APPEALS COURT OFFERS GUIDANCE FOR DISPUTES INVOLVING SEALED BOXES

Cargo shortages from sealed containers in ocean trade with the United States are common. As a result, courts frequently perform the difficult task of determining if ocean carriers will be liable to consignees when goods in sealed containers are short-loaded.

The shipping industry began using containers during the 1960s to expedite cargo handling. In typical container service, the carrier furnishes the shipper with an empty container. The shipper loads and seals the box and delivers it to the ship. A bill of lading is issued to the shipper by the carrier. Eventually, the container is discharged from the vessel and delivered to the consignee who purchased the bill of lading. The container’s seal is broken and cargo is removed and tallied. If goods are missing, a claim against the carrier ensues.

Under the Carriage of Goods by Sea Act, the carrier must issue a bill of lading that becomes a receipt, document of title, and contract of carriage. This permits the shipper to negotiate the bill and sell the cargo to the consignee, with the consignee relying on the bill’s cargo description, usually count and weight.

Before the advent of containers, Cogsa required shipowners to quantify cargoes by visual inspection. Today, shipper-sealed containers make this practice unworkable and ocean carriers argue they should not be responsible for cargo quantities they cannot count.

Carriers found a practical solution to the description dilemma by adding qualifying clauses on bills, such as “shipper’s load and count.” This practical approach ended in 1982. The U.S. 2nd Circuit Court of Appeals in the Westway Coffee case (75 F.2d 30) held that once the carrier lists weights on a bill of lading, he represents there are no reasonable grounds for suspecting that the weight is false, and he has reasonable means for checking the weight.

Cogsa provides a method for avoiding short-load liability. Carriers are not required to list weights or quantities on bills that cannot be verified.

Unfortunately, if bills fail to describe cargo quantums, they cannot be utilized by shippers to sell specified goods to consignees.

Zim America case helped pave way for new rules
In 1994, the 2nd Circuit again addressed the sealed container issue in the Zim America case (22 F.3d 65), which clarified the Westway Coffee case by holding that while the listing of weight on the bill is evidence that the carrier received a container which weighted that amount, the bill cannot act as complete evidence of the number of items in the container.

The latest development in the sealed container bill of lading description dilemma is found in the Plastique case from the 11th Circuit Court of Appeals in Georgia (83 F.3d 137). In the Plastique case, the bill of lading stated “Shipper’s Load & Count said to contain 5,600 boxes/14,437,500 plastic bags.” After discharge, 2,18,500 bags were missing. The District Court found the plaintiff failed to establish a claim by relying solely on the bill’s description.

Court’s two guidelines smooth out rough spots The appellate Court affirmed the lower court decision and set guidelines for resolving sealed container disputes:

1. Consistent with Westway Coffee, the bill will constitute complete proof if: There is no limiting language (e.g. “shipper’s load and count”) or if the bill sets forth terms that the carrier can verify.

2. Consistent with Zim America, the bill will not constitute complete proof if: There is limiting language, and the bill sets forth terms that are not easily verifiable by the carrier.

The Plastique case gives further guidance to the Westway Coffee case exceptions provided in the Zim America case, and also reflects a trend toward acceptance of the practical approach to resolving various cargo quantity disputes.


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