On 2 February 1984, Mu Inc (Mu) delivered two pieces of road machinery equipment, called concrete runway groovers, and a carton of spare parts to Puerto Rico Marine Management Inc, the agent for Puerto Rico Maritime Shipping Authority (PRMSA), the defendant carrier. Transportation took place on the MV Puerto Rico from Charleston, South Carolina, to San Juan, Puerto Rico. The vessel arrived at San Juan on 10 February 1984 and the defendant, PRMSA, ignoring instructions from Mu, who had asked to be notified so it could oversee unloading, moved the groovers from the vessel. As a result of improper handling, the groovers were extensively damaged. Mu filed suit for USD 50,000.

PRMSA raised the affirmative defence of the US Carriage of Goods by Sea Act (COGSA), which provided for a USD 500 package limitation, and filed a motion for partial summary judgment to limit its liability to USD 1000. The District Court initially denied the motion based on the precedent in Cincinnati Milacron Ltd v MV American Legend 784 F 2d 1161 (4th Cir 1986). On 6 November 1986, the Court of Appeals en banc reheard the Cincinnati Milacron case and reached a contrary result. PRMSA then moved for reconsideration of its motion for partial summary judgment. On 17 February 1987, the District Court granted partial summary judgment based upon the USD 500 per package limitation of liability. Mu's motion to alter or amend the judgment was denied. The District Court entered judgment against PRMSA in the amount of USD 1,000. Mu appealed.

Held: The judgment of the District Court is affirmed.

The cargo was carried pursuant to the PRMSA short form bill of lading which was prepared by Mu's agent. The bill of lading provided for the incorporation of PRMSA’s long form bill of lading, public tariff, and the applicability of COGSA, which otherwise would not have applied to the Charleston to Puerto Rico run. On the reverse side of the bill of lading under the heading 'Insurance', the bill of lading stated that 'failure to indicate the type of coverage and/or to declare the value will result in non-insurance'. The pertinent provisions of PRMSA’s long form bill of lading were paras 1, 2, and 22. Paragraph 1 stated that the bill of lading was in effect at all times material, and that PRMSA could rely upon the rights and limitations in COGSA, even if the carriage was 'between ports of the United States'. Paragraph 2 defined the word 'package' as including 'any container, vehicle, animal, pieces and all articles except goods shipped in bulk'. There is no doubt that under the above definition of package each of the groovers would constitute identifiable separate packages. Paragraph 22 restated the USD 500 per package limitation of liability contained in § 1304(5) of COGSA and the 'package' definition quoted above. 

Mu contends that the instant case falls between the cracks of Cincinnati Milacron (en banc) and Commonwealth Petrochemicals. In Cincinnati Milacron Ltd v MV American Legend (en banc) 804 F 2d 837 (4th Cir 1986), the Court considered a COGSA case where an ocean carrier's short form bill of lading, containing no specific reference to the COGSA limitation of liability under 46 USC § 1304(5), provided for the incorporation of a long form's terms. The Court held that the shipper was afforded a fair opportunity to declare a higher value and avoid a USD 500 package limit where the long form contained a recitation of the COGSA limitation of liability provisions. In Commonwealth Petrochemicals Inc v SS Puerto Rico 607 F 2d 322 (4th Cir 1979) (CMI1632), the Court held that: (1) a shipment between the United States and Puerto Rico is not a COGSA shipment; and (2) 'when COGSA does not apply of its own force but is incorporated into a maritime contract by reference ... effect should be given to the parties’ definition of package even if that definition is contrary to that which would control if COGSA were directly applicable'. 

The plaintiff argued that where COGSA does not apply by its own force, incorporation by reference of the terms and conditions of a long form bill of lading, including a definition of package which is inconsistent with the judicially established definition of package under COGSA, into a short form bill of lading, should not result in a limitation of liability, unless the short form contains a recitation of the limitation of liability provisions. 

In Cincinnati Milacron, Phillips J stated that 'carriers customarily utilize short form bills of lading as convenient working documents, while reserving for the more cumbersome long forms most of the substantial terms of the agreement, see Commonwealth Petrochemicals'.  Phillips J's reference to Commonwealth Petrochemicals indicated that he expected Cincinnati Milacron to apply to all cases in which a short form bill of lading incorporates COGSA by reference. Such wide application of the rule is further supported by Phillips J's concluding statement that 'it does not seem unduly burdensome to impute to shippers knowledge of all of the terms in the more accessible long form bill of lading including, where they appear, the applicable provisions of COGSA'. Thus, there was no basis for a distinction between cases where COGSA would apply of its own force, and where it would not so apply.

In this case, the long form bill of lading included the COGSA § 1304(5) limitation of liability provision and a definition of 'package' which covered the groovers. PRMSA had thus established a prima facie case that Mu was provided with notice of the USD 500 per groover limitation of liability and a 'fair opportunity' to declare a higher value for the goods shipped. Mu, in an attempt to rebut the prima facie case, contended that it was not afforded a fair opportunity to declare a higher value in order to avoid the package limitation. PRMSA's tariff specifically provided that Mu could have paid 2% of the declared value of the groovers in order to avoid the USD 500 limitation. Thus, Mu's argument that there was no precisely defined rate that applied to declared value was erroneous. Furthermore, the reverse side of the short form bill of lading stated that insurance was available and that failure to declare value would result in non-insurance. Clearly, Mu was on notice that PRMSA's liability would be limited if Mu failed to declare a higher value. Finally, Mu had failed to provide any evidence that it would have declared a higher value and paid a higher rate. In sum, Mu had failed to meet its burden to rebut PRMSA's prima facie showing of the existence of a 'fair opportunity' to declare excess value.