Weatherford Artificial Lift Systems LLC (Weatherford) purchased 50 Rotaflex machines and organised their shipment from China to the US. In March 2015, Weatherford contracted with Air Express International USA Inc d/b/a DHL Global Forwarding (Air Express) to provide freight forwarding services to Weatherford in connection with the shipment. Those services included: charter fixture arrangements, hiring of the non-vessel operating carrier and the vessel operating carrier, issuance of a sea waybill, pre-voyage inspection of onboard cargo stowage arrangements, freight forwarding services, voyage monitoring services, and notification of cargo release. This Master Transportation Services Agreement (MTSA) contained the following limitation of liability provisions:

6.1 Standard of Care. Subject to Article 6.2 below, Company agrees that in connection with any and all services performed by Company or its subcontractors, Company shall be liable for all acts, which are the direct and proximate cause of any injury to Customer, including loss or damage to Customer's Products ...

6.3 International Conventions. International transportation by air, ocean, road, or rail is subject to and governed with the force of law by the liability provisions contained in the following international conventions or statutes, as applicable and without limitation: ... the International Convention for the Unification of Certain Rules Relating to Bills of Lading, August 25, 1924 (the 'Hague Rules'); the Protocol to Amend the Hague Rules, February 23, 1968 (the 'Hague-Visby Rules'); the United States Carriage of Goods by Sea Act, 46 U.S.C. App. §§ 1300 et seq. ('COGSA'); ... For all other Services not governed by a specific statute or international convention, Company's liability shall be limited to 8.33 SDR per kilo. For customs brokerage services, Company's liability to Customer in the case of an error or omission, or a series of errors or omissions which are repetitions of or represent the continuation of an original error or omission shall be limited to the lesser of: (a) the loss incurred; or (b) $75,000 USD per occurrence.

On 22 November 2021, Pacific Basin HandySize (HK) Ltd (Pacific Basin) entered into an agreement with DHL Global Forwarding (China) Co Ltd (DHL Global) for the charter of the vessel to carry the machines. On 18 January 2022, Pacific Basin issued a bill of lading (the Pacific Basin b/l). The Pacific Basin b/l listed DHL Global as the shipper, DHL Global Forwarding as the consignee, Pacific Basin as the carrier, and the Imabari Logger as the vessel. Under the heading 'Number and kind of packages, description of goods', it said '50 packages'. After the words 'Ship's Remarks' it contained the following description of goods and disclaimer of liability:

[ ] DUST ON THE OUTER SURFACE AFFECTED ALL PACKAGES, CARGO QUANTITY AS PER TIANJIN OCEAN SHIPPING TALLEY CO., LTD AND QUALITY & WEIGHT AS DECLEARED [sic] BY SHIPPERS

(of which 50 PACKAGES / 1427.7MT on-deck at Shipper's risk; the Carrier not being responsible for loss or damage howsoever arising)

50 units shipped on-deck at shippers/charterers risk and responsibility without liability on the part of the vessel/owners for any expense, delays, loss or damage howsoever caused and even if caused by owners’ negligence or unseaworthiness of the vessel.

The Pacific Basin b/l included a paramount clause stating that it 'shall be subject to the Hague Rules contained in the International Convention for the Unification of Certain Rules of law relating to Bills of Lading, dated at Brussels the 25th August 1924, or the corresponding legislation of the flag-state of the ship'. It also contained the following general provision limiting liability:

The Carrier for any loss of or damage to the goods shall be limited to an amount not exceeding £ 100 per package or freight unit unless the value of the goods higher than the amount is declared in Writing by the Shipper before receipt of the goods by the Carrier and inserted in this Bill of Lading and extra freight paid as required. If the actual value of the goods per package or per freight unit exceeds such value the declared value shall nevertheless be deemed to be the declared value and the Carrier's liability if any, shall not be the declared value and any partial loss or damage shall be adjusted pro rata on the basis of such declared value.

