 limitation. The parties have submitted to the Court informal memoranda of law on the issue.

A brief review of the general legal principles in this area is necessary before turning to the specific facts of this case. The meaning of the word "package", which has remained undefined by Congress since COGSA was enacted in 1936, has troubled the courts for many years, especially as new methods of shipping goods have been developed. Binladen BSB Landscaping v. M. V. Nedlloyd Rotterdam, 759 F.2d 1006, 1011-12 (2d Cir.), cert. denied, 474 U.S. 902, 106 S.Ct. 229, 88 L.Ed.2d 229 (1985). One of these new methods is the practice of placing cargo in large metal shipping containers, which the Second Circuit has described as "functionally part of the ship." Leather's Best, Inc. v. S.S. Mormaclynx, 451 F.2d 800, 815 (2d Cir. 1971).

The Second Circuit has made clear that "when a bill of lading discloses not only the number of containers but the number of cartons within them, the cartons, not the containers, will be treated as COGSA packages." Binladen, 759 F.2d at 1013, citing Mitsui & Co. v. American Export Lines, Inc., 636 F.2d 807, 821 (2d Cir. 1981). See also Leather's Best, 451 F.2d at 815-16; Allied International American Eagle Trading Corp. v. S.S. Yang Ming, 672 F.2d 1055 (2d Cir. 1982). On the other hand, "if the bill of lading lists the container as a package and fails to describe objects that can reasonably be understood from the description as being packages, the container must be deemed a COGSA package." Binladen, 759 F.2d at 1013. Thus, under the current interpretation of the statute, a shipper who wishes to protect itself may do so "by stating in plain terms on the bill of lading the number of COGSA packages being shipped." Binladen, 759 F.2d at 1016.

With that background, we may turn to the facts of the present case. This action is brought by St. Paul Fire & Marine Insurance Company as subrogee of Concept Cargo, Inc. ("Concept" or "plaintiff") for damages arising out of a shipment by vessel from Florida to the Dominican Republic. Concept is a non-vessel operating common carrier (NVOCC). As is customary for NVOCCs, Concept issued ocean bills of lading for various customers and then consolidated the cargo in one container belonging to the carrier, in this case Sea-Land Service, Inc. ("Sea-Land"). After the cargo had been consolidated, Concept delivered the container to Sea-Land, which in turn issued its own bill of lading, dated December 21, 1986, for the entire shipment.

The particulars of the cargo, as provided by Concept, are described on the face of the Sea-Land bill of lading as follows:

MKS & NOS/    NO OF PKGS      DESCRIPTION OF PACKAGES
CONTAINER NOS                          AND GOODS
CONTAINER NO:       1        40 FT CONT. NO: SEAU 465911-3,
SEAU-465911-3               SEAL NO: 0000613, S.T.C. 150 PKGS:
0000613                                  F.A.K.

S.T.C. commonly means "said to contain" and F.A.K. commonly means "Freight All Kinds."

The container was duly shipped from Port Everglades, Florida to Santo Domingo, Dominican Republic on the vessel Vermillion Bay. Upon delivery by Sea-Land at the port, the container seal was missing and, when the customs agent opened the container, it was observed that certain cargo had been stolen. Concept's insurer paid the claims of Concept's consignees and subsequently brought this action as subrogee of Concept against Sea-Land to recover those amounts it had paid on Concept's behalf.

On these facts, there would be little doubt that Sea-Land's liability would be $500 for each of the 150 packages, rather than $500 total for the container. Concept took the step the courts have required in order to be protected from the severe limitation of recovery that would result if the container were considered the COGSA package: it stated in plain terms on the face of the bill of lading the number of packages in the container, thereby notifying Sea-Land of its potential liability. See, e.g., Mitsui, 636 F.2d at 821.

The fact that "1" appears in the column designated "Number of Pkgs" does not alter this conclusion as defendant argues. While this designation is important, see Standard Electrica, S.A. v. Hamburg Sudamerikanische Dampfschifffahrts-Gesellschaft, 375 F.2d 943 (2d Cir.), cert. denied, 389 U.S. 831, 88 S.Ct. 97, 19 L.Ed.2d 89 (1967); Nichimen Co. v. M.V. Farland, 462 F.2d 319 (2d Cir. 1972), in this case it carries little weight since from the face of the document it is clear that the column lists the number of containers, the contents of which are described in the next column as "150 pkgs F.A.K." To rule otherwise would place undue emphasis on a technical aspect of the document at the expense of the clear import of the document as a whole. Furthermore, courts that have considered similar bills of lading have not regarded the "No. of Pkgs" column to be dispositive where, as here, the adjacent column describes the contents of the container. In Binladen, for example, the number of packages was listed as "1", which in actuality indicated the number of containers, but the court did not rely on that designation in its ruling that the container was the COGSA package. The court held that the container was a COGSA package because it "list[ed] the container as a package and fail[ed] to describe objects that can reasonably be understood from the description as being packages." 759 F.2d at 1015 (emphasis added). Accordingly, the designation of the container as a package alone is insufficient.

Sea-Land has made the resolution of this case more difficult, however, by including in the boilerplate language on the reverse side of its bill of lading a purported definition of the word "package." The reverse side of the bill of lading contains 22 numbered paragraphs setting forth various terms of the contract between the parties, including the following:

  17. VALUATION. In the event of loss, damage or
  delay to or in connection with goods exceeding in
  actual value the equivalent of $500 lawful money of
  the United States, per package . . . the value of
  the goods shall be deemed to be $500 per package or
  unit, unless the nature and higher value of goods
  have been declared by the shipper herein and extra
  charges paid as provided in Carrier's tariff. . . .
  The word "package" shall include a container used
  to ship household goods or Freight All Kinds

  shipped under lump sum tariff. . . . (emphasis
  added)

Defendant contends that this definition is binding on Concept and limits its liability in this case to $500 for the container. Plaintiff argues that the provision is invalid because it contravenes the provisions of COGSA. The issue to be decided, then, is whether a NVOCC who has complied with the requirement of describing the contents of the container such that under the Second Circuit's interpretation of COGSA ...


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