Wemhoener Pressen (the plaintiff), a German corporation, sold a hydraulic press and related machinery to an Ohio business, IDI/PSC, and selected a forwarding agent, ICT Neuss, to ship the press to Ohio. Transportation involved stuffing the press into a crate and then lashing the crate with steel cables onto a wheeled, non-motorised flatbed trailer called a MAFI. The MAFI was owned by the carrier, Polskie Linie Oceaniczne (POL). The express cargo bill (express bill) accompanied the crate and served as the bill of lading. Shippers were entitled to avoid liability limitation if they so chose by entering the value of the goods in the space provided on the express bill and by paying a higher price to ship the goods, but the plaintiff did not exercise this option. The space designated in the express bill as the value of goods declared by the shipper was left blank.

On 30 November 1989, the crate was unloaded from the ship by Ceres Marine Terminals Inc (the defendant)'s stevedores and transported to a storage area at the terminal, still strapped to the MAFI. An employee of the defendant used a cutting torch to remove the steel cables, which caused the packaging to catch fire, damaging both the press and the MAFI. The plaintiff claimed that the press had an invoice value of over USD 1 million and that components valued at USD 350,000 were damaged by the fire. The plaintiff claimed against the defendant for its negligent and improper handling of the plaintiff’s property as a terminal operator.

The defendant moved for partial summary judgment on the ground that its liability was limited to USD 500 per package. The defendant relied on the Himalaya clause in POL's bill of lading, which was incorporated into the terms of the express bill. The defendant argued in its motion for partial summary judgment that while cutting the cables, stripping the crate from the MAFI, and preparing the crate for rail transport, it was performing parts of the carriage as a subcontractor for POL and that it was thus entitled to the carrier's Carriage of Goods by Sea Act, 46 USC ss 1300 ff (COGSA) benefits under the Himalaya clause. The District Court for the District of Maryland agreed.

The plaintiff appealed to the Court of Appeals, Fourth Circuit. The issues before the Court of Appeals were whether the District Court erred in finding that federal maritime law applied to the plaintiff's claim against the defendant, and in holding that the Himalaya clause in the bill of lading effectively extended to the defendant the USD 500 limitation of liability available to the carrier under the provisions of COGSA § 1304(5) .

Held: The plaintiff's appeal is dismissed.

The bill of lading for the damaged press, because it was issued in international trade, is governed by the terms of COGSA. By its own terms, COGSA only 'covers the period from the time when the goods are loaded on to the time they are discharged from the ship', but parties to a bill of lading may contract to extend the time period prior to loading and after discharge. The bill of lading at issue in this case purports to extend the benefits of COGSA to the carrier's subcontractors to the extent that they perform portions of the carriage, which may take place prior to loading and after discharge. With respect to this portion of the carriage, the Harter Act specifically applies. Under the Harter Act, the 'manager, agent, master or owner of any vessel' transporting goods between the United States and a foreign port may not insert into the bill of lading any provision to absolve it from liability for 'loss or damage arising from negligence, fault or failure in proper loading, stowage, custody, care, or proper delivery of any and all ... property committed to its or their charge': 46 USC § 190. However, the Harter Act does not preclude limitations of liability. To the extent that the Harter Act pertains to aspects of carriage covered by COGSA, the provisions of COGSA prevail. To portions of the carriage that take place prior to loading or after discharge and therefore are not covered by the terms of COGSA, the Harter Act controls. Thus, the issues before the Court must be decided with reference to the bill of lading and both statutes.

Contractual incorporations of COGSA into foreign bills of lading should be construed according to federal law. In so holding, we reject the approach taken by the Second Circuit in Colgate Palmolive Co v SS Dart Canada 724 F 2d 313 (2d Cir 1983), cert den 466 US 963, 104 S Ct 2181, 80 L Ed 2d 562 (1984). So long as the bill of lading is still governed by COGSA or the Harter Act, which includes the period of time after discharge of the goods but prior to delivery, the rights and obligations of third party beneficiaries under a Himalaya clause should be determined with reference to the bill of lading, not state law, even if state law is inconsistent. This holding does not conflict with our recognition in Commonwealth Petrochemicals Inc v S/S Puerto Rico 607 F 2d 322, 325 (4th Cir 1979) that 'when COGSA does not apply of its own force but is incorporated into a maritime contract by reference, it does not have "statute rank"; rather, it is merely part of the contract, a term like any other'. In Commonwealth, the Court was reviewing a contract of domestic carriage which purported to incorporate COGSA. The difference is not insignificant: unlike domestic bills of lading, the foreign bill of lading is within District Courts' admiralty jurisdiction by virtue of both COGSA and the Harter Act. Further, the contract of carriage embodied by the bill represents the parties' intentions at the time the contract was made. So long as it remains in effect, it should be interpreted according to its terms and without reference to the varying state laws of this nation's many ports.

Passage of COGSA was prompted by the congressional aim of ensuring uniformity in international maritime commerce. COGSA was enacted in 1936 to embody the American version of an international Convention known as the Hague Rules. By subjecting all foreign bills of lading to COGSA, Congress afforded to international shippers and carriers a greater degree of certainty and uniformity in their dealings. And, by permitting those parties to contractually extend application of COGSA to the periods prior to loading and after unloading but before delivery, Congress authorised shippers and carriers to place all of their dealings under COGSA, if they so intend. To hold that this contractual extension of COGSA, to which both shipper and carrier have agreed, may be measured against the state law of the port in which the cargo may be damaged could undercut these protections and would offer to sellers and shippers the benefit of additional legal theories and remedies for which they had not bargained. Certainly, it would not give effect to Congress' intent.

The plaintiff's cargo was not 'at the disposal of' the consignee and was not ready to be received by the inland carrier until after it had been stripped from POL's MAFI. When the defendant's employee cut the cables holding the press onto the MAFI, it was acting as POL’s subcontractor and was fulfilling POL's contractual responsibility for carriage of the goods until delivery. At the time of damage to the press, neither actual nor constructive delivery had yet taken place.

The Himalaya clause is sufficiently specific to confer its benefits on those persons who, as agents of the carrier, perform services necessary to carry out POL's obligation to complete carriage of the goods. 'Carriage' can only pertain to activities related to the transport of the goods from the time the cargo is committed to the custody of the carrier to the point of delivery, at which time the carriage is complete. When it damaged the cargo, the defendant was acting as POL's agent and was, under the terms of the bill of lading, entitled to the contractually incorporated benefits of COGSA.