In 1992, Orimpex-Zona Ind del Este (Orimpex), a Venezuelan business, purchased prefabricated steel building materials from Butler Manufacturing (Butler), of Kansas City, worth USD 1,36,001. Butler recommended that the materials be shipped in 40-foot containers but Orimpex opted to ship the cargo uncontainerised. Butler provided the materials in 1,140 packages, including plastic-bagged rolls of insulation, cartons of fasteners, roofing and wall materials, and bundles of structural steel.

Orimpex arranged for shipping and insurance via its Venezuelan customs broker, Servicios Expoarma CA (Servicios). Servicios contracted with Industrial Maritime Carriers Inc (IMC) to ship the goods from New Orleans to La Guaria in Venezuala in two shipments.

The bills of lading specified that '[t]he Carrier or his Agent shall not be liable for loss of or damage to the goods during the period before loading and after discharge from the vessel howsoever such loss or damage arises'. It also specified that the carrier assumed responsibility for the goods 'from ship's tackle at port of loading to end of ship's tackle at port of discharge'. The nature and value of the two shipments were not declared beyond the USD 500 per package limit of liability contained in the Carriage of Goods by Sea Act, 46 USC ss 1300 ff (COGSA), s 4(5).

The first shipment left on the Andrealeon on 16 April 1992. The second shipment left on the Ardal on 2 May 1992. The bills of lading for both shipments showed Servicios as consignee and notify party and were issued clean on board. The Andrealeon arrived in La Guaria on 30 April 1992 and completed discharge on 2 May 1992. The goods were discharged to an adjacent pier and then moved about 30m to the warehouse of Mercaduana Almacenes (Mercaduana) to be stored pending customs clearance. The goods cleared customs on 12 May 1992 and were released to the consignee. The Ardal arrived and discharged its cargo to Mercaduana on 14 May 1992. Servicios obtained customs clearance for the second shipment on 25 May 1992.

Some of the goods from both shipments were damaged. Both parties conducted independent surveys of the damage and disagreed as to its cause and extent. At trial, the District Court found that all the packages in the first shipment and half of the packages in the second shipment had been damaged to some extent in transit.

Orimpex trucked the building materials to the construction site and removed the materials from their packages. Orimpex paid USD 324,342.64 to repair or replace components of the first shipment and USD 51,910.90 to repair or replace components of the second shipment. Orimpex recovered USD 15,664 from its cargo insurer for the damage to the rolls of insulation.

Orimpex and Servicios sued IMC under COGSA in the District Court. The Court found IMC liable for the damage to the materials. The Court then computed the maximum liability of USD 500 for each damaged package (COGSA s 4(5)). In the first shipment there were 287 non-insulation packages for a maximum liability of USD 143,500. In the second shipment there were 249 non-insulation packages for a maximum liability for half the packages that had been damaged of USD 62,250.

IMC appealed.

Held: Appeal allowed. The District Court’s decision is reversed and remanded.

Time bar

COGSA s 3(6) provides a limitation period of one year from 'delivery' during which a shipper must bring suit against the carrier:

In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered.

This suit was filed more than a year from the Andrealon’s discharge and transfer of the cargo to the customs warehouse, but less than a year from when the consignee, Orimpex, received the goods after they cleared customs. Thus, when 'delivery' occurred dictates whether the claims arising from the damage to the cargo of the Andrealon are time-barred. IMC argues that 'delivery' means 'delivery from the carrier', whereas Servicios argues that 'delivery' means 'delivery to the consignee'. Between these two points in time are the 10 days during which the cargo was in the possession of neither the carrier nor the consignee.

The COGSA limitation period makes no reference to when the cause accrues. Rather, it defines the limitation period solely by reference to an extrinsic event: when the goods were delivered. Where goods are lost at sea and never delivered, the period begins running not when the ship sinks, or when the consignee has notice of the loss, but when the goods should have been delivered. Similarly, when a shipment is first delayed and arrives at port damaged, the limitation period commences not when the damaged goods are actually delivered, but when they should have been delivered.

