We’ve seen a good deal of attention over the past decade about how the U.S. Carriage of Goods by Sea Act (COGSA), which by its terms governs ocean carrier cargo liability “tackle-to-tackle,” or between the times cargo crosses a vessel’s rail during onloading and offloading, can be extended by agreement. Steamship lines typically want stevedores, connecting surface carriers, warehousemen and others it contracts with to enjoy the same COGSA-blessed $500/package limitation of liability ocean carriers do. They just have to specify in a bill of lading or other document evidencing the contract, typically in a Himalaya Clause or Clause Paramount, that cargo claims against other service providers will be subject to COGSA.
The U.S. District Court for the Southern District of Alabama recently had occasion to look at a similar, but less-frequently encountered, scenario of COGSA extension, here, on-deck cargo stowage. Like the Hague and Hague-Visby Rules, COGSA excludes from its definition of covered goods cargo a carrier stows externally above deck (along with a few other varieties of cargo). This is a largely obsolete concept derived from the days when cargo shipped above decks was exposed to damage from the elements and greater likelihood of loss overboard. The law evolved to prevent carriers from enjoying COGSA’s various benefits – including limitation of liability – when they derive the economic advantage of added capacity at shippers’ heightened risk. Notably, containerized cargo you see stacked high above modern vessels’ top decks counts as cargo stowed below deck, as standard shipping containers are deemed an extension of a vessel’s internal hold.
In this case, shipper Atwood Oceanics, through a forwarder and with the assistance of logistics service providers, booked transit of a cargo of riser joints with carrier PACCship UK from Malaysia to Alabama. The shipper agreed to on-deck stowage in a bill of lading, which specified that the exposed transit would be at the shipper’s risk and expense, and further provided that PACCship wouldn’t be liable for loss or damage to on-deck cargo. Per the bill of lading’s Additional Clause, the transport was otherwise subject to COGSA “throughout the entire time the cargo is in the Carrier’s custody.”
When Atwood Oceanics’ cargo was damaged and partially lost at sea, it sued all concerned, and facing the carrier’s defenses based on the bill of lading language, moved the court for partial summary judgment. The carrier believed that, based on the shipper’s assumption of all risk, its liability, at most, should be limited to $500/package, as COGSA allows. The court disagreed, partially granted Atwood Oceanics’ motion.
COGSA can indeed be extended to cover on-deck cargo, but only if documentation does so expressly. PACCship UK urged that its bill of lading demonstrated the shipper’s conscious waiver of COGSA. Conceptually, it makes sense that if a shipper is assuming full responsibility for its cargo being transported exposed, it was agreeing that COGSA doesn’t apply. But the Additional Clause didn’t go far enough to extend COGSA’s definition of the term “goods” to include Atwood Oceanics’ cargo. At least not “expressly,” which the law requires.
The court’s opinion goes only so far as to exclude PACCship UK’s COGSA argument as providing a quick, easy and cheap out. When COGSA doesn’t apply in a situation like this, another U.S. cargo liability statute, the Harter Act, typically kicks in to provide the parties’ rights and obligations. However, the court further ruled that issues of whether Harter applied in a way that could relieve the carrier from full liability, and whether it could take advantage of the bill of lading’s other responsibility-shifting terms, were premature for ruling. Perhaps because the parties hadn’t briefed the issue fully, or fact issues remain to be developed.
Ref: Atwood Oceans, Inc. v. M/V PAC Altair, et al., 2016 WL 3248440 (S.D. Ala. 2016).
Before proceeding, please note: If you are not a current client of Lane Powell PC, please do not include any information in this email that you or someone else considers to be confidential or secret in nature. Prior to the establishment of a lawyer-client relationship, unsolicited emails from non-clients containing confidential or secret information cannot be protected from disclosure.