A recent decision of the United States Court of Appeals Second Circuit on package limitation under the Carriage of Goods by Sea Act 1936 (US COGSA), OOO Garant-S v Empire United Lines Co Inc, is helpful for freight forwarders operating in the USA.

Garant-S contracted over a number of years with Empire, a freight-forwarder, to ship cars from Elizabeth, New Jersey, where they were held at Empire’s warehouse before being loaded on board a vessel. In 2013, two cars were stolen from the Elizabeth warehouse and Garant-S sued Empire.

Empire did not deny that they were liable, but argued that they were entitled to rely on the package limitation provisions of US COGSA. The first instance court gave summary judgment to Empire, meaning that they were only liable for $500 per package (i.e. per car), far less than they were actually worth. Garant-S appealed, raising a number of arguments for package limitation not applying.

Garant-S first argued that US COGSA did not apply at all. US COGSA only applies mandatorily once goods have been loaded on board a ship, but the parties can agree by contract to it applying earlier. This was the effect of Empire’s house bill of lading, which stated that US COGSA would apply from when the goods were received at Empire’s warehouse. However, at the time that the cars were stolen, no bills of lading had been issued. Empire argued that, because they had done business previously with Garant-S using the same house bill of lading, those terms should apply to the contract even before the bill was issued. The court accepted this argument, holding that although the bills had not been issued, the parties’ previous dealings meant that as “there is no indication that the house bill of lading with which Garant-S had extensive experience would not have been issued, US COGSA applies by contract”.

Garant-S’s fallback argument was that even if US COGSA did apply, the package limitation provisions did not. US COGSA requires that shippers be given a “fair opportunity” to declare that their cargo is worth more than the $500 package limit, and the courts have held that “the carrier bears the initial burden of providing fair opportunity”.

Garant-S argued that it had not had a fair chance to declare the value of the cars. Empire were again able to defeat this argument using the wording on their house bill of lading, which, the court found, “unambiguously notifies the shipper both that US COGSA applies to limit liability and that a higher value may be declared”.

Therefore, because Garant-S were held to be aware of the wording of the house bill, it had been given a fair opportunity to declare a higher value and the $500 limit applied.

This case is a good example of the ability to limit liability that US COGSA gives to carriers and freight-forwarders and how the scope of those limits of liability can be increased by the use of a carefully worded house bill of lading.