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United States District Court, Southern District of New York

April 24, 1990


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


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:

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

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 the container is not a package, is bound by a provision in the bill of lading that defines "package" differently.

In Leather's Best, Inc. v. S.S. Mormaclynx, supra, the court dealt with a very similar situation. The bill of lading described the "number and kind of packages; description of goods" as "1 container s.t.c. 99 bales of leather". Language in capital letters in the lower left hand corner of the bill of lading stated that "SHIPPER HEREBY AGREES THAT CARRIER'S LIABILITY IS LIMITED TO $500 WITH RESPECT TO THE ENTIRE CONTENTS OF EACH CONTAINER EXCEPT WHEN SHIPPER DECLARES A HIGHER VALUATION. . . ." 451 F.2d at 804. Despite this provision on the face of the bill of lading, the Second Circuit stated

  we cannot escape the belief that the purpose of
  § 4(5) of COGSA was to set a reasonable figure
  below which the carrier should not be permitted to
  limit his liability and that "package" is thus more
  sensibly related to the unit in which the shipper
  packed the goods and described them than to a large
  metal object, functionally a part of the ship, in
  which the carrier caused them to be "contained."
  [footnote omitted] We therefore hold that, under
  the circumstances of this case, the legend in the
  lower-left hand corner of the bill of lading was an
  invalid limitation of liability under COGSA.*fn2

Similarly, in Gulf Italia Co. v. The Exiria, 160 F. Supp. 956 (S.D.N.Y. 1958), aff'd, 263 F.2d 135 (2d Cir.), cert. denied, 360 U.S. 902, 79 S.Ct. 1285, 3 L.Ed.2d 1254 (1959), the court held "[t]o allow the parties themselves to define what a `package' is would allow a lessening of liability other than by terms of the Act since a carrier could always limit its liability to $500 by merely extracting a stipulation from the shipper that everything shipped, in no matter what form, would be deemed for the purposes of limitation of liability a `package'." Judge Cashin's concerns in Gulf Italia are apt in this case.*fn3

Allowing the carrier, in this case Sea-Land, to insert an essentially unbargained-for*fn4 definition of "package" in the bill of lading would effectively eliminate the protection COGSA was meant to afford shippers. As described above, the Second Circuit on a number of occasions has consistently held that a container is not a COGSA package when the carrier has been put on notice of the contents of the container. There is little sense in saying that carriers can sidestep these rulings by adding boilerplate language to their bills of lading to the effect that containers are always packages, regardless of what the shipper puts on the front of the bill of lading. Quickly, all bills of lading would include such language, and no carrier would ever be subject to more than $500 of liability for each container it takes on board, no matter whether the containers contain "packages" within the meaning of COGSA, as interpreted by the courts, or not.

It is true that a rule such as the one Sea-Land seeks here would have the virtue of certainty. However, it is inappropriate to emasculate the statute for the sake of certainty alone. It is the duty of the courts to interpret statutes so as to give effect to Congress' intention. See Mitsui, 636 F.2d at 815. Section 4(5) of COGSA has dual purposes: to limit liability, but to "make[ ] null and void any agreement reducing the carrier's liability below that level." Id., 636 F.2d at 814; see also Allied, 672 F.2d at 1058. As the Second Circuit reminded in Mitsui, "courts must therefore take a critical look at any proposed construction of that section that would reduce a carrier's liability below reasonable limits." 636 F.2d at 815. To allow carriers to define "package" as Sea-Land has done here would allow them to effectively substitute the word "container" for the word "package" in COGSA, a development which the Second Circuit has decided Congress did not intend.

Sea-Land argues that language in recent Second Circuit opinions indicates that the Court of Appeals no longer adheres to the view espoused in Leather's Best and Gulf Italia. For example, defendant points to the court's statement in Binladen that "nothing prevents the parties from agreeing in their contract (the bill of lading) that each container shall constitute a package." 759 F.2d at 1015. Aside from the fact that this statement is dictum, since the parties in that case did not so agree, when read in context it appears that the court meant only to suggest that the failure to describe as "packages" the contents of the container on the face of the bill of lading mandates a conclusion that the parties expressly or implicitly agreed that the container itself would be the COGSA package. Since Concept in this case specified the number of packages inside the container, the opposite conclusion — i.e., that the parties understood there were 150 packages — is equally warranted.

Similarly, defendant cites Allied International American Eagle Trading Corp. v. S.S. Yang Ming, 672 F.2d at 1061, in which the court stated

  the bill of lading expresses a contractual
  relationship, in which the intent of the parties
  is the overarching standard. . . . [W]hen the bill
  of lading expressly refers to the container as one
  package, or when the parties fail to specify an
  alternative measure of the `packages' shipped, the
  Courts have no choice but to respect their express
  or implied understanding and to treat the
  container as a single package.

Again, however, the court in Allied was not presented with a situation where the carrier had inserted a purported definition of "package" into the boilerplate of the bill of lading. Moreover, Allied involved pallets, not containers, and the court indicated that containers present different considerations than pallets. Id., 672 F.2d at 1061. Furthermore, the court reiterated the general rule established in Leather's Best and nowhere questioned or discussed the Leather's Best holding that the boilerplate language deeming the container the COGSA "package" was invalid under COGSA.

Finally, the defendant argues that COGSA does not apply ex proprio vigore to this case, and that the specific provision of paragraph 17 must prevail over the general incorporation of COGSA into the bill of lading for periods not covered by the statute. Defendant's argument is based upon its conclusion that the theft of the Concept cargo took place after discharge of the cargo in the Dominican Republic, when COGSA no longer applied of its own force.*fn5 Plaintiff does not indicate in its papers whether it disputes defendant's version of the facts, but instead appears to believe that it is uncontested that COGSA applies ex proprio vigore to this case. Since determination of a genuine dispute of material fact, by the Court would be inappropriate, the Court will not reach this issue.

Accordingly, the Court holds that the provision on the reverse side of the Sea-Land bill of lading is invalid under COGSA and does not relieve Sea-Land of the liability it would otherwise have under COGSA.


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