On 28 April 1994, a fire broke out in the forward hold of the Tokyo Senator on a voyage from Pusan, Republic of Korea, to Norfolk, Virginia in the United States, when a cargo of 300 drums of thiourea dioxide (TDO), which had been exported from the People's Republic of China and loaded in Pusan, spontaneously ignited. TDO is a white, odourless power used as a reducing agent and in the bleaching of protein fibres such as paper, paper pulp, and textiles. At the time it was shipped, TDO was considered a stable compound under normal conditions.

The fire caused damage to the vessel and other cargo. At trial in the District Court, Senator Lines (the plaintiff/appellant) claimed USD 439,785.88 in damages. The District Court found that the defendants/respondents, Zen, Sinochem, Sunway, and Eastern Sunway, were all shippers. However, at the time of the shipment, TDO was not named as a hazardous or dangerous cargo in the International Maritime Dangerous Goods Code (IMDG Code) or in the Department of Transportation Hazardous Materials Table. TDO was listed as a hazardous or dangerous material in the IMDG Code in 1998 and as a dangerous cargo in the Code of Federal Regulations in 1999.

The District Court granted the defendants' motion for judgment holding that, among other things, that the Carriage of Goods by Sea Act 46 USC s 1304(6) (COGSA s 4(6)) does not impose liability on a shipper of inherently dangerous goods unless it can be shown that the shipper actually or constructively knew of the dangerous nature of the cargo prior to shipment and failed to disclose that nature to the carrier. The District Court further held that general maritime law in the Second Circuit and the United Kingdom did not impose an absolute warranty on the part of the shipper that its cargo was not hazardous.

The District Court noted that only one contemporaneous document submitted by Senator Lines - a technical data report on TDO prepared by the FMC Corp (the FMC document) and alleged by the plaintiffs to have been in the defendants' possession one day after the fire - referred to TDO in connection with an exothermic reaction. The District Court found no evidence, however, that the FMC document had been available in the People's Republic of China at the time of the accident, and further found that the document stated only that contact of reducing agents with chemicals similar to TDO, such as hydrogen peroxide, can result in an exothermic reaction. The Court concluded that '[n]one of the literature received into evidence was sufficient to put any party on notice that an exothermic reaction of the severity of the one in this case was possible during the transport of the TDO'.

Senator Lines appealed.

Held: Appeal allowed. The part of the District Court's judgment granting the defendants' motions for judgment is vacated and remanded for proceedings consistent with the Court of Appeals' opinion.

There is no clear error in the District Court’s finding that the parties lacked knowledge of TDO’s dangerous nature. Even if the FMC document was in the defendants' possession prior to the mishap, Cedarbaum J did not clearly err in holding that the defendants lacked knowledge of TDO's dangerous propensities. The Court found that the FMC document stated only that contact of reducing agents with chemicals similar to TDO, such as hydrogen peroxide, could result in an exothermic reaction.

COGSA applies to all contracts of carriage of goods by sea between the ports of the United States and the ports of foreign countries. Here, the goods were shipped by sea under bills of lading between the Republic of Korea and the United States. Although the District Court concluded, and the defendants contend, that COGSA s 4(6) imposes liability on a shipper of inherently dangerous goods only if it can be shown that the shipper had actual or constructive preshipment knowledge of the dangerous nature of the goods, a close analysis of s 4(6) will reject such a requirement.

COGSA s 4(6) (art 4.6 of the Hague Rules) states:

Goods of an inflammable, explosive, or dangerous nature to the shipment whereof the carrier, master or agent of the carrier, has not consented with knowledge of their nature and character, may at any time before discharge be landed at any place or destroyed or rendered innocuous by the carrier without compensation, and the shipper of such goods shall be liable for all damages and expenses directly or indirectly arising out of or resulting from such shipment.

The only reference to 'knowledge' in this provision implicates the carrier. A plain-meaning approach would suggest that it is the carrier's knowledge of the goods' dangerous nature, not the shipper's, that conditions shipper liability. William Tetley in Marine Cargo Claims notes that according to art 4.6 of the Hague Rules 'the shipper is responsible for all the consequences of having shipped dangerous goods whether he knew of their nature or not. His only defence is that the carrier knew or should have known of their dangerous nature.'

The District Court concluded that '[t]he general rule under [s 4(3) of] COGSA is that "a shipper shall not be responsible for loss or damage sustained by the carrier or the ship ... without the act, fault, or neglect of the shipper."'

