Between 1994 and 1996, the plaintiff/shipper, United States of America (the US), through its Commodity Credit Corp (CCC), shipped cargoes of foodstuffs to famine-stricken areas of Africa on behalf of the Agency for International Development (AID). The cargoes were shipped under charterparties subject to the US Carriage of Goods by Sea Act (COGSA) (46 USC §§ 1300 ff) on the M/V Overseas Harriette and the M/V Overseas Marilyn, vessels owned by the defendants/carriers, Ocean Bulk Ships Inc, and Transbulk Carriers Inc. Clean bills of lading were issued for each shipment after the cargoes were stowed, indicating that the cargoes was received by the carrier in good condition. However, upon discharge some of the cargoes were either missing, damaged, or unusable. The lost and damaged cargoes were valued at USD 203,319.87.

The US filed lawsuits seeking COGSA damages for five famine relief shipments. The defendants argued that a significant portion of the damage was caused by the US' failure to package the goods in a manner sufficient to survive the voyage (46 USC § 1304(2)(n)). Second, they relied on the 46 USC § 1304(2)(q) catch-all exception, suggesting that a portion of the loss and damage to the five shipments was attributable to pilferage. The defendants conceded that some of the damage was attributable to their own negligence. However, they did not submit any evidence on the appropriate allocation of loss.

In December 1999, the District Court for the Southern District of Texas entered judgment in favour of the US for USD 7,300.08, the amount of damage that the defendants admitted occurred prior to discharge. Among other things, the District Court stated that a COGSA carrier is not responsible for careless discharge. Dissatisfied, the parties appealed and cross-appealed.

Held: The judgment of the District Court is vacated. Judgment of USD 203,319.87 plus pre-judgment interest is rendered in favour of the US.

When COGSA was enacted in 1936, one of its express purposes was to 'redress the edge in bargaining power enjoyed by carriers over shipper and cargo interests by setting out certain duties and responsibilities of carriers that cannot be avoided even by express contractual provision': Thomas J Schoenbaum, Admiralty and Maritime Law, vol 2 (3rd edn, West Group 2001) §§ 10–15, citing 46 USC § 1303(8). COGSA applies to 'all contracts for carriage of goods by sea to or from ports of the United States in foreign trade': 46 USC § 1312. The provisions of COGSA are not generally applicable to charterparties: 46 USC § 1305. However, a shipper and carrier may agree to a clause paramount by which the terms of COGSA are incorporated into a charterparty. COGSA governs the resolution of this dispute. The charter agreements, shipping contracts, and bills of lading contain clauses making the shipments subject to COGSA.

COGSA sets up a 'complex system of shifting burdens and accompanying presumptions of liability'. This use of presumptions and shifting burdens of proof 'predates the statutory schemes of liability' and is 'thus rooted in strong policy considerations' specific to the context of cargo loss. Most of these rules developed to alleviate the perceived unfairness of certain common law rules requiring a shipper to conclusively prove the cause of cargo loss or damage notwithstanding the fact that the circumstances surrounding the loss or damage were primarily accessible to the defendant-carrier. Those policy considerations are evident in COGSA's current statutory scheme, which shifts the burden of proof 'more frequently than the winds on a stormy sea'.

COGSA's statutory scheme has been described as a 'ping-pong' game of burden shifting: Tubacex Inc v M/V Risan 45 F 3d 951, 954 (5th Cir 1995). The first stage of COGSA's statutory framework requires the shipper to establish a prima facie case of loss or damage by 'proving that the cargo for which the bill of lading was issued was loaded in an undamaged condition, and discharged in a damaged condition': Tubacex 954; see also Quaker Oats Co v M/V Torvanger 734 F 2d 238, 240 (5th Cir 1984). A clean bill of lading issued by the carrier to the shipper is prima facie evidence that the goods were received in an undamaged condition: Shell Oil Co v M/T Gilda 790 F 2d 1209, 1213 (5th Cir 1986); Blasser Bros Inc v N Pan-American Line 628 F 2d 376, 381 (5th Cir 1980); see also 46 USC § 1303(4).

