This appeal arose from a claim of damage to cargo shipped on the MV OOCL Inspiration. The MV OOCL Inspiration was owned by Sea-Land Services Inc (Sea-Land). Orient Overseas Container Line (UK) Ltd (OOCL) had a space charter and sailing agreement (the agreement) with Sea-Land. OOCL executed a bill of lading to transport the cargo, 367 rolls of printing paper, from Stenay, France, to various locations in the United States. Upon arrival, 43 rolls of paper were discovered to have suffered wetting. Experts for both the shipper, Sibille Dalle Inc, and OOCL concluded that the damage resulted from sea water. The claim was brought by the shipper under the Carriage of Goods by Sea Act (COGSA), 46 USC ss 1300 ff. The District Court held that the shipper was entitled to recovery based on Sea-Land's tariff, rather than on OOCL's. OOCL and Sea-Land appealed.

Held:The District Court's judgment is reversed and remanded.

In a COGSA cause of action, a shipper who wishes to recover against the carrier for damage to goods bears the initial burden of proving both delivery of goods to the carrier in good condition, and out-turn by the carrier in damaged condition: see Vana Trading Co v SS Mette Skou 556 F 2d 100 (2d Cir 1977). Once the shipper establishes a prima facie case, the carrier must explain what took place. The law casts upon the carrier the burden of the loss it cannot explain, or to bring its case within the exceptions which relieve it from liability: see Associated Metals & Minerals Corp v MV Arktis Sky 978 F 2d 47 (2d Cir 1992); Quaker Oats Co v MV Torvanger 734 F 2d 238 (5th Cir 1984). The statutory scheme clearly evinces an intent to hold carriers prima facie liable for damage to goods at sea.

There are two general ways a plaintiff can make out such a prima facie case under COGSA. First, the plaintiff may present direct evidence relating to the healthy condition of the goods at delivery and their damaged condition at discharge. In this respect, the case law and the statute outline various presumptions that may be relied upon by both plaintiffs and defendants. For example, the issuance of a clean bill of lading creates a presumption of delivery in good condition favourable to the plaintiff. Conversely, a consignee who does not give notice of damage within three days of receipt is burdened by a presumption of arrival in good condition under COGSA s 1303(6): see Bally Inc v MV Zim 22 F 3d 65 (2d Cir 1994).

The second way in which a plaintiff may discharge its burden of making out a prima facie case under COGSA is to show that the characteristics of the damage suffered by the goods justify the conclusion that the harm occurred while the goods were in the defendant's custody. The consignee's burden does not mean that it must always introduce direct evidence that the cargo was in good condition when shipped. It may additionally meet its burden by showing from the condition of the cargo as delivered or otherwise that the damage was caused by the carrier's negligence and not by any inherent vice in the cargo: Vana Trading 105, Elia Salzman Tobacco Co v SS Mormacwind 371 F 2d 537 (2d Cir 1967). This second avenue is available because a plaintiff who is unable to provide specific evidence as to the condition of the goods at delivery or out-turn can nonetheless show by the nature of the damage that the injury complained of happened to the cargo while it was in the carrier's custody. The whole point of the prima facie requirements in COGSA is to establish that the damage to the goods occurred while under the supervision of the defendant: see Bally 69-70, Caemint Food Inc v Brasileiro 647 F 2d 347 (2d Cir 1981).

The applicability of this second avenue is the key to this case. The appellants' various attacks on the plaintiff's case are grounded in the erroneous assumption that the plaintiff is required to rely on the first approach: ie on evidence directly pertaining to delivery and out-turn, to make out its prima facie case. The District Court correctly found that the nature of the damage, seawater wetting, was of the sort that inexorably justified the conclusion that the injury occurred at sea. The defendants contended that, because the plaintiff's notice of damage was belated, COGSA's presumption of discharge in good condition applied. But even assuming that the good-out-turn presumption applied against the plaintiff, it would have been rebutted by the nature of the damage to the goods, namely seawater wetting. Absent believable evidence to the contrary, such damage establishes the fact that the goods were damaged during ocean transit, and hence, were received damaged.

OOCL's tariff incorporated COGSA’s default limitation of liability of USD 500 per package (unless the shipper specifically declares and pays for excess value): s 1304(5). Sea-Land used the significantly more generous Hague-Visby Rules.

Clause 1, headed 'IDENTITY OF CARRIER', provided that 'OOCL (UK) shall be deemed the Carrier for Goods transported (in either direction) between the North American continent and Europe/Mediterranean'.

Clause 2, headed 'DEFINITIONS', provided that 'CARRIER shall include the party on whose behalf this Bill of Lading has been signed, the Vessel, her owner(s), operator(s), demise, time, slot and space charterers or any person or entity to the extent bound by this Bill of Lading'.

Thus, in addition to OOCL (who was defined as a carrier in cl 1 of the bill of lading), the MV OOCL Inspiration (as the vessel), and Sea-Land (as its owner and operator) are also carriers. Under the terms of the bill of lading, the tariff of the carrier identified in cl 1, which is OOCL, governs at all times, except when the goods are in the custody of a 'Participating Carrier'. The shipper contended that Sea-Land was a participating carrier because Sea-Land's tariff incorporated the more generous Hague-Visby Rules limitations on liability. However, the definition of participating carrier (found in cl 2 of the bill) on its face suggests that an entity cannot be both a carrier and a participating carrier at the same time.

'Carrier' is defined as 'the party on whose behalf this Bill of Lading has been signed, the Vessel, her owner(s), operator(s), demise, time, slot and space charterers or any person or entity to the extent bound by this Bill of Lading'.

'Participating Carrier' is defined as 'any other water, land or air carrier performing a part of the carriage provided herein'.

This disjunctive language strongly indicates that participating carriers are entities other than carriers. The shipper's argument was that the definition of 'carrier' included the vessel, and reading this definition together with the definition of the vessel, would give rise to the meaning that a participating carrier, since it can operate a vessel, can also be a carrier. The definition of vessel included 'the vessel(s) named in this Bill of Lading ... and any vessel, craft, lighter or other means of transportation whatsoever owned, chartered, operated or controlled and used by the Carrier or Participating [C]arrier in the performance of this contract'.

This argument is unavailing. Not only is it the less natural reading of cl 2, but it also contravenes the obvious overall structure of the bill of lading. Reading the bill as a whole, it is clear that participating carriers are entities that engage in the maritime practice of 'feeder' and through carriage in intermodal transportation contracts. Cl 2 further employs the following definitions:

PORT OF LOADING shall mean the place where the Goods are received for marine transport by the Carrier.

PORT OF DISCHARGE shall be the place where the Goods are to be discharged from the Carrier’s vessel.

PLACE OF RECEIPT shall be the place where the Goods are received from the Merchant by the Carrier, Participating Carrier or their respective agents.

PLACE OF DELIVERY shall mean the place where the Goods are delivered by the Carrier or the Participating Carrier to the Merchant.

As the operator and owner of the MV OOCL Inspiration, Sea-Land was merely a carrier whom OOCL (who was obligated under the bill of lading to perform the ocean transportation between the port of loading and the port of discharge) had arranged through the agreement. Because Sea-Land was not a participating carrier under the bill of lading, it follows that its tariff, even for the portion of the trip during which it was the carrier in custody of the goods, cannot apply. Therefore, the COGSA liability limitation of USD 500 per package, as incorporated by OOCL's tariff, applies.