Regarding on-deck cargo, it stated:

DECK CARGO, LIVE ANIMALS AND PLANT. Cargo on-deck, plants and live animals are received, handled, carried, kept and discharged at Merchants risk and the Carrier shall not be liable for loss thereof or damage thereto.

On 18 January 2022, Danmar issued an Express Sea Waybill (the Danmar bill). The Danmar bill listed Shandong Weatherford Highland Artificial Lift Equipment Co as the shipper, Weatherford as the consignee, Danmar Lines Ltd as the carrier, and the Imabari Logger as the vessel. The Danmar bill was 'governed by and construed in accordance with the laws of the United States of America and particularly 28 USC Section 1300 et seq. of US COGSA'. Under the heading 'Number and kind of packages: description of goods' on the front of the Danmar bill it read '50 package(s)', followed by 'Gross Weight in kilos' of '1427700 KG (1427.7 T)', which was then followed by 'Measurement in cubic meters' of '6083.700 M³'. The 'ship's remarks' appearing below the description of the packages were identical to those on the Pacific Basin b/l. Below the freight calculation at the bottom of the front page, the Danmar bill stated, 'the Carrier's liability is determined and limited in accordance with clause 8 of the TERMS AND CONDITIONS'. With regard to US carriage, cl 8 read:

8.1. The Carrier's liability in respect of any loss of or damage to the Goods or delay in the performance of the Services shall be determined and limited in accordance with the provisions of this clause 8 unless:

8.1.1 in the case of US Carriage, an international convention or national law (including US COGSA) compulsorily applies (US Compulsory Legislation), in which case the liability of the Carrier will be determined and limited in accordance with the provisions of such US Compulsory Legislation ...

8.2. Liability for Goods lost or damaged where no Compulsory Legislation applies ...

8.3 Amount of compensation ...

8.3.4 for US Carriage, US$500 per Package or per the freight unit billed for Goods not packaged.

The clause specifically pertaining to on-deck cargo stated:

The Carrier has the right to carry the Goods, whether packed in Containers or not, under deck or on-deck without notice to the Merchant. If the Goods are carried on-deck, the Carrier shall not be required to note, mark or stamp on the bill of lading any statement of such on-deck carriage. All Goods whether carried on-deck or under deck shall participate in General Average. Goods carried on-deck and which are not stated on the front of this bill of lading to be carried on-deck shall be subject to the same liability regime for loss or damage or delay as Goods shipped under deck. Goods which are stated on the front of this bill of lading to be carried on-deck, and which are actually carried on-deck, are carried without responsibility on the part of the Carrier for loss or damage of whatsoever nature arising during carriage of Goods by sea or inland waterway howsoever caused, whether caused by negligence or any other cause whatsoever.

Regarding the carrier's liability, cl 2.4 read:

In addition to being able to rely on this bill of lading, the Carrier has, absent Compulsory Legislation providing otherwise, the right to avail itself of and invoke any limitation or exclusion of liability, immunity, defence, right, remedy and/or law and jurisdiction clause contained in any Underlying Bill of Lading as if the Carrier were the carrier referred to in the Underlying Bill of Lading (copies of said terms of an Underlying Bill of Lading being available to the Merchant at any office of the Carrier upon request).

The plaintiffs brought an action against the vessel and Danmar on 28 October 2022, seeking damages relating to the lost and damaged cargo and alleging claims for negligence, false sea waybill, and breach of maritime contract, federal common law and bailment obligations. The plaintiffs commenced a separate action against Air Express in the District Court for the Southern District of Texas on November 3, 2022, alleging breach of contract and negligence claims stemming from the same shipment. These two proceedings were subsequently consolidated. Danmar, Air Express, and the shipowner filed for summary judgment. The plaintiffs filed their opposition.

Held:

1. The defendants' motions for summary judgment to dismiss the plaintiffs' claims in their entirety are denied;
2. Danmar's motion for partial summary judgment is granted insofar as its liability is limited by the Danmar bill to USD 500 per package;
3. The M/V Imabari Logger's motion for partial summary judgment is granted insofar as its liability is limited by the Pacific Basin b/l to GBP 100 per package; and
4. Air Express's motion for partial summary judgment that its liability be limited to USD 500 per package is denied; instead, Air Express's liability should be limited to 8.33 SDRs per kg.

