On 6 October 2022, a container containing 24 pallets of electrical wire harnesses fell into the water while being loaded onto the Chicago Express in Barcelona, Spain. The plaintiff sued the defendant under US COGSA for the value of the damaged cargo. The parties agreed to a bench trial limited to the question whether the smaller cartons in which the electrical wire harnesses were contained or the larger pallets that contained the cartons should be considered the 'package' for COGSA limitation purposes.

Held: The proper unit for limitation of liability is the pallet. The electrical wire harnesses were palletised for the convenience of the shipper and consignee, and the sea waybill's limitation of liability provision unambiguously applies to palletised shipments. Accordingly, the defendant's liability is limited to USD 500 per pallet, resulting in a total liability cap of USD 12,000.

The defendant carrier was obligated by COGSA, as incorporated in the sea waybill, to provide 'either the number of packages or pieces, or the quantity or weight, as the case may be, as furnished in writing by the shipper': COGSA § 3(3)(b). For US carriage, the terms and conditions on the reverse of the sea waybill incorporated COGSA and declared that 'this sea waybill shall have effect subject to the provisions of COGSA and to the Pomerene Act regardless of whether said Act would apply of its own force.' Section 6.1(c) of the sea waybill stated in respect of US carriage:

Neither the Carrier nor the Vessel shall in any event be or become liable in any amount exceeding US$500 per package or customary freight unit. For limitation purposes under COGSA, it is agreed that the meaning of the word 'package' shall be any palletised and/or unitised assemblage of cartons which has been palletised and/or unitised for the convenience of the Merchant, regardless of whether said pallet or unit is disclosed on the front hereof.

Section 6.2, with respect to non-US carriage, provided that

the liability of the Carrier for loss of or damage to the Goods shall be determined in accordance with any national law making the Hague Rules or Hague-Visby Rules compulsorily appliable to bills of lading and if no such national law is compulsorily applicable, then in accordance with the Hague-Visby Rules Article 1-8 inclusive (excluding Article 3 rule 8).

The sea waybill also contained a definition of 'Package', which read:

'Package' where a Container is loaded with more than one package or unit, the packages or other shipping units enumerated on the face of this sea waybill as packed in such Container and entered in the box on the face hereof entitled 'Total number of Containers or Packages received by the Carrier' are each deemed a Package.

The parties agree that federal maritime law applies when interpreting a sea waybill, which is a maritime contract. The sea waybills at issue covered the ocean transportation of goods from Spain to the US. 'When a contract is a maritime one, and the dispute is not inherently local, federal law controls the contract interpretation': Norfolk S Ry Co v Kirby 543 US 14, 22-23 (2004) (CMI1454); Herod's Stone Design v Mediterranean Shipping Co SA 846 Fed Appx 37, 40 (2d Cir 2021) (CMI1215). The parties chose to do business through a sea waybill rather than through a bill of lading, so COGSA does not apply ex proprio vigore. However, 'COGSA also gives the option of extending its rule by contract': Norfolk S Ry Co 29. Under federal maritime law, 'contracts for carriage of goods by sea must be construed like any other contracts: by their terms and consistent with the intent of the parties': Norfolk S Ry Co 31.

The sea waybills are clear and unambiguous. Where, as here, the contract is one for US carriage, the defendant's liability is limited by this contract to USD 500 per pallet where the cargo has been palletised or unitised for the convenience of the merchant. The Court starts, as it must, with the language of the sea waybill: Binladen BSB Landscaping v MV Nedlloyd Lines 759 F 2d 1006, 1012 (2d Cir 1985) (CMI1621); AP Moller-Maersk A/S v Ocean Express Miami 590 F Supp 2d 526, 532 (SD NY 2008). Where the contract of carriage is one to, from, or through any port of the US, the carrier's liability is limited to USD 500 per package. Where an assemblage of cartons has been palletised or unitised for the convenience of the 'Merchant', defined in the sea waybill as 'the Shipper and the Persons named in this sea waybill as consignee and notify party', the 'package' for limitation of liability purposes is the pallet. That provision applies 'regardless of whether said pallet or unit is disclosed on the front hereof'. It is thus irrelevant whether the number of packages on the front of the sea waybill is calculated on the basis of a pallet, a carton, or some smaller unit. Regardless of what is stated on the front of the sea waybill, if the contract of carriage is one for US carriage, under this contract, the package for limitation of liability purposes is the pallet.

