This was a case which arose from damage to a tractor. The plaintiff, Caterpillar Overseas SA, brought a case against Marine Transport Inc, Farrell Lines Inc, and Virginia International Terminals Inc, who were the trucker, carrier, and port operator respectively. The damage took place while the tractor was being transported overland by the trucker, who was employed by the carrier. The trucker was moving the tractor between two ports operated by the same port operator. This took place before the cargo was loaded on board the carrier's vessel.

The District Court found the port operator free of negligence, but concluded that both the carrier and the trucker had caused the damage to the cargo by their negligence. Additionally, the District Judge found that the carrier’s liability was limited by the application of the Carriage of Goods by Sea Act 46 USC § 1304(5) (COGSA), but that the trucker was not entitled to the limitation of liability provided under the Himalaya clause in the bill of lading. The Judge also restricted the plaintiff to its actual loss, eliminating any profit, in his award.

The plaintiff appealed on both issues, first, that the carrier could not limit liability under COGSA, and second, that the profits should be recoverable. The trucker and carrier counter-appealed against the lack of limitation under COGSA.

Held: Affirmed. Appeals dismissed.

The Court of Appeals affirmed the District Court decision of imputing a bill of lading between the parties. In this case, the terms of the long form, although not delivered or formally executed, were known, and both parties understood and intended those terms to apply. Knowledge of acceptance of the terms of such bill of lading could fairly be imputed as the contract of carriage: see Cincinnati Milacron Ltd v MV American Legend 784 F 2d 1161 (4th Cir 1986).

The Court held that the plaintiff’s argument of unreasonable deviation failed, because the doctrine of deviation does not infringe on the carrier’s right to limit: see Atlantic Mut Ins Co v Poseidon Schiffahrt 313 F 2d 872 (7th Cir), although there is somewhat differing treatment elsewhere: see Sedco Inc v SS Strathewe 800 F 2d 27 (2d Cir 1986). More importantly, by its agreement to the deviation, the plaintiff’s case fell out of the doctrine’s applicability: see Royal Exchange Assur Ltd v SS President Adams 510 F Supp 581 (WD Wash 1981).

The Court held that the plaintiff’s argument that the tractor was not a 'package' or 'customary freight unit' was inconsistent with previous authority. The two terms are stated as alternative bases for the application of § 1304(5). It would seem that the same principle of construction should cover the determination of the application of the two terms: see Pannell v United States Lines Co 263 F 2d 497 (2d Cir 1959) (CMI1799) and General Motors Corp v Moore-McCormack Lines Inc 451 F 2d 24 (2d Cir 1971). Accepting that rationale, the Court held that the tractor qualified as a 'customary freight unit' under § 1304(5).

The plaintiff’s argument that the sale price of the tractor should be the determining measure of damages did not succeed, since COGSA clearly states 'in no event shall the carrier be liable for more than the amount of damage actually sustained'. The District Court had found that the plaintiff could and did acquire from its parent company a replacement tractor which was duly shipped to plaintiff's customer. The customer paid the plaintiff the agreed price under the original contract. The plaintiff suffered no loss of profits under these circumstances. Damages were limited to the cost price of the tractor: see Illinois R Co v Crail 281 US 57 (1930).

The trucker’s argument to be covered under the Himalaya clause was rightly declined. The Court held that COGSA does give parties to the bill of lading the liberty to extend limitation to third parties: see Robert C Herd & Co v Krawill Machinery Co 359 US 297 (1959) (CMI1735). However, this limitation should be strictly construed. The bill of lading restricted its applicability to accidents occurring at a time the goods were 'in the custody of the carrier'. The goods here were in the custody of the trucker, and the nature of its custody was non-maritime. Therefore, the Himalaya clause was inapplicable. In determining the meaning of the term 'independent contractor' in the application of the Himalaya clause, the Court is to take into consideration the nature of the services performed, compare them to the carrier's responsibilities under the contract of carriage, and see that the independent contractor is performing a maritime service: see La Salle Machine Tool Inc v Maher Terminals Inc 611 F 2d 56 (4th Cir 1979); Taisho Marine & Fire Ins Co v The Vessel 'Gladiolus' 762 F 2d 1364 (9th Cir 1985). The trucker had both custody and responsibility for the safety of the tractor. This is an extremely different situation than that of the stevedore whose services are rendered in the terminal facilities while engaged in actually loading the cargo directly on the ship. Stevedoring is essentially a maritime trade. Transporting cargo down a group of public highways for a stretch of miles, on the contrary, is not a normal maritime operation.