This was an action for damage to a cargo of pipes carried aboard the Norlandia from Jacksonville, Florida, USA, to Talcahuano, Chile. The owner of the pipes, Armco Chile Prodein SA (Armco), and its insurer, Compania de Seguros Cruz del Sur SA (the plaintiffs), sued the Norlandia in rem and Scheepvaartmij Antigua (Antigua) in personam.

Armco had subcontracted the manufacture of the pipes to Price Brothers Inc, located in Florida. Armco was responsible for the shipment of the pipes from Florida to Chile. Armco entered into a Conline booking note with Meridian Ship Inc (Meridian) on 30 October 1989. Meridian was to oversee the packing of the cargo. Meridian chartered the Norlandia from its owner, Antigua. The charterparty expressly gave Meridian authority to sign bills of lading on behalf of the master of the Norlandia. The shipment was evidenced by a bill of lading. It acknowledged that the cargo was delivered in apparent good order and condition, and was claused to show partial on-deck stowage.

The pipes were inadequately stowed below deck, which caused them to flex during the ocean transit. The pipes on deck were also not properly secured. After loading in Jacksonville, the Norlandia headed towards New Orleans, rather than taking the direct route to Talachuano by heading to the Panama Canal. As a result the Norlandia deviated from its course by approximately 800 miles. On the way to New Orleans, the Norlandia encountered a storm which caused loss of, and damage to, the pipes. Had the Norlandia taken the direct route, it would not have encountered this storm. Following discharge in Talcahuano, the pipes were trucked to Renaico, approximately 140 miles inland. After inspection of the damage to the pipes, only four pipes were found acceptable. As a result, replacement pipes were ordered and shipped from Mobile, Alabama. These pipes also sustained similar physical damage. However, they were able to be repaired and used. Later shipments were packaged and handled differently.

Held: Judgment for the plaintiffs. The defendants are liable: the Norlandia, in rem; and Antigua, in personam, jointly, in the amount of USD 2,677,589.50 with interest.

The Carriage of Goods by Sea Act, 46 USC §§ 1300 ff (COGSA) applies of its own force whenever a bill of lading is issued for the carriage of goods in foreign trade to or from ports of the United States. Thus the rights and liabilities of the parties to this dispute are governed by COGSA. COGSA does not apply of its own force to a contract for on-deck shipment: § 1301(c), which corresponds to art 1.c of the Hague Rules. However, a contract of carriage may incorporate and apply COGSA to on-deck shipments. In this case, the bill of lading was claused to show the partial on-deck storage.

The Norlandia, the vessel that carried the cargo, is a 'carrier', and liability runs to the Norlandia in rem. Antigua is the owner. Under COGSA, suit may be brought against the ship, charterers, or the owner. However, depending on the relationship of the parties, the provisions of the charter, and who actually issued the bill of lading, there may not be joint liability in every instance. Bills of lading that are signed by the master, or on behalf of the master (with authority to do so) will bind the owner as well as the charterer. Should the charterer undertake to issue and sign the bill of lading on its own, the charterer and the ship will be liable, but the owner will not be liable in personam. Antigua will be liable in personam if it is a 'carrier' of goods by sea. COGSA provides that the term 'carrier' includes the owner or charterer who enters into a contract of carriage with a shipper (§ 1301(a) / art 1.a of the Hague Rules). COGSA is applicable to an owner who has chartered its vessel to a COGSA carrier only when the owner has entered into a contract of carriage with the shipper or has some privity of contract with the shipper.

Contracts of carriage include only those 'covered by a bill of lading or any similar document of title' (§ 1301(b) / art 1.b of the Hague Rules): Pacific Employers Ins Co v M/V Gloria 767 F 2d 229, 236 (5th Cir 1985). Antigua, the owner of the Norlandia, time-chartered the vessel to Meridian. The terms of the charterparty entitled Meridian, as charterer of the vessel, to issue bills of lading on behalf of the master. Thus, Antigua anticipated being responsible for cargo carried on its ship, as long as the bills of lading conformed with the mate’s receipt, even if the bills of lading were signed by the charterer or its agents. Antigua made no argument that the bill of lading issued in this case did not conform with the mate's receipt. Therefore, as Meridian and its agents had authority from Antigua to sign for the master, they became liable in personam.

A cargo claimant establishes a prima facie case of liability upon proving that the cargo was received in good order and condition and delivered in bad condition. A clean bill of lading issued by the carrier is prima facie evidence the goods were received as described and creates a rebuttable presumption that the goods were received in good condition. Once the claimant establishes a prima facie case of liability, the burden shifts to the carrier to prove that the damage resulted from a cause set out in art 4.2 of the Hague Rules. If the carrier is unable to rebut the claimant’s prima facie case, the carrier is liable for all damages. If the carrier is able to rebut the prima facie case of liability, the burden shifts back to the claimant to prove the carrier was negligent, and that such negligence was at least a concurrent cause of the damage. If the claimant is able to prove at least concurrent negligence, the burden shifts back to the carrier to apportion between the portion of damages caused by an exception and the portion of damages caused by its negligence. Failure of the carrier to differentiate causes of damage renders the carrier liable for the entire damage.

Here, the plaintiffs have met their burden that the cargo was received by the carriers in good order. A clean bill of lading was issued. This is prima facie evidence that the cargo was received as described.

Section 3.6 of COGSA provides:

[u]nless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier or his agent at the port of discharge before or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the loss or damages is not apparent, the notice must be given within three days of the delivery.

The defendants argued that the cargo is presumed to have been discharged in the condition reflected in the bill of lading, since the plaintiffs did not notify them of the damage within three days of delivery. This is a rebuttable presumption which the plaintiffs have rebutted. They have provided sufficient evidence that the cargo was damaged before it was discharged.

The carriers violated their duty under § 1302 (art 3.2 of the Hague Rules): 'The carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.' The defendants raised the defence that there was an inherent defect in the cargo (§ 1304(2)(m) / art 4.2.m). Even if the defences of inherent vice and insufficient packaging (§ 1304(2)(n) / art 4.2.n) are valid, there were concurrent causes of loss. The defendants' negligence was at least a concurrent cause of the damage. The defendants have not acquitted their burden of apportioning the damage caused by their negligence and the damage caused by the alleged improper packaging and/or inherent vice. Therefore the defendants are liable for 100% of the damage.

Section 4.5 of COGSA provides:

Neither the carrier nor the ship shall in any event become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding USD 500 per package ... unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.

Generally the burden rests on the shipper to declare a value of goods and pay a higher rate if the shipper wishes to avoid COGSA's USD 500 limitation of liability. However, a carrier cannot limit its liability under COGSA unless the shipper is afforded a fair opportunity to declare a higher value, and pay a correspondingly higher rate.

The bill of lading in this case contained a paramount clause which stated the following:

The Hague Rules contained in the International Convention for the Unification of certain rules relating to Bills of Lading, dated Brussels the 25th August 1924 as enacted in the country of shipment shall apply to this contract. When no such enactment is in force in the country of shipment, the corresponding legislation of the country of destination shall apply, but in respect of shipments to which no such enactments are compulsorily applicable, the terms of the said Convention shall apply.

In a roundabout way, this clause states that COGSA applies, but it does not refer to art 4.5. Therefore, the paramount clause failed to give the plaintiffs a fair opportunity to avoid art 4.5's limitation of liability, since the bill of lading merely incorporated COGSA. Accordingly, package limitation will not apply in this case.