The plaintiff relies on the definition of 'Package' under the definition section of the T&Cs of the sea waybill, the front of the sea waybill which describes 'Packages' or cartons as the unit of measurement under the column 'Number of Packages', and the Second Circuit's decision in Seguros Illimani SA v M/V Popi P 929 F 2d 89, 93 (2d Cir 1991) (CMI1828). Here, the units under the column 'Number of Packages' on the sea waybills correspond to the number of cartons the defendant agreed to carry. The plaintiff thus argues that 'package' for limitation of liability purposes should be the number of cartons. The plaintiff seeks to gain support for its argument from the Second Circuit's statement in Seguros 94 that

[t]he number appearing under the heading 'NO. OF PKGS.' is our starting point for determining the number of packages for purposes of the COGSA per-package limitation, and unless the significance of that number is plainly contradicted by contrary evidence of the parties’ intent, or unless the number refers to items that cannot qualify as ‘packages,’ it is also the ending point of our inquiry.

The Court was prepared to accept at the summary judgment stage that it was possible that s 1's definition of package on the reverse of the sea waybill combined with the column under 'Number of Packages' was in conflict with the more specific language of s 6.1(c). At that stage, the defendant had 'not offered a satisfactory understanding that would render the Number of Packages heading anything other than surplusage if its reading of the T&Cs were adopted.' If the only purpose of the 'Number of Packages' column was to specify the carrier's limitation of liability then, at least in theory, there would be tension between the front of the sea waybill and the back. With the benefit of further close reflection, the potential conflict is more apparent than real. The definitional language of s 1 and the column for 'Number of Packages' has a purpose different from the section that sets out the limitation of liability and can be readily reconciled with the language of s 6.1(c) in a way that gives meaning to all contractual provisions.

The sea waybill is a standard form contract intended for a wide variety of circumstances. From its face, it is apparent that it applies to US and non-US carriage of loose cargo and packages as well as pallets and containers. Standard form contracts are essential to the modern economy, permitting parties to agree to a single set of terms designed to apply to a variety of different circumstances. Each term in the standard contract will be relevant to one or the other of the types of transactions to be governed by the contract, even if that term is not necessarily relevant to every type of transaction. That is the point of a standard form contract - it is adaptable. Judge Learned Hand long ago described bills of lading as 'a motley patchwork of verbiage thrown together apparently at random, often in an unfamiliar diction three hundred years old': Farr v Hain SS Co 121 F 2d 940, 945 (2d Cir 1941). He added that with such contracts, it was 'idle to invoke the canon against redundancy.' While any particular provision might appear meaningless as applied to the narrow circumstances of a specific shipment, it would have meaning when the aperture was expanded, and the full range of circumstances the standard form contract was intended to address was considered.

The Court need not construe the definition of 'Package' in s 1 to apply to the limitation of liability for US carriage to give it meaning. Section 6.1(c), which limits the carrier's liability to the pallet, is narrowly cabined. It applies only to US carriage and only where the pallet was assembled 'for the convenience of the Merchant'. Where the carrier is given loose cartons or where it palletises the cartons for its own benefit, and not the merchant's, s 6.1(c) does not apply. In that case, the parties would default to the definition of the term 'Package', and the figure under the column heading 'Number of Packages' would have force. In the absence of any other definition of 'Package', the form of package reflected in the column 'Number of Packages' would control for COGSA purposes.

