Empresa Nacional de Fundiciones (ENAF) shipped 8,996 tin ingots from La Paz, Bolivia, to Arica, Chile, for transhipment to New York on the M/V Popi P under 16 bills of lading. The 8,996 ingots were organised into 600 steel-strapped bundles - 599 bundles contained 15 ingots each, and one bundle contained 11 ingots.

Chile's port authority, Empresa Portuarias de Chile, temporarily stored the ingots and supervised Sudamericana Agencias Aereo y Maritimo (SAAM) as it loaded the ingots into 18 shipping containers that were placed onboard. SAAM was the agent of Lineas Navieras Bolivianas (LINABOL) and Compania Sud Americana de Vapores (CSAV), who were the space and time charterers of the M/V Popi P. The ingots were discharged into the care of Universal Maritime Service Corp (Universal) at the Port of New York, but 1,005 ingots were stolen in its care.

ENAF, Seguros 'Illimani' SA, Derby & Cia Inc, and SW Shattuck Chemical Co sought to recover USD 463,934.58 from M/V Popi P, Nimipet Corp, LINABOL, CSAV, and Chilean Line Inc. CSAV and LINABOL made a third-party complaint and demanded full indemnification from Universal.

The District Court for the Southern District of New York held that the carriers bore the initial responsibility for the loss, but the ingots were removed while the containers were in the custody and control of Universal. The District Court ordered Universal to indemnify the carriers for the loss but limited its total liability to USD 33,500 under the Carriage of Goods by Sea Act, 46 USC ss 1300 ff (COGSA). Section 4(5) of COGSA limited the liability for the loss of each of the 67 steel-strapped bundles to USD 500. The plaintiffs appealed.

Held: The judgment of the District Court is affirmed.

State law governed a shipper's tort claim against a terminal operator, whereas admiralty law determined a stevedore's liability as an indemnitor for losses suffered by carriers. Universal's liability for the loss of the ingots was based on the warranty of workmanlike service from a carrier's contract with its stevedore, as implied by admiralty law.

The implied warranty of workmanlike service imposes obligations on a stevedore that are inescapable elements of the service undertaken. A stevedore's implied warranty includes the duties to store cargo properly, furnish safe equipment, and deliver goods to the right party. The warranty applied to a situation where cargo in the custody of a stevedore/terminal operator mysteriously disappeared. A breach of this implied warranty may occur even if the stevedore was not negligent in discharging its contractual duties, and will be presumed if the stevedore is unable to explain what had occurred to the cargo in its control. A stevedore can escape this liability by showing that the carrier's conduct prevents or hinders the stevedore's ability to perform in a workmanlike fashion, or where the shipper is best situated to adopt preventive measures. Universal's liability was established when the ingots were removed whilst the containers were in its custody and control.

COGSA statutorily applies after the cargo is loaded and before its discharge. Section 1(e) defines 'carriage of goods' as covering 'the period from the time when the goods are loaded on to the time when they are discharged from the ship': Miller Export Corp v Hellenic Lines Ltd 534 F Supp 707, 709 (SD NY 1982). Section 4(5) concerns the liability of only the carrier or the ship.

The bills of lading extended the package limitation to the post-discharge period and to Universal as the carriers' stevedore. Thus, COGSA applied not 'of its own force as a statute, but merely as a contractual term in the bill of lading': Allied Chemical International Corp v Companhia de Navegacao Lloyd Brasileiro 775 F 2d 476, 483 (2d Cir 1985), citing Colgate Palmolive Co v S/S Dart Canada 724 F 2d 313, 315 (2d Cir 1983).

The contractual limitation of a stevedore's liability was not void. Such an agreement may be invalid under state law (see eg Colgate Palmolive Co 315-16). However, the admiralty warranty of workmanlike performance, rather than state law, governed the indemnity claim against Universal. Admiralty law permits the contractual extension of COGSA's limitation of liability to cover stevedores and the post-discharge period.

A bill of lading can reveal the parties' agreement on the appropriate COGSA 'package': Allied Chemical 485, from its use of the term 'package': Allied International American Eagle Trading Corp v SS 'Yang Ming' 672 F 2d 1055, 1061 (2d Cir 1982) and its unambiguous identification of the unit of packaging in the bill of lading: Binladen BSB Landscaping v MV Nedlloyd Rotterdam 759 F 2d 1006, 1015-16 (2d Cir 1985) (CMI1621); Yang Ming 1061. In the event of an ambiguity, a Court will look elsewhere in the bill of lading and to other evidence of the parties' intentions: Allied Chemical 485-86.

The 16 bills of lading contained two columns that use the term 'package': (1) number of packages; and (2) description of packages and goods.

The number of packages column were completed with '600' for 13 bills of lading, including the three bills under which the lost ingots were carried, '300' for two bills of lading, and '596' for one bill of lading.

For the purposes of package limitation, the unit of packaging referred to under the number of packages column in the bill of lading points to the number carried under the bill of lading at issue and not to a number that pertains to the entire shipment (Binladen 1015-16; Yang Ming 1061). The figure '600', appearing in each of the bills covering the lost ingots, represented the number of individual ingots.

Ordinarily, the figure in the number of packages column would reflect the parties' understanding as to the number of packages and determine the aggregate COGSA per package limitation if the item to which the numbers referred could fairly be considered a 'package', and hence reflect the quantity of individual tin ingots. However, an ingot is not a COGSA package. It is 'not sufficiently wrapped, bundled, or tied to be [a] COGSA package': Mitsui & Co v American Export Lines Inc 636 F 2d 807, 822 (2d Cir 1981). Nevertheless, forming the metal in the shape of an individual ingot does facilitate handling.

Under the description of packages and goods, all 16 bills of lading had 'ingots: tin ingots' described. Each bill also contained a separate line or two describing the number of bundles: 40 bundles for those 13 bills and bill of lading no 16, and 20 bundles for the remaining two bills. The three bills under which the lost ingots were carried each listed 40 bundles, which would equal the number of steel-strapped bundles of 15 ingots into which a shipment of 600 ingots would be organised. For a single shipment carried under several bills of lading, each bill created a separate contract to carry discrete portions of the overall shipment, which would, in this case, total 8,996 ingots grouped in 600 steel-strapped bundles.

The 'package' for COGSA limitation of liability purposes was steel-strapped bundles of ingots, rather than individual ingots. If the number reflected in the number of packages column referred to an item or a collection of items that qualified as a COGSA 'package', this number would be the number of packages for applying the per package limitation. However, the number referred to an item that was not a package, and so the next best indication of the parties' intent would be the numbers reflected on the bills of lading that could refer to something that qualified as a 'package' ie the number of bundles, which appeared somewhere on the bills of lading. The ingots were in fact strapped together in bundles.

'Package' is a term of art in the ocean shipping business, and parties to bills of lading should expect to be held to the number that appears under the column whose heading so unmistakably refers to the number of packages. This approach of filling out bills of lading encourages precision, and will minimise disputes when it is consistently followed (Binladen 1015-16; Yang Ming 1061).