Shippers’ Law: Decked

   A recent court decision is a reminder that the $500 package limit under the Carriage of Goods at Sea Act (COGSA) does not automatically apply in the event that deck cargo is damaged or lost. (Atwood Oceanics Inc. v. M/V Pac Altair et al. U.S District Court, Southern District of Alabama. No. 15-456. June 13.)
   Atwood Oceanics, an offshore drilling company, purchased 85 marine drilling riser joints and had them shipped from Port Klang, Malaysia, to Mobile, Ala. The risers are essentially specialized “pipes” used to move oil from the ocean floor to the surface. 
   The risers were loaded on the deck of the ship Pac Altair on Oct. 8, 2014 in Malaysia. While on route, the ship was reportedly struck by a rogue wave on Oct. 14. One riser was lost overboard and at least three others suffered external physical damage. Atwood estimated damages of $800,000.
   Atwood sued the ship and carrier defendants, including PACC Container Line, stating their duties and responsibilities were governed by COGSA. It also sued the forwarder and a company hired to inspect and observe how the cargo was loaded and stowed.
   In all, Atwood alleged six claims against the defendants for “breach of contract for common carriage, negligence, gross negligence, fraudulent misrepresentation, negligent misrepresentation and breach of express/implied warranty.”
   (A similar lawsuit, alleging $3 million in damage due to the loss of six riser joints lost overboard and damage to four riser joints, was filed in May against the ship Pac Antares and PACC in federal court in the Eastern District of Louisiana by Vantage Deepwater Drilling.)
   The face of the bill of lading provided that the risers were “shipped on deck at shipper’s risk and expense.” Section 3(a) provided “the carrier shall in no case be responsible for loss of or damage to cargo… with respect to deck cargo.” An additional clause stated in case the contract was subject to COGSA, which “shall govern before loading and after discharge and throughout the entire time the cargo is in the carrier’s custody,” and unless the nature and value of the cargo was declared by the shipper before the cargo has been handed over to the carrier and inserted in a bill of lading, the carrier “shall in no event be or become liable for any loss or damage to the cargo in an amount exceeding $500 per package.”
   Atwood sought partial summary judgment on COGSA’s applicability to the on-deck cargo. It contended the carrier was not entitled to assert the $500-per-package limitation of liability because the risers were on-deck. For COGSA’s $500-per-package limitation to apply, the bill of lading would have had to contain language expressly extending the benefit of that limitation to on-deck cargo, and it did not, it said. From this, Atwood argued the availability of the COGSA limit is a matter of contractual interpretation which can be resolved as a matter of law per the terms and clauses of the bill of lading.
   The carrier defendants disputed Atwood’s claim, and asserted the $500-per-package limitation applied to the on-deck cargo, as no higher declarations or valuations were declared by Atwood. They said their liability, if any, is limited to $500 per package. They asserted the on-deck storage of the cargo was done with the knowledge and approval of the shipper, with full acceptance of any and all risk of damage and loss, so that they were not liable or responsible for any loss. Further, they said, if the court did not agree then the bill of lading was ambiguous and issues of fact precluded summary judgment.
   The court said the issue was whether COGSA, which compulsorily applies to and governs every bill of lading for cargo moving between U.S. and foreign ports, applies to on-deck cargo.
   COGSA states, “The term ‘goods’ includes goods, wares, merchandise, and articles of every kind whatsoever, except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried.”
   In this instance, the bill of lading provided the cargo would be shipped on-deck at the shipper’s risk, so the on-deck cargo was not automatically subject to COGSA.
   The parties to a contract can decide to expressly extend COGSA to on-deck cargo as a contractual term in a bill of lading, and this choice will be enforced, but the court said “extension of COGSA to on-deck cargo must be expressly stated in a BOL because COGSA does not apply ex prorio vigore (of its own force).” 
   Here, neither the bill of lading nor the so-called “Clause Paramount” (a provision subjecting a charter to COGSA), expressly stated that COGSA applied to on-deck cargo or that COGSA was being extended by agreement to on-deck cargo, the court found.
   So it granted the plaintiff’s partial motion for summary judgment on the issue of the inapplicability of COGSA and its $500-per-package limitation to the bill of lading.
   It added the “Shipper’s Risk clause” on the face of the bill of lading was insufficient to equate with an express incorporation of COGSA to on-deck cargo and the $500-per-package limitation.
   Though Atwood raised arguments regarding overall liability issues in this case and whether the Harter Act applied, the court said “an assessment of the applicability of the Harter Act and defendants’ liability is premature,” and denied that portion of Atwood’s motion.
   If the case is not settled, Atwood would still have to prove liability and damages.