The first issue is whether COGSA or the Harter Act governs the bills in this dispute. Both the Harter Act and COGSA compulsorily apply to shipments of goods to and from the US. The Harter Act, enacted in 1896, 'applies to a carrier engaged in the carriage of goods to or from any port in the United States': 46 USC § 30702. COGSA, enacted forty years later in 1936, represents the codification of the US's obligations under the Hague Rules. COGSA applies by its own force during the period of time from when goods are loaded on a ship to when they are discharged from the ship: 46 USC § 30701 n § 1(e). In contrast to the Harter Act, COGSA prescribes a carrier's limitation of liability in the event of damage to or loss of cargo to '$500 per package ... or ... per customary freight unit ... unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading': 46 USC § 30701 n § 4(5).

COGSA, however, does not regulate cargo carried on the deck of a vessel: 46 USC § 1301(c). To overcome this exclusion, parties must expressly state in the bill of lading that COGSA also regulates on-deck cargo. Here, the Pacific Basin b/l clause paramount incorporates the Hague Rules, and the Danmar bill incorporates COGSA and any 'national law' that 'compulsorily applies'. Neither bill of lading purports to extend COGSA to on-deck cargo. Therefore, since it is undisputed that the cargo was stowed on the deck of the vessel, COGSA cannot govern the bills of lading. The question then becomes whether the Harter Act still compulsorily applies where COGSA does not. The defendants argue that the Harter Act cannot apply to the bills of lading because it is well established that COGSA superseded the Harter Act in international trade. The Court does not agree.

The Second Circuit has held that COSGA superseded the Harter Act 'with respect to the tackle-to-tackle period of international shipments', leaving the Harter Act to 'govern the carrier's duties in international shipments prior to the time when the goods are loaded on the ship and after the time they are discharged from the ship, until proper delivery': Sompo Japan Insurance Co of America v Union Pacific Railroad Co 456 F 3d 70 n 15 (2d Cir 2006). Notwithstanding COGSA's supersession for the tackle-to-tackle period, courts in this Circuit have uniformly found that the Harter Act still applies to on-deck cargo, which COGSA excludes. See eg Saudi Pearl Insurance Co v MV Aditya Khanti No 95-CV-2174, 1997 WL 291834 *3 (SDNY 2 June 1997): 'Accordingly, the Court finds that COGSA does not apply to the [on-deck] shipments at issue here. Instead, the older Harter Act controls'; Sompo id (citing Blanchard Lumber Co v SS Anthony II 259 F Supp 857, 865 (SDNY 1966) for the proposition that the Harter Act applies to 'damage to goods in international trade during the tackle-to-tackle period, as long as the goods were carried on-deck'). Treatises and other authorities are to the same effect.

The only authority cited by the defendants that is contrary comes from outside this Circuit. See Chester v Maritima del Litoral SA 586 F Supp 192, 198 (ED Wis 1983). The reasoning of that case, however, is faulty. In Chester, the District Court considered whether defendants were liable with respect to on-deck cargo under the Harter Act and concluded that the Harter Act 'may not apply' to shipments of deck cargo. Relying on Blanchard Lumber Co, the Court stated that the 'Harter Act has been applied only where it is necessary to avoid "a result strictly contrary to the one reached by American courts interpreting similar language in the comparable American statute, namely, [COGSA]"'. But in citing Blanchard to support the inapplicability of the Harter Act to on-deck cargo, the Chester court ignored Blanchard's holding just the opposite: that the Harter Act applies to shipments of on-deck cargo during the tackle-to-tackle period. Moreover, Chester misstates the proposition that it attributes to Blanchard. The Blanchard Court did not hold that the Harter Act applies only when necessary to avoid a result contrary to COGSA. Rather, the Court rejected the argument that the Canadian Water Carriage of Goods Act should be applied to the dispute at issue, because 'the Canadian interpretation of [the Canadian Water Carriage of Goods Act] leads to a result strictly contrary to the one reached by American courts interpreting similar language in the comparable American statute, namely, [COGSA]'. Id. The Chester Court's statement thus was neither categorical nor in reference to the Harter Act. In light of the consistent case law in this Circuit, and the parties not having expressly agreed to extend COGSA protections to on-deck cargo, this Court is constrained to find that the Harter Act regulates the on-deck cargo during its ocean voyage in this case.

