CARRIERS, SHIPPERS, COURTS GRAPPLE WITH THE TRUE MEANING OF ‘PACKAGE’

The Carriage of Goods by Sea Act, or Cogsa was created by Congress in 1936 to level the playing field in international shipping by protecting shippers from ocean carriers’ superior bargaining position in transportation contracts.

This was accomplished in part by establishing a minimum liability amount for cargo damage.

The act prohibits carriers from limiting liability below $500 a package. Unfortunately, neither Cogsa nor its legislative history provides any clue as to the meaning of the word “package.”
Consequently, courts must determine the definition.
Most people understand the plain meaning of “package.” The dictionary defines it as a commodity or unit of a product uniformly wrapped or sealed.

Yet, since 1936, hundreds of court decisions have attempted to define a package under Cogsa.

Early cases indicate that packages were considered single intems requiring some preparation for transportation. In these cases, the package did not necessarily have to conceal or completely enclose the goods.

When the intent of the carrier and shipper was reasonable and clear, courts looked to intent for guidance. Packages included items such as bags, bales, boxes, bundles, cartons, coils, crates, roles and skids.

The single-item approach later became strained with the advent of palletized cargo. When smaller parcels are consolidated on wooden pallets, what is the package?

The dilemma was resolved by deferring to the parties’ intent, as manifested in the bill of lading.

The shipping industry began using cargo-laden containers during the 1960s. Thereafter, carriers amended bills of lading to define containers as Cogsa packages.

Before the advent of containers, carriers could identify shippers’ packages by inspection. With sealed containers, carriers argued that they should not be liable for what they could not see.

Therefore, the $500 package should be the container. It became patently clear to shