In October 1999, Schramm Inc (the appellant) sold a mobile drilling rig to Perforaciones San Rafael SRL (Perforaciones), a Bolivian company. The total cost of the rig was USD 160,725.42, which included freight and insurance charges. The appellant arranged to have Shipco Transport Inc (the respondent) transport the rig from the Port of Baltimore, Maryland, to the Port of Arica, Chile, on an ocean-going vessel. The respondent was a non-vessel operating common carrier (NVOCC). The respondent did not handle the cargo, but instead subcontracted with other parties to carry it and deliver it to its destination. Here, the respondent contracted with the owner of the MV Csav Guayas to transport the rig from the United States to Chile. The respondent issued a clean bill of lading to the appellant to cover the transport of the rig. The bill of lading designated the appellant as the shipper and the respondent as the carrier. In a paragraph entitled 'package or shipping unit limitation', the parties agreed that the respondent’s liability was limited to USD 500 per package wherever 46 USC ss 1300 ff (COGSA) was applicable, 'unless a declared value has been noted' by the parties. A space was provided on the front of the bill of lading for 'shipper's declared value', where the appellant was entitled to avoid COGSA’s liability limitation of USD 500 and declare the value of its goods in order to receive greater protection. However, the appellant left this space blank, and obtained independent cargo insurance from Atlantic Mutual Insurance Co (Atlantic Mutual).

The rig fell over on a concrete dock while being restowed at an intermediate port and was damaged beyond repair. It was declared a total loss by marine inspectors. Pursuant to its insurance obligations, Atlantic Mutual paid Perforaciones the purchase price and related costs on the appellant's behalf. On 20 October 2000, the appellant and Atlantic Mutual filed suit against the respondent, among other parties, to recover breach of contract damages from the destruction of the rig. They claimed losses of USD 176,797.96, which represented the amount that Atlantic Mutual had paid to Perforaciones. The respondent filed for partial summary judgment, claiming that its liability was limited to USD 500, either by COGSA or the bill of lading.

The District Court concluded that COGSA did apply when the rig was destroyed. It held that the 'tackle-to-tackle' application of COGSA covered goods from the port of loading until the final port of destination, and that COGSA thus applied during the restowage of the cargo at intermediate ports, regardless of whether damage occurred while goods were on land or on the vessel. Moreover, the District Court held that the bill of lading did not limit COGSA's application. The District Court granted the appellant's motion for summary judgment on the question of liability and granted the respondent’s motion to limit its liability to USD 500. The appellant challenged the District Court's decision to limit the respondent’s liability under COGSA.

Held: Appeal dismissed.

COGSA governs 'every bill of lading ... which is evidence of a contract for the carriage of goods by sea to or from ports of the United States [and] in foreign trade'. The statute provides a default limitation of liability for carriers:

Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package ... unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.

Here, the appellant left blank the space in the bill of lading for declaring a higher value on its goods. It thus accepted COGSA's limitation of liability, which was incorporated into the bill of lading, and chose to obtain independent cargo insurance from Atlantic Mutual. Consequently, if the Court finds that the COGSA applied when the rig was damaged, the respondent’s liability is properly limited to USD 500.

By its terms, COGSA covers 'the period from the time when the goods are loaded on to the time when they are discharged from the ship'. The fundamental question is whether the drilling rig was 'discharged' from the vessel, within the meaning of that term in COGSA, when it was damaged.

The appellant contends that the rig was discharged because it was damaged not on the vessel, but on land. However, this does not automatically mean that COGSA’s provisions are inapplicable. When the rig was damaged, it was not unloaded onto the dock at its final port of destination. Rather, for security reasons, it was temporarily offloaded from the vessel and transported dockside by a stevedore at an intermediate port of call in Charleston. The sole purpose for the temporary offloading of the rig onto the dock was to restore it below deck. The appellant has pointed the Court to no decisions finding that such restowage operations at intermediate ports fall outside the scope of COGSA.

In addition, the statutory text of COGSA also does not permit the view that restowage of the rig constituted a 'discharge' under COGSA. COGSA does not itself define the term 'discharge'. When viewing the statute as a whole, however, it is clear that goods are not 'discharged' from a vessel under COGSA until they are released from the ship at the final port of destination, and thus restowage of goods at an intermediate port does not constitute a discharge.

In sum, the term 'discharge' under COGSA means the removal of the goods at their final port of destination, and hence COGSA also covers the temporary unloading of goods at an intermediate port. This holding is by no means open-ended. COGSA can apply to goods transported by sea but damaged on land, but there must be a sufficient nexus between the activity which caused damage to the goods and the carriage of goods by sea. This would be an altogether different case if the cargo was damaged in the circumstances far removed from customary maritime activities. On the facts of this case, the appellant’s drilling rig had not been 'discharged' from the vessel under COGSA when it was damaged during restowage at the intermediate port, and therefore the respondent's liability was properly limited to USD 500.