Federal Insurance Co (Federal), the plaintiff, was the subrogated cargo insurer of Chatham. Chatham was the ex-works purchaser, owner, and intended consignee of three shipments of mezcal liquor. MSC Mediterranean Shipping Co SA (MSC), the defendant, was the carrier which contracted to transport the shipments from Mexico City to New York by way of Veracruz.

The issue was whether the terms and conditions of the bills of lading and sea waybill issued by MSC limited its liability to USD 500 per package, with the pallets constituting the relevant package. MSC argued that its liability was therefore limited to USD 30,000 (3 x 20 pallets x USD 500), rather than the 2,016 cartons of mezcal listed in the relevant bills of lading and sea waybill. MSC sought partial summary judgment on this point.

Held: Summary judgment granted.

COGSA represents the codification of the United States' obligations under the Hague Rules, which was the culmination of a multinational effort 'to establish uniform ocean bills of lading to govern the rights and liabilities of carriers and shippers inter se in international trade': Robert C Herd & Co v Krawill Machinery Corp 359 US 297, 301, 79 S Ct 766, 3 L Ed 2d 820 (1959) (CMI1735)). Among the more prominent features of COGSA is its limitation of liability in the event of damage to or loss of cargo to USD 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.

A package under COGSA is 'a class of cargo, irrespective of size, shape or weight, to which some packaging preparation for transportation has been made which facilitates handling, but which does not necessarily conceal or completely enclose the goods': Allied Int'l Am Eagle Trading Corp v SS Yang Ming 672 F.2d 1055, 1057-58 (2d Cir 1982); Hercules OEM Grp v Zim Integrated Shipping Servs Ltd No 22-CV-02636 (JLR), 2023 WL 6317950 *8 (SDNY, 28 September 2023) (CMI2288).

The question of what constitutes the COGSA package 'is largely and in the first instance a matter of contract interpretation': Allied Chem Int'l Corp v Companhia de Navegacao Lloyd Brasileiro 775 F 2d 476, 485 (2d Cir 1985) (citing Yang Ming 1057, 1061). The Second Circuit has long accepted that a pallet may, under appropriate circumstances, be deemed to be a package. This may be so even where the containers on the pallet themselves constitute ordinary commercial units: Allied Chemical Int'l Corp 485.

To determine what constitutes the COGSA package in this case, the Court looks to the terms and conditions of the bills of lading and the sea waybill that were issued to Chatham. While it is true, as the plaintiff emphasises, that Chatham listed 2,016 cases of Mezcal and 2,016 packages in the Description of Packages and Goods on the relevant contracts of carriage, the terms and conditions that form part of the contracts unambiguously make clear that, '[f]or limitation purposes under [COGSA]' the parties 'agreed that the meaning of the word "package"' was 'any palletised and/or unitised assemblage of cartons which ha[d] been palletised and/or unitised for the convenience of the Merchant, regardless of whether said pallet or unit [was] disclosed on the front [of the contracts]'. Because it is undisputed that each of the three shipments were placed on 20 pallets when they were shipped, the Court finds that the COGSA packages in this case consisted of the 20 pallets.

The plaintiff seeks to avoid the provisions of the terms and conditions on the reverse side of the contracts of carriage by asserting that these terms and conditions were not provided to Chatham, its subrogor. However, the bills of lading and sea waybill expressly provide that Chatham 'ACCEPT[ED] AND AGREE[D] TO ALL THE TERMS AND CONDITIONS, WHETHER PRINTED, STAMPED OR OTHERWISE INCORPORATED ON [THE FRONT] SIDE AND ON THE REVERSE SIDE' of the documents. The reverse-side terms and conditions in fact were 'otherwise incorporated' into the contracts of carriage. Each of the contract of carriage states at the top in the English language, as well as other languages, 'See website for large version of the reverse' followed by the website citation 'www.msc.com' and entered at the very bottom of the page appears the language in block capital letters: 'TERMS CONTINUED ON REVERSE'.

Second, the plaintiff itself relies on the reverse-side terms and conditions, invoking the forum selection clause contained in MSC's terms and conditions in bringing suit in the Southern District of New York. Obviously, the plaintiff cannot pick and choose which reverse-side terms and conditions are applicable and which are not. The plaintiff is bound by all the terms and conditions of the contracts of carriage upon which its lawsuits are based.