Sun Oil Trading Co Inc (Sun) claimed for damage to a cargo of high-temperature fuel oil carried from Guayanilla, Puerto Rico, to the ports of Good Hope and St Rose, Louisiana, the United States. The cargo was loaded on the MT Overseas Arctic under a tanker voyage charterparty. The carriers agreed to provide a vessel capable of heating and maintaining the cargo at a maximum temperature of 135^o F. As the carriers expected that they would only be required to maintain the temperature, as opposed to increasing it, the parties deleted the contract's penalty for failing to increase the cargo's temperature. The master reported a delay in the loading operations due to the fuel’s low temperature, which was between 89-90^o F. However, the fuel was fluid enough to be pumped onto the ship. During the voyage, Sun ordered only that the loaded temperature of the fuel be maintained. When the ship sailed from cooler Caribbean waters to Mississippi River waters, the oil located close to the skin of the vessel began to congeal. The low temperatures and a delay in discharge operations resulted in 8,734 barrels of fuel oil solidifying and remaining on the ship.

Sun filed claims against the vessel, Overseas Bulktank Corp, and BP Oil Shipping Co. The District Court held that Sun had failed to make out a prima facie case, because it could not prove that the cargo was in good order when loaded, and it had also failed to load the cargo at a proper temperature. Therefore, the carriers had complied with their duties, and the Court dismissed the claim. Sun appealed.

Held: The Court of Appeal affirmed the decision.

The charterparty contained a clause paramount establishing full incorporation of the Carriage of Goods by Sea Act, 46 USC § 1300 (COGSA), so COGSA governs the claim.

A prima facie case under COGSA for the loss of cargo requires the charterer to prove initially that the carrier failed to deliver the goods loaded: Tenneco Resins Inc v Davy International AG 881 F 2d 211, 213 (5th Cir 1989); Horn v Cia de Navegacion Fruco SA 404 F 2d 422, 435 (5th Cir 1968). Once the charterer presents its prima facie claim, the carrier must prove either that it exercised due diligence to prevent the loss, or that the loss was caused by one of the exceptions set out in s 1304(2) of COGSA: Tenneco Resins Inc 881 F 2d 211, 213. If the carrier rebuts the prima facie case, the charterer must prove that the carrier's negligence was at least a concurring cause of the loss. If the charterer meets this challenge, the carrier must prove the percentage of loss due to its negligence and the portion due to the charterer. If the carrier fails to prove the percentage, it becomes liable for the entire loss.

Sun sufficiently proved its prima facie claim with the bill of lading showing the number of barrels of straight-run fuel oil loaded onto the vessel, and proved that the carriers failed to deliver all but 8,734 barrels. The carriers alleged that the cargo was not loaded at the required temperature. Hence, the damage resulted from an inherent defect, quality, or vice of the goods (s 1304(2)(m)); or was caused by the acts or omissions of the shipper, its agent or representative (s 41304(2)(I)).

The Court held that the exoneration cause of inherent defect only applies when the defect, quality, or vice is inherent in the cargo. The carriers must show that some defect, quality, or vice existed within the cargo itself: Quaker Oats Co v M/V Torvanger 734 F 2d 238, 241 n 3 (5th Cir 1984). The temperature of the fuel oil transported did not constitute an inherent defect. This defect was due to external, as opposed to internal, conditions. A simple change in the external conditions could have easily remedied the fuel oil’s temperature problems. Thus, the carriers cannot rely on this exoneration cause. The Court admitted the second exception, stating that Sun failed to meet the industry standards regarding the right temperature to load this cargo for transportation in cooler waters that cause a decrease in temperature.

Sun argued that the vessel was unseaworthy because it could not raise the temperature to 135^o F as required in the charterparty. The Court stated that the charterparty only required the carrier to maintain that temperature, but not to raise it. Sun never asked for the temperature to be raised, but ordered the carrier to maintain the loaded temperature. Sun had to prove that unseaworthiness not only existed, but that it also caused the loss of the cargo: Bruszewski v Isthmian SS Co 66 F Supp 210 (DC Pa), affd 163 F 2d 720 (3d Cir 1947), cert denied 333 US 828, 68 S Ct 451, 92 L Ed 1113 (1948). Sun also complained that the carrier did not maintain the right temperature. The Court dismissed this allegation. The Court referred to the master's testimony that an order to maintain the loaded temperature does not require vessels to maintain every square inch of the cargo at one temperature. A 'maintain heat' order requires vessels to maintain the average temperature of the cargo. According to the master, this interpretation was consistent with the standards in the high-temperature fuel oil transportation industry. Sun did not provide any evidence to the contrary.

Sun finally argued that the carriers had a duty under COGSA to know the cargo’s special characteristics and heating requirements, and to properly carry, care for, and discharge the cargo. The Court said that this Circuit had rejected the argument that carriers have a legal duty to learn the special needs of the cargo. On the contrary, the charterer 'has an obligation to inform the carrier of the cargo’s special requirements': Tenneco Resins Inc 881 F 2d 214. The burden to discern the cargo's special stowage needs is upon the party that will most likely know or have access to knowledge of such needs. Sun should have known the right loading temperature of this cargo and ensured that it came onboard at that temperature. However, it did not instruct the carrier to increase the temperature but only to maintain it. Therefore, the District Court's conclusion that Sun had breached its duty to ensure the right temperature during the loading operations was correct.