Itochu International Inc (the plaintiff) was the voyage charterer and the owner of 128 bundles of hot rolled steel plates carried aboard the M/V Havjo from Kokkola in Finland to New Orleans in the United States. K/S A/S Havbulk and Western Bulk Carriers K/S (the defendants) owned and operated the vessel respectively.

The plaintiff purchased the cargo from Industrial Metals & Manufacturing Ltd (IMM). IMM delivered the cargo and paid for the port charges and the cost of the loading stevedores. The cargo was loaded at Kokkola in the presence of IMM's transport manager and a port captain acting on behalf of the operator of the vessel. Upon arrival in New Orleans, the cargo was determined to have sustained extensive compression damage.

The plaintiff filed suit against the defendants seeking recovery of costs incurred to recondition the cargo. The District Court for the Eastern District of Louisiana found that the defendants were exempt from liability. It found that the damaged cargo was caused by the stevedores' loading of the cargo with misaligned, randomly positioned dunnage boards. As the stevedores were not employed or controlled by the defendants, the District Court found that the defendants were not at fault for the damaged cargo, and hence were entitled to a defence under the US Carriage of Goods by Sea Act (COGSA), in particular under 46 USC § 1304(2)(q), which provides:

Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from ... [a]ny other cause arising without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage.

See Itochu Int'l v M/V Havjo Civil Action No 95-3385, 1998 WL 12195, 1998 US Dist LEXIS 257 (ED Louisiana, 8 January 1998).

The plaintiff appealed. The plaintiff argued that the District Court erred as, first, the carrier's duty of care was non-delegable, and this prevented the carrier from invoking the 46 USC § 1304(2)(q) defence. Second, even if the carrier could invoke the 46 USC § 1304(2)(q) defence to such a non-delegable duty, the defendants failed to prove that they were faultless in relation to the damaged cargo, because the port captain was partially responsible for the damaged cargo.

Held: Judgment affirmed.

COGSA was created to void the inclusion of 'overreaching clauses' in bills of lading which would unreasonably limit the carrier's liability: Tubacex v M/V Risan 45 F 3d 951, 955 (5th Cir 1995) (Tubacex). Under COGSA, both parties engage in burden shifting pursuant to 46 USC §§ 1303-1304: Tubacex 954. Once the shipper presents a prima facie case, the burden shifts to the carrier to prove either that it used due diligence to prevent the damage or that it is entitled to one of the defences enumerated in § 1304(2) of COGSA: Tubacex 954. One such defence is the catch-all exception in § 1304(2)(q).

As to the plaintiff's first argument on appeal, the Court noted that some courts have held that COGSA imposes on carriers a non-delegable duty to properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried: Nichimen Co v MV Farland 462 F 2d 319, 330 (2d Cir 1972). Nevertheless, there is 'no conflict in the statute with applying [§ 1304(2)(q)] ... to the nondelegable duties of the carrier': Tubacex 955. In other words, the fact that a carrier's duties are non-delegable does not eviscerate defences to liability that are 'specifically extended to carriers' under COGSA: Tubacex 955. The Court of Appeals for the Second Circuit reached a similar conclusion in Associated Metals & Minerals Corp v M/V Arktis Sky 978 F 2d 47 (2d Cir 1992) (Arktis Sky: see CMI1603). It held that even though the carrier had a non-delegable duty to properly load and stow the cargo, the carrier may nonetheless 'exonerate its responsibility by carrying its burden of proof that the damage did not occur because of its own acts': Arktis Sky 52.

As to the plaintiff's second argument on appeal, the District Court found that the duties of the port captain extended solely to ensuring the seaworthiness of the vessel, and not the condition of the cargo, and this finding was supported by the evidence before the District Court.