Carriage of Cargo on Deck: An Update— Lessons from AGCS Marine Insurance Co. v. M / V Imabari Logger( continued from page 10)
stowage, custody, care, or proper delivery. The Court also held that even if the Harter Act did not apply, the exculpatory clauses were void under federal common law, as they eliminated any possibility for the cargo owner to obtain compensation and gave the carrier an excuse to exercise less caution.
However, and this is the critical distinction, the Court drew a line between exoneration and limitation of liability. While the Harter Act prohibits complete exoneration, it does not prohibit a carrier from limiting the monetary extent of its liability. Accordingly, the Court upheld the limitation clauses in both bills of lading, one limiting liability to £ 100 per package and the other to $ 500 per package, as valid and enforceable under the Harter Act.
What Constitutes a“ Package” Under the Bills of Lading One of the most instructive aspects of the decision is the Court’ s analysis of what constitutes a“ package” for the purposes of applying per-package limitations. The machines at issue were not boxed or fully enclosed; rather, each was outfitted with bubble wrap, a shipping cover consisting of sheet metal and packaging foam, braided cables, internally placed wooden wedges, hood guards, struts, and support rails. Additionally, the units had to be collapsed from a vertical position into a horizontal position for shipping purposes.
Applying Second Circuit precedent, the Court held that a“ package” need not be fully enclosed or concealed. Rather, cargo qualifies as a package if“ some packaging preparation for transportation has been made which facilitates handling, but which does not necessarily conceal or completely enclose the goods.” The Court found that the preparations made to each machine were more than sufficient to render them packages, and no reasonable inference could be drawn otherwise.
The Court also turned to the bills of lading themselves, noting that both repeatedly referred to the cargo as“ 50 packages” under headings specifically designated for that purpose. Citing the Second Circuit’ s holding in Seguros Illimani S. A. v. M / V Popi P, 929 F. 2d 89( 2d Cir. 1991), the Court observed that the number appearing under the heading“ No. of Pkgs.” is both the starting and ending point of the inquiry, unless plainly contradicted. A lone reference to“ 50 units” in the ship’ s remarks was insufficient to overcome the multiple references to“ packages.”
The Court also rejected the argument that the NVOCC’ s bill of lading freight calculation, based on cubic meters rather than packages, undermined the per-package limitation. The Court distinguished the case from Allied Chemical International Corp. v. Companhia de Navegacao Lloyd Brasileiro, 775 F. 2d 476( 2d Cir. 1985), noting that in this case there was no ambiguity in the bills of lading, and the freight calculation did not carry the same evidentiary weight regarding the parties’ intent.
Key Takeaways for Carriers The Imabari Logger decision reinforces the guidance from our 2022 article with added urgency:
• Carriers must not rely on broad“ shipper’ s risk” or exoneration clauses in on-deck bills of lading. Such clauses will be struck down under both the Harter Act and federal common law as void against public policy.
• Carriers should include clear limitation of liability clauses in their bills of lading. While exoneration is prohibited, reasonable per-package limitations are enforceable, even under the Harter Act.
• Carriers should ensure that bills of lading consistently describe cargo as“ packages” under the appropriate headings, and that any packaging preparation, even partial, is documented. The Court’ s analysis confirms that the bill of lading’ s characterization of cargo as“ packages” is given significant weight, and that partial packaging preparations are sufficient to trigger per-package limitations.
• As we emphasized previously, carriers should strongly consider expressly incorporating COGSA into on-deck carriage. Had the carriers in this case done so, they would have had the benefit of COGSA’ s defenses, including its $ 500 per-package limitation, the oneyear statute of limitations, and the error in navigation defense, tools that would have significantly streamlined the dispute.
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