It is true that s 4(3) of COGSA sets forth a basic fault - or negligence-based - theory of shipper liability. This 'general rule' is in tension, however, with the specific rule for a shipper's dangerous-goods liability under s 4(6). In Effort Shipping Company Ltd v Linden Management SA (CMI571), the UK House of Lords addressed the relationship between arts 4.3 and 4.6 of the Hague Rules (the identically worded counterparts of ss 4(3) and 4(6) of COGSA). On appeal from the Court of Appeal, the House of Lords held that where none of the parties had knowledge of the dangerous cargo, art 4.6 imposed strict liability on the shipper.

Lord Lloyd undertook a close textual analysis of the dangerous-goods provision. His Honour observed that, in the first half of the first sentence, the right of the carrier to render innocuous or to destroy dangerous goods shipped without the carrier’s knowledge of the danger

[o]bviously ... cannot be dependent in any way on whether the shipper has knowledge of the dangerous nature of the goods. Yet the sentence continues, without a break, 'and the shipper of such goods shall be liable'. It is natural to read the two halves of the first sentence as being two sides of the same coin. If so, then the shippers' liability for shipping dangerous goods cannot be made to depend on the state of his knowledge. His liability is not confined to cases where he is at fault.

Lord Lloyd held that art 4.3 does not qualify the specific provisions of art 4.6 based upon the statutory interpretation rule of generalia specialibus non derogant - general provisions do not qualify specific ones.

The House of Lords analysis is persuasive and applicable to the corresponding COGSA provisions. The plain meaning of s 4(6) and its relationship to s 4(3) strongly suggests that the two provisions have separate and distinct roles to play in COGSA's allocation of risk between shippers and carriers, and that s 4(6) sets forth a rule of strict liability for a shipper of inherently dangerous goods when neither shipper nor carrier had actual or constructive preshipment knowledge of the cargo’s dangerous nature.

The legislative history of COGSA shows that the Act was lifted almost bodily from the Hague Rules of 1921, as amended by the Brussels Convention of 1924. The purpose of the Hague Rules was 'to establish uniform ocean bills of lading to govern the rights and liabilities of carriers and shippers inter se in international trade'. COGSA in its turn was designed to provide uniformity in the law governing carriage of goods by sea. COGSA legislators appear to have been more intent on preserving the international consensus embodied in the language of the Hague Rules, and getting carriers and shippers to agree to that language, than on codifying particular rules of general maritime law as expressed in US case law.

During the decades of debate over the language of the Hague Rules and COGSA, almost no comment was directed at the language of shipper liability in what eventually became art 4.6. In Effort Shipping, Lord Steyn said, '[t]he resort to the travaux préparatoires [of the Hague Rules] provided nothing worthy of consideration in the process of the interpretation of art 4.3 and art 4.6'. Instead, discussants focused on the carrier's knowledge of dangerous goods or the problem of adequate notice to the carrier of a cargo's dangerous nature. There is only one recorded instance of a challenge to the language of shipper liability in what eventually became art 4.6. Among the statements presented by various nations at the 1923 International Conference on Maritime Law in Brussels, the Norwegian Government suggested that the provisions that would later become arts 4.3 and 4.6 of COGSA should be deleted entirely 'because the real purpose of the convention was to regulate the obligations of the carrier' and the provisions for shipper liability 'followed general legal principles'. Clearly, Norway was raising the question of whether such shipper liability need be addressed at all in the carriage provisions, not whether that liability should be strict or fault-based.

The history of COGSA and the Hague Rules tells us little about the kind of liability that legislators and drafters thought that they were adopting in art 4.6 and its earlier versions. On the whole, however, it appears that Congress was chiefly concerned with preserving intact the hard-won international consensus reflected in the language of the Hague Rules, and securing the agreement of US shipper and carrier interests to that language.

COGSA s 4(6) did not codify pre-existing maritime common law regarding liability for shippers of inherently dangerous goods. The related question is whether s 4(6) would displace otherwise inconsistent maritime common law. It does. The Supreme Court has stated that where the issue is whether federal statutory or federal common law governs, 'we start with the assumption that it is for Congress, not federal courts, to articulate the appropriate standards to be applied as a matter of federal law'.

In finding that s 4(6)'s strict-liability rule displaces otherwise inconsistent general maritime law, this has been done in consideration of COGSA's overarching purpose to 'allocat[e] risk of loss and creat[e] predictable liability rules on which not only carriers but others can rely': Stolt Tank Containers v Evergreen Marine Corp 962 F 2d 276, 279 (2d Cir 1992). The recognition that, in the rare circumstances of a case such as this, the strict-liability rule of s 4(6) supersedes the varying and uncertain rule of maritime common law will help ensure predictability in the allocation of risk between maritime parties.

In conforming the construction of COGSA s 4(6) to that given to its British counterpart by the House of Lords in Effort Shipping, this furthers another broad purpose of COGSA and the Hague Rules: international uniformity in the law of carriage of goods by sea.