Moreover, the 'Number of Packages' column has the most direct meaning with respect to the receipt contained in the sea waybill. In signing the sea waybill, the carrier agrees that it has received from the shipper 'in apparent good order and condition unless otherwise herein stated, the total number or quantity of Containers or other packages or units indicated in the box entitled "Number of Packages" for carriage from the port of loading ... to the port of discharge'. The receipt is prima facie evidence that the carrier has received that number of packages, and that the packages are 'in apparent good order and condition': Leather's Best Intern Inc v MV Lloyd Sergipe 760 F Supp 301, 308-09 (SD NY 1991). If, on discharge, the carrier does not have the number of packages reflected in the 'Number of Packages' column or if those packages are not in good order and condition, the burden will be on the carrier to show that it received fewer packages than represented: Leather's Best Intern 309-10. Thus, leaving aside the separate question of the relevance of the 'Number of Packages' column for the purposes of limitation of liability, that column has a significant purpose for initial liability determinations. It is a tool that measures the potential liability against which the cap for limitation of liability will be applied. If, for example, the 'Number of Packages' column lists 40 cartons worth USD 200 each and upon discharge, the carrier is found to have only 39 cartons, it will be irrelevant that the carrier's liability is limited to USD 500 per pallet. The carrier's liability will be USD 200; all of the work being done by the 'Number of Packages' column and the receiving employee's inspection upon discharge.

The plaintiff relies on the Second Circuit's decision in Seguros 93, but that decision cannot support the weight that the plaintiff puts upon it. The Court specifically envisioned the circumstance where the number under the 'Number of Packages' column might reflect one form of package, and language elsewhere in the bill of lading would reflect a different form of package. It held that, in that case, the parties would not be bound to the unit under 'Number of Packages' if either: (1) 'the significance of that number [wa]s plainly contradicted by contrary evidence of the parties' intent'; or (2) 'the number refer[red] to items that cannot qualify as "packages"'. In this case, the figure under the column heading 'Number of Packages' is plainly contradicted by contrary evidence of the parties' intent.

The little parol evidence that was adduced also favours the defendant carrier. The one consistent measurement common to all the shipping documents is the number of pallets. Whether the pallets contain 20 cartons or 40 cartons, the carrier is indifferent - it is obligated to pick up a pallet, to load the pallet onto the container, to unload the pallet from the container, and to deliver the pallet. It makes sense from this course of business that the parties would intend that the pallet - rather than the carton - would be the unit to which the COGSA limitation of liability is applied. COGSA liability, and the COGSA limitation of liability, is a form of allocating risks between the parties. It is a form of quasi-insurance. The greater the liability to which the carrier will be exposed, all else being equal, the more it will charge for carriage. From that perspective, it is logical that the parties would agree that COGSA liability, and the limitation of liability, were based on the pallet. It makes far less sense for COGSA liability, and the limitation of liability, to turn upon a unit - the carton - which from the evidence is insignificant as to logistics or cost of the shipping transaction.

Finally, the plaintiff's argument, if taken to its logical conclusion, would lead to absurd consequences. The plaintiff admits that the unit from which the number of packages is calculated is within the unilateral control of the shipper. Thus, under the plaintiff's theory, a shoebox conceivably could be the COGSA container. Were that rule adopted, the measure of the COGSA package, even in a case where COGSA did not apply ex proprio vigore, would no longer be what the parties intended based upon the contract form they chose to do business: Allied Intern American Eagle Trading Corp v SS Yang Ming 672 F 2d 1055, 1061 (2d Cir 1982). Instead, it would be whatever the shipper (or the shipper acting at the behest of the consignee) said what the package was. The carrier would be at the mercy of the shipper. It could render the COGSA limitation of liability illusory - the shipper could simply set the COGSA limitation at whatever amount it sought by the mere expedient of choosing a container that is small enough that limitation would be irrelevant. If a shipper desires to obtain insurance from a carrier in excess of the limit provided by COGSA, it has a ready means of doing so. COGSA provides that the shipper and carrier can agree to an ad valorem dollar amount provided that such amount shall not be less than USD 500 per package: COGSA § 4(5). However, as the terms and conditions of the sea waybill themselves reflect, that mechanism is not necessarily cost-free. The carrier who is asked to assume additional responsibility for a shipment has the right to charge additional sums in exchange for assuming that responsibility.