The text of the one-year limitation clause demonstrates that the operative events are defined by reference to the carrier's acts, not the ultimate consignee's. Notice of loss or damage must be given to the carrier 'at the port of discharge before or at the time of removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage'. Where the person entitled to delivery is a railroad or a customs house, not the consignee, there is 'delivery' for the purposes of the statute without regard to the actions of the consignee. If Congress had meant to begin the limitation period when the consignee received the goods, it could have done this by using words to that effect.

This interpretation of delivery is consistent with the historical background of the statute. COGSA is the domestic enactment of the Hague Rules, a multinational Convention that established uniform rules to govern ocean bills of lading. Those rules were approved by the Brussels Convention in 1922, some 14 years before COGSA made them the law of the US. As its purpose was to establish international uniformity, COGSA could not substantially deviate from the Hague Rules.

At the time when the Hague Rules were drafted, bills of lading generally contained highly restrictive time limits, often requiring a consignee to sue the carrier within 90 days. COGSA replaced these clauses with the uniform notice and time limit in s 3(6), and subsequent cases indicate how that subsection ought to be interpreted.

In A Russo & Co v United States 40 F 2d 39 (5th Cir 1930) (a case involving delivery by ship and railroad) the Court held that 'delivery' occurred when the ocean carrier fulfilled its obligations under the bill of lading by placing the cargo into the hands of the railroad. It was immaterial that the consignee received the goods 10 days later. Delivery was not defined by receipt by the consignee, but when the ocean carrier properly surrendered the goods in accordance with its contractual duties.

The text of COGSA and its underlying policies and history required that 'delivery' be afforded its general legal meaning: the point at which the carrier has fulfilled its responsibilities to carry, discharge and otherwise perform its contractual duties with respect to the cargo. Delivery occurs when the carrier places the cargo into the custody of whomever is legally entitled to receive it from the carrier. In this case IMC delivered the cargo of the Andrealeon to Mercduana on 2 May 1992. Once IMC had properly placed its cargo in the hands of the party authorised to receive it, IMC had 'delivered' the cargo and the one-year time limitation began to run. Servicios and Orimpex filed their claims more than one year after this delivery, and the claims for damage for that shipment are thus time-barred.

Package limitation

Section 4(5) of COGSA provides that '[n]either the carrier nor the ship shall in any event be or become liable for any loss or damage to ... goods in an amount exceeding USD 500 per package'.

Servicios and Orimpex did not keep the contents of the various packages separate after delivery but opened them all, and only after their contents were mingled did they assess the aggregate damage. The District Court heard no evidence of the damage done to each package, or whether the damage to any package exceeded the USD 500 limitation. Therefore the District Court aggregated the USD 500 limit for all the damaged packages, and against this total limit applied the total damage sustained. This was in error.

Here, there were very different packages damaged, respectively, to a very different extent: from bundles of steel that were bent in various degrees, to rolls of insulation that were torn in various ways. There was no attempt by the consignee to quantify the per-package damages. Although Orimpex hired a surveyor immediately after the cargo was discharged from the Andrealeon, it made no attempt to discern the quantum of damage to each package. By the item IMC’s surveyor arrived, much or all of the cargo had been removed from its original packaging and comingled.

The substantive law of damages includes the USD 500 package limitation. It is the plaintiff's burden to show its compensable damages. It is not enough that Servicios proved the gross amount of its damages, where it is not entitled to recover that entire amount. Servicios must show how much damage accrued to each package, and it will be awarded the actual damages to each package subject to the USD 500 limit.

By its strict application, this rule would require outright dismissal of Servicios' claims, for where a plaintiff at trial has failed to prove an essential element of its cause of action, including both the fact and amount of their damages, that is fatal and cannot prevail as a matter of law. The unusual circumstances of this case mean that the decision is remanded in order to give Servicios an opportunity to show its per-package damages. There was not a total failure of proof. Rather, Servicios mistakenly assumed that as a matter of law it was required to prove only the total quantum of damages. More importantly, this belief was shared by the District Court. Servicios never had a true opportunity to show the damages to which it may be entitled.

For these reasons, the decision of the District Court is reversed and remanded for a proper determination of damages of the claims that are not time-barred.