On 28 January 2008 the Fourth Circuit Court of Appeal handed down its decision in the case of Maersk Line Ltd v United States of America1. The judgment concerned the application of the US COGSA per package limit of $500 to a Halvorsen aircraft loader (K-loader) transported from the US to Oman. A total of seven K-loaders were transported pursuant to a universal Services Contract, a standard form contract offered to carriers by Military Surface Deployment and Distribution Command (SDDC) on behalf of the United States. The contract expressly incorporated US COSGA. The booking was completed over the internet and Maersk received shipping instructions in a Transportation Control and Movement Documentation (TCMD). Maersk loaded each K-Loader onto a flatrack. When one K-Loader sustained damage during transit, Maersk alleged their entitlement to rely on the $500 per package limitation to cap their liability. SDDC claimed that the K-loader was not a package within the meaning of US COSGA and that a per ton adjustment of damage should instead apply. A deduction was, accordingly, made from monies due to Maersk. Maersk commenced proceedings and obtained summary judgment in their favour. The District court found in favour of Maersk for the following reasons: 1) the K-loader fell within the broad definition of a package in Catepillar Overseas SA v Marine Transport Inc2 2) examination of the contracts revealed that the parties intended each K-loader to constitute a package Under s.4 COSGA 1936 “Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package…”; however, no attempt was made to define the term “package” either within the statute or in debate. It was noted that in the Second Circuit a package is defined as “a class of cargo, irrespective of size, shape or weight, to which some packaging preparation for transportation has been made which facilitates handling, but which does not necessarily conceal or completely enclose the goods.” 3 This definition was re-affirmed in dicta in Catepillar Overseas SA v Marine Transport Inc4 and adopted by the Appeal Court in the instant case. The focus of the Appeal Court’s enquiry was the extent of preparation made to facilitate handling of the K-loader. It was held that the simple act of placing a cargo onto a flatrack was not ‘dispositive’ as this would allow carriers to automatically limit their liability by unilaterally converting cargoes to packages; however, in this case, placing the cargo onto the flatrack was the only way it could be loaded onto the vessel. It was also found that the language of the contracts and bill of lading clearly indicated that the United States considered the K- loader to be a package and understood that some preparation was required to facilitate handling (i.e. placing on the flatrack). The United States sought to argue that references to ‘package’ within the documentation should be ignored. The Court had no sympathy with this argument upholding that “in contractual disputes every word is important.” The Court also pointed to the basic principle of contra proferentum when considering any ambiguities within the documentation. Finally, the court acknowledged the fact that the United States could have avoided the per package limit by either declaring the nature and value of the shipment at the outset or through negotiation with Maersk. The United States had not sought to do either.
1. Maersk Line Limited v United States of America No. 07-1013 (4th Circuit 2008)
2. Catepillar Overseas SA v Marine Transport Inc 900 F.2d 714 (4th Circuit 1990)
3. Aluminios Pozuelo Limited v S.S. Navigator, 407 F.2d, 155 (2d Cir. 1968)
4. Catepillar Overseas SA v Marine Transport Inc, 900 F.2d 714 (4th Circuit 1990)