Here, both bills of lading include liability provisions exonerating each respective carrier from any liability with respect to cargo stowed on the deck. Moreover, each bill of lading incorporates a 'shipper's risk' clause on the front alerting the shipper of these liability provisions. Because the bills of lading allow the defendants to avoid 'liability for loss or damage arising from negligence or fault in [their]...custody' or care', cl 4.3 of the Danmar bill, c 15 of the Pacific Basin b/l, and the 'Shipper's Risk' clauses are void under the Harter Act and cannot exonerate the defendants from liability: 46 USC § 30704.

Even if the Harter Act did not apply, the exculpatory clauses, as they relate to on-deck cargo, are void under federal common law. Guidance can be found in Sompo 181, where the Second Circuit reviewed an exoneration clause in a bill of lading to determine if it violated federal common law. The exoneration clause at issue provided that 'other than the Carrier, no Person, firm or corporation or other legal entity whatsoever ... is, or shall be deemed to be, liable with respect to the Goods as Carrier, bailee or otherwise'. Id 178 (emphasis in original). The Second Circuit held that the exoneration clause did not violate federal common law because it did not eliminate the negligence of all parties; rather, it simply concentrated all of the liability with the carrier. Unlike the exoneration clause in the bill of lading in Sompo, the clauses in the bills here violate the Supreme Court's principles because they eliminate any possibility for the owner to obtain any compensation for lost or damaged cargo that is on the deck of a vessel.

However, the clauses limiting liability (cl 12 of the Pacific Basin b/l and cl 8 of the Danmar bill) are distinct from the exoneration clauses that are void under the Harter Act, and both are valid and enforceable under the Harter Act. Here, there is no doubt that the preparation of the machines for shipment qualifies them as 'packages'. Both bills are unambiguous - the parties treated each machine as a package for a total of 50 packages. The carrier's liability under both bills is thus based on the machines as packages.

Air Express argues that any liability it may face under the MTSA is limited to COGSA's USD 500 per package limitation, because COGSA is incorporated into the express terms of the MTSA. However, the MTSA does not contain an express statement extending COGSA's application to cargo carried on-deck. Without such express language, COGSA does not apply to the on-deck cargo at issue. Accordingly, Air Express's liability is not limited by COGSA to USD 500 per package. The plaintiffs argue that if COGSA does not govern, the MTSA should be governed by the Harter Act, and Air Express should be held liable 'for the full extent of Plaintiffs’ damages without limitation of any kind'. That argument assumes that the Harter Act is applicable to freight forwarders even though COGSA is not. Whether that is so is unclear. A freight forwarder 'secure[s] cargo space with a steamship company, give[s] advice on governmental licensing requirements, proper port of exit and letter of credit intricacies, and arrange[s] to have the cargo reach the seaboard in time to meet the designated vessel': see New York Foreign Freight Forwarders and Brokers Assoc v Federal Maritime Commission 337 F 2d 289, 292 (2d Cir 1964). A freight forwarder thus does not fulfil the same functions as a carrier.

Here, the evidence suggests that Air Express performed tasks outside the limited role of a freight forwarder. But this need not be resolved. Air Express's liability under the MTSA remains the same whether the Harter Act applies. If the Harter Act applies, a limitation of liability is permitted even if complete exoneration is not. The provision limiting liability to 8.33 SDRs per kg would not be void. If the Harter Act does not apply, the contractual limitation still applies. Thus, any liability for loss or damage that Air Express may face should be limited to 8.33 SDRs per kg.