A COGSA shipper must also demonstrate damage upon discharge: STS International Ltd v Laurel Sea Transport Ltd 932 F 2d 437, 440 (5th Cir 1991). Damage upon discharge may be established by the report of an independent cargo surveyor attending the discharge: 46 USC § 1303(6); United States v Central Gulf Lines Inc 974 F 2d 621, 624–28 (5th Cir 1992).

A shipper's prima facie case creates a presumption of liability: Blasser 382. At that point, the burden of proof shifts to the defendant/carrier, which must prove either that it exercised due diligence to prevent the loss or damage to the cargo (46 USC § 1304(1)), or that the loss or damage was the result of one of COGSA's enumerated 'uncontrollable causes of loss' (46 USC § 1304(2)). See also Tubacex 954; Blasser 381.

If the carrier successfully rebuts the shipper's prima facie case, the presumption of liability vanishes and the burden returns to the shipper to show that carrier negligence was at least a concurrent cause of the loss or damage to the cargo: Tenneco Resins Inc v Davy International AG 881 F 2d 211, 213 (5th Cir 1989); Blasser 382. If the shipper successfully establishes that the carrier's negligence is at least a concurrent cause of the loss or damage, the burden shifts once again to the carrier, which must establish what portion of the loss was caused by other factors: Tenneco 211; Blasser 382. If the carrier is unable to prove the appropriate apportionment of fault, then it becomes fully liable for the full extent of the shipper's loss: Tenneco 211; Blasser 382.

The District Court accepted the clean bills of lading as evidence that the cargo was delivered to the defendants in good condition. The Court did not question the reliability of the survey reports, but accepted the virtually undisputed fact that the cargo was either lost or damaged upon discharge. The Court then held that the defendants were not responsible for the losses, because: (1) the damage occurring during discharge could have been caused by third parties, such as the port authority or its agents, see UN/FAO World Food Programme v M/V Tay 138 F 3d 197 (5th Cir 1998); or (2) the US failed to respond to the defendants' suggestion that improper packaging played a role in the loss with evidence that the loss or damage was caused, at least in part, by negligence attributable to the carrier. Both holdings presumed the existence of a prima facie case, and thus focussed upon later stages of the COGSA burden-shifting paradigm.

To the extent that the District Court raised any question at all about the US' reliance upon the survey reports, that question was limited to the issue of whether the survey reports were probative on the issue of causation, rather than damage. The Court referred to language appearing in two of the five survey reports, stating its opinion that the reports listed several possible causes without settling upon a single cause as more probable than another. Thus, the Court suggested that those two reports standing alone did not tend to establish what caused that portion of the loss and damage (about 35 per cent) documented in those surveys. However, the issue of causation and the shipper's burden to prove concurrent causation in particular, is not a required element of the shipper's prima facie case and is, likewise, limited to the later stages of COGSA's burden-shifting framework.

Accordingly, the Court rejected the defendants' argument that the District Court implicitly rejected the US' evidence of damage upon discharge. The Court also found that the US satisfactorily established a prima facie case of loss or damage under COGSA by producing clean on board bills of lading for each shipment, paired with records unambiguously documenting that the cargo was either missing or damaged when discharged at the destination port. Such a showing is clearly sufficient under COGSA: see eg Quaker Oats 240.

With the prima facie case established, the burden of proof shifted. The Court accepted the US' argument that the carriers failed to rebut the prima facie case. Furthermore, even if the defendants had satisfied their rebuttal burden, the US had established that at least some of the loss and damage was attributable to the defendants' negligence. The defendants failed to respond with evidence tending to establish precisely what portion of the claimed loss and damage was attributable to another concurrent cause.

