The plaintiff, Global Oil Tools Inc, contracted with Expeditors International of Washington Inc (Expeditors) to arrange for the shipment of two containers from New Orleans, Louisiana, to Constanta, Romania. Expeditors booked carriage for the containers onboard the M/V Bavaria, a ship operated by Hapag-Lloyd America LLC (Hapag-Lloyd). Expeditors, acting as a non-vessel operating common carrier, issued the bill of lading for the plaintiff's containers. The bill of lading incorporated the provisions of COGSA/the Hague Rules and a Himalaya clause. The plaintiff twice delayed shipment of the cargo, but Hapag-Lloyd failed to relay the plaintiff's instruction to Ports America Louisiana LLC (Ports America), the stevedoring company responsible for loading containers onto the M/V Bavaria. As a result, the ship arrived at its destination earlier than the plaintiff had scheduled.

The plaintiff filed suit against Expeditors, Hapag-Lloyd, Ports America and other parties, seeking damages for the allegedly erroneous shipment of cargo. Expeditors filed cross-claims against Hapag-Lloyd.

Hapag-Lloyd and Ports America filed motions for summary judgment, invoking the application of the Himalaya clause in the relevant bill of lading (see Global Oil Tools Inc v Expeditors International of Washington Inc ​CMI232).

In addition, Expeditors and Hapag-Lloyd filed motions for summary judgment to limit their potential liability. Specifically, Expeditors filed a motion for summary judgment to limit its potential liability to the plaintiff. Expeditors argued that, under COGSA/the Hague Rules, its potential liability to the plaintiff was limited to USD 500 per package. The two containers that were supplied and packed by the plaintiff constituted two packages. Expeditor's potential liability was therefore limited to USD 1,000. Hapag-Lloyd filed a motion for summary judgment to limit its potential liability to Expeditors on the ground that its potential liability was limited to USD 1,000 under the terms of the sea waybill, which incorporated the limitation of liability regime under COGSA/the Hague Rules. Expeditors did not oppose the motion of Hapag-Lloyd. Instead, Expeditors submitted that 'because the arguments and the facts are the same as its motion for summary judgment on limitation of liability both motions on the package limit should be consistent'.

Held: Motions granted.

Under COGSA/the Hague Rules, a carrier's liability is limited to USD 500 per package, or per customary freight unit for goods not shipped in a package, 'unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading'. For a carrier to benefit from the limitation of liability regime under COGSA/the Hague Rules, the carrier must give the shipper a fair opportunity to avoid the limitation 'by declaring the package's actual value and paying additional ad valorem freight'. The carrier bears an initial burden of showing that it offered the shipper a fair opportunity to avoid the limitation. If the carrier satisfies the initial burden, the burden of proof shifts to the shipper to demonstrate that a fair opportunity did not in fact exist.

The Court found that Expeditors gave the plaintiff multiple opportunities to avoid limitation. For example, a blank electronic form of the Shipper's Letter of Instructions (SLI) that Expeditors sent to the plaintiff clearly indicated that 'the carrier's liability is limited to USD 500 per package or, for goods not shipped in packages, per customary freight unit and that higher compensation will be paid only when the shipper declares a higher value for the goods shipped'. In addition, a house ocean bill of lading that Expeditors issued to the plaintiff gave notice of the plaintiff's right to declare a higher value and pay a higher freight charge.

COGSA/the Hague Rules do not define the term 'package'. In this case, the SLI and the bill of lading defined 'package' or 'shipping unit' as 'Where a Container is used to consolidate Goods and such Container is Stuffed by Carrier, the number of packages or Shipping Units stated on the face of this Bill of Lading in the box provided shall be deemed the number of packages or Shipping Units for the purpose of any limit of liability per package or Shipping Unit provided in any applicable international convention or national law relating to the carriage of goods by sea. Except as aforesaid the Container shall be considered the package or Shipping Unit'. It was undisputed that the plaintiff purchased and stuffed the containers in which its cargo was to be shipped, and the SLI and the bill of lading stated that the 'number of packages' was two containers. Therefore, under the applicable contractual definition, the containers themselves were the packages, and Expeditors' liability was limited to USD 1,000.

For the same reasons stated with respect to the limitation of Expeditors' liability to the plaintiff, Hapag-Lloyd's potential liability to Expeditors was limited to USD 1,000.