This was an appeal by Electronic Trades Center Inc (ETC) against a summary judgment in favour of Flota Venezolana de Mar, Rio y Lago SA (Flota).

ETC loaded 522 cartons of goods into a container provided by Flota. ETC sealed the container and delivered it to Flota's agent in West Palm Beach, Florida. Flota issued a bill of lading for the shipment of one package containing 522 cartons of electronics goods. Paragraph 10 of the bill of lading incorporated s 4(5) of the US Carriage of Goods by Sea Act (COGSA) which provides:

In case of any loss or damage to or in connection with Goods exceeding in actual value the equivalent of USD 500 lawful money of the United States, per package, or in case of Goods not shipped in packages, per shipping unit, the value of the Goods shall be deemed to be USD 500 per package or per shipping unit or pro rata in case of partial loss or damage, unless the nature of the Goods and a valuation higher than USD 500 per package or per shipping unit, shall have been declared in writing by the shipper before shipment and inserted in this Bill of Lading, and extra freight or charges paid. In such case, if the actual value of the Goods, per package or per shipping unit, shall exceed such declared value, the value shall nevertheless be deemed to be declared value and the Carrier’s liability, if any, shall not exceed the declared value and any partial loss or damage shall be adjusted pro rata on the basis of such declared value.

Paragraph 12 of the bill of lading stated that each container shall be deemed a single package.

The container was loaded on the Marlago I for delivery to the Port of La Guaira, Venezuela. When the Marlago I suffered mechanical difficulties, the crew unloaded the shipment in the Virgin Islands and reloaded it onto another vessel. The container arrived at its destination, but it had been broken into and 192 boxes, valued at USD 50,732.16, were missing. When notified of the loss, Flota denied the claim, citing the contractual liability limitation of USD 500 per package. Flota asserted that because the bill of lading listed the container as the only package, Flota’s liability was limited to USD 500. ETC sued Flota for damages, alleging that each box in the container constituted a package. The trial court granted Flota’s motion for summary judgment and entered final judgment. ETC appealed.

Held: Appeal allowed. The decision of the lower Court is reversed and remitted for further proceedings.

The COGSA package limitation sets a 'reasonable limitation on liability which carriers by law could not reduce by contract'. Unfortunately, the term 'package' is not defined and the use of containers on ships only increased the difficulty of definition. It did not take long for carriers to realise if they could persuade the courts to consider a container rather than smaller units stowed inside to be the 'package' for the purpose of s 4(5) of COGSA, they would practically nullify that section.

To implement legislative intent, courts have consistently held that a container is functionally part of the ship, rather than a package, and if the number of units is disclosed in the shipping documents, each of those units is to be considered the package referred to in s 4(5).

In this case, ETC loaded boxes of electronic equipment into a container provided by Flota. Flota issued a clean bill of lading describing the goods as one '20' container STC 522 cartons "electronic goods"'. That description renders each carton a separate package for the USD 500 limitation. The trial Court’s grant of summary judgment, based on the conclusion that the container was the package, was in error.