The plaintiff, GF Co, arranged for the shipment of its cargo of wooden doorskins from Taiwan to the United States on the MV Pan Queen, a vessel owned and operated by the defendant, Pan Ocean Shipping Co Ltd. The relevant bills of lading stated that the cargo was shipped in apparent good order and condition unless otherwise indicated. The bills of lading also contained the following clause:

THE TERM APPARENT GOOD ORDER AND CONDITION WHEN USED IN THIS BILL OF LADING WITH REFERENCE TO IRON, STEEL OR METAL PRODUCTS OR WOOD PRODUCTS DOES NOT MEAN THAT THE GOODS, WHEN RECEIVED, WERE FREE OF VISIBLE RUST OR MOISTURE STAINING, CHAFING AND/OR BREAKAGE. IF THE SHIPPER SO REQUESTS, A SUBSTITUTE BILL OF LADING OMITTING THE ABOVE DEFINITION AND SETTING FORTH ANY NOTATIONS AS TO RUST OR MOISTURE STAINING, CHAFING AND/OR BREAKAGE WHICH MAY APPEAR ON THE MATES, OR TALLY CLERKS' RECEIPTS.

On receiving the doorskins in the United States, the plaintiff discovered that they had suffered significant physical damage. The District Court granted summary judgment in favour of the plaintiff, holding that the above clause was invalid, and that the defendant was estopped from asserting that the doorskins were damaged prior to loading.

Held: The District Court’s judgment is reversed, and the case is remanded back to the District Court.

The defendant contended that the District Court erred in invalidating the clause and not following a similar case based on damage to a cargo of steel: Tokio Marine & Fire Ins Co v Retla SS Co 426 F 2d 1372 (9th Cir 1970). On the other hand, the plaintiff contended that the clause was invalid as it was an attempt to alter the requirements in s1303(3) of the Carriage of Goods by Sea Act 46 USC ss 1300 ff (COGSA).

The COGSA is identical to the Hague Rules. COGSA ss 1303(3)(c) and 1303(4) reproduce arts 3.3.c and 3.4 of the Hague Rules.

The Court compared the holdings of Tokio Marine and Portland Fish Co v States SS Co 510 F 2d 628 (9th Cir 1974) on the issue of the carrier's reliance on the bill of lading. In Portland Fish, it was held that a carrier is estopped from asserting that a shipper delivered less cargo than that listed on the bill of lading. The Portland Fish bill of lading stated that a cargo of tuna was 'SAID TO WEIGH ... 30 SHORT TONS'. However, the District Court erred in believing that the two decisions were inconsistent. In Tokio Marine, it was held that estoppel was inappropriate because, by inserting qualifying language into the bills of lading, the carrier essentially made no representations about the condition of the cargo. In Portland Fish, the carrier was estopped because disclaimers such as 'particulars declared by shipper, shipper's weight, or said to be' are deemed to be actual representations in the bill of lading about the weight of the cargo. The District Court overlooked this critical difference between the two cases. It should not have invalidated the clause. The bill of lading is to be issued only on the demand of the shipper. If the shipper accepts a bill of lading which does not show all the particulars listed, the document is valid. If the shipper accepts a bill of lading which does not show the apparent order and condition of the goods, the carrier is not guilty of any wrong, and cannot be held responsible for misrepresentations of the conditions of the goods.