The Court first addressed the carrier's rebuttal burden. The Court observed that there was controversy as to whether the carrier's rebuttal burden with respect to most of the statutory exceptions to carrier liability set out at 46 USC § 1304(2) is one of production or persuasion. The catch-all exception, 46 USC § 1304(2)(q), states that the carrier is not liable for losses or damages resulting from 'any other cause arising without the actual fault and privity of the carrier' or its agents. Unlike the other exceptions, 46 USC § 1304(2)(q) goes on to provide that 'the burden of proof shall be on the person claiming the benefit of this exception' to show that the carrier's fault or neglect did not contribute to the loss or damage. Some decisions suggest that the carrier claiming an exception under 46 USC § 1304(2)(q) must bear the ultimate burden of persuasion (ie the stricter burden) with respect to the applicability of that exception, in addition to the burden of production (ie the more lenient burden) relevant to establishing the applicability of the other exceptions: Tubacex 954-55; Quaker 241; Westinghouse Electric Corp v M/V Leslie Lykes 734 F 2d 199, 207 (5th Cir 1984) (citing In re Ta Chi Navigation (Panama) Corp 677 F 2d 225, 229 (2d Cir 1982) (In re Ta Chi)); Sun Oil Co v M/T Carisle 771 F 2d 805, 811 (3d Cir 1985); EAC Timberlane v Pisces Ltd 745 F 2d 715, 719-20 (1st Cir 1984); Ta Chi 229; Lekas & Drivas Inc v Goulandris 306 F 2d 426, 432 (2d Cir 1962); Hecht, Levis & Kahn Inc v SS President Buchanan 236 F 2d 627, 631 (2d Cir 1956). However, in Waterman SS Corp v United States Smelting, Refining & Mining Co 155 F 2d 687, 691 (5th Cir 1946), the Court held that a carrier seeking to avoid liability on the theory that the damages were caused by perils of the sea, 46 USC § 1304(2)(c), or latent defects in the cargo, 46 USC § 1304(2)(p), bore both the 'burden of going forward' to demonstrate the applicability of the exceptions and 'the risk of non-persuasion': Waterman 691. Waterman has never been overruled. The proposition that a carrier bears both the burden of production and the burden of persuasion with respect to those exceptions was drawn from Commercial Molasses Corp v New York Tank Barge Corp 314 US 104 (1941). In Commercial Molasses, the Supreme Court held that 'the shipowner, in order to bring [it]self within a permitted exception to the obligation to carry safely, whether imposed by statute or because [it] is a common carrier or because [it] has assumed it by contract, must show that the loss was due to an excepted cause and not to breach of [its] duty to furnish a seaworthy vessel': Commercial Molasses 109. Furthermore, 'since the burden is on the shipowner, [if the shipowner] does not sustain it, ... the shipper must prevail if, upon the whole evidence, it remains doubtful whether the loss is within the exception': Commercial Molasses 109. The Court in Commercial Molasses explained that this burden rests upon the carrier 'not in consequence of [its] being an ordinary "bailee" but because [the carrier] is a special type of bailee who has assumed the obligation of an insurer': Commercial Molasses 109. Furthermore, other decisions either suggest that the carrier bears the burden of persuasion for all 46 USC § 1304(2) exceptions, or fail to differentiate between the applicable burden for those exceptions. See Shell Oil Co v M/T Gilda 790 F 2d 1209, 1213 (5th Cir 1986); Servicios-Expoarma CA v Industrial Maritime Carriers Inc 135 F 3d 984 (5th Cir 1998) (CMI1834); Tokio Marine & Fire Insurance Co Ltd v Vessel Sammi Aurora 903 F 2d 1244, 1246 (9th Cir 1990); Sony Magnetic Products Inc v Merivienti O/Y 863 F 2d 1537, 1540 n 3 (11th Cir 1989) (CMI1847).

In this case, it was unnecessary to decide whether the defendants' rebuttal burden with respect to their 46 USC § 1304(2)(n) defence was one of production or persuasion. This is so because the defendants failed to produce competent evidence to meet either standard. The carrier must do more than offer mere speculation as to the cause of lost or damaged cargo. Pacific Employers Insurance Co v M/V Gloria 767 F 2d 229, 241 (5th Cir 1985); Harbert International Establishment v Power Shipping 635 F 2d 370, 375 (5th Cir 1981). The carrier must 'explain what took place or suffer the consequences': Compagnie De Navigation v Mondial United Corp 316 F 2d 163, 170 (5th Cir 1963); see also The Vallescura 293 US 296, 303 (1934); Pacific Employers 242. Even the lesser burden of production, if applicable to the defendants' 46 USC § 1304(2)(n) defence, requires that a COGSA defendant provide more than mere 'blanket assertions about mysterious possible causes' in order to rebut a COGSA plaintiff's prima facie case. Transatlantic Marine Claims Agency Inc v M/V OOCL Inspiration 137 F 3d 94, 101-02 (2d Cir 1998) (CMI1888); see also Pacific Employers 242 (when the 'exact cause of the damaged cargo remains a mystery', the carrier will be liable, because 'any doubts as to the cause of the loss must be resolved against the carrier').

The defendants relied solely on survey reports prepared at discharge. While those reports documented the quantity and compromised quality of lost and damaged cargo with some precision, three of the five survey reports failed to provide even a speculative assessment with regard to the cause of the missing and damaged cargo. Thus, the defendants failed to offer any probative evidence whatsoever with respect to their 46 USC § 1304(2)(n) defence for those three shipments. The two remaining survey reports included a list of five causes which may have contributed in some way to the loss, including the use of bags with very thin liners. Together, the losses that can even potentially be associated with the surveyor's remarks about the packaging of these shipments is slightly less than one-third of the total loss claimed by the US. With regard to the first shipment, the survey does not in any way tend to establish that insufficient packaging, rather than one of the other listed causes, was the cause of the damage. The surveyor's speculation is insufficient to meet even a burden of production with respect to establishing their 46 USC § 1304(2)(n) defence. See Pacific Employers 241; Harbert 375. With regard to the second shipment, the brief comments in the survey report are insufficient to satisfy the defendants' rebuttal burden, without regard to whether that burden was one of production or persuasion. Even if the survey report satisfied the applicable evidentiary burden, the US is still entitled to recover. The defendants conceded that some of the damage was attributable to their own negligence. Given that carrier negligence was at least a concurrent cause of the loss, the defendants bore the burden of establishing which portion of the loss was not attributable to carrier negligence. In this regard, the defendants did not submit any evidence on the appropriate allocation of loss: Tenneco 211; Blasser 382.

Having rejected the 46 USC § 1304(2)(n) defence, the Court turned to examine the catch-all exception (46 USC § 1304(2)(q)). The defendants suggested that a portion of the loss and damage to the five shipments was attributable to pilferage, either from the vessel or from the docks and environs during discharge. The District Court wrongly stated that a COGSA carrier is not responsible for careless discharge. COGSA extends through discharge, and a COGSA carrier is subject to statutory obligations to 'properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried': 46 USC § 1303(2). 46 USC § 1304(2)(q) may shield a carrier from liability when the carrier has absolutely no control with respect to the selection of port stevedores or the rate they will be paid and, further, no control with respect to how or when the cargo is discharged: World Food Programme 200-202. But this interpretation of 46 USC § 1304(2)(q) is not broad enough to shield the carrier from liability for any and all stevedore negligence. To the contrary, such 'lack of practical control is ordinarily associated with a breakdown of law and order so that the carrier is powerless to prevent the unlawful or negligent conduct of the stevedores': World Food Programme 201. As to this exception, the defendants clearly bore, not only the burden of production, but the burden of persuasion: 46 USC § 1304(2)(q). On the evidence, the defendants did not satisfy their burden of persuasion with respect to their 46 USC § 1304(2)(q) defence. Besides, even if the defendants satisfied their rebuttal burden, carrier negligence was at least a concurrent cause of the damages claimed. The defendants failed to make any attempt to apportion or separate the losses attributable to their own negligence as compared to the losses attributable to pilferage or some other cause: Tenneco 211; Blasser 382.

Turning to the issues of quantum of liability, the Court accepted the US' argument that the extent of liability is established by declarations in the bills of lading covering the shipments. COGSA expressly allows a shipper to declare the value of its cargo as long as 'the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading' and that '[t]his declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier': 46 USC § 1304(5).

The Court agreed with the District Court's finding that the declarations of the cargo's value embodied in the bills of lading were sufficient evidence of damages claimed. The Court rejected as irrelevant the carriers' rebuttal of inadmissible 'double hearsay' ie that the 'information for the value as listed on the bills of lading is not based on personal knowledge of the agents of defendants who issued the bills of lading'. 46 USC § 1304(5) allows the shipper to declare the cargo's value, and inclusion of this value on the bill of lading evidences the carrier's acquiescence to this declaration. The US' declared value was prima facie evidence of the cargo's value and, absent any rebuttal evidence from the carrier, was adequate to set the value of the cargo for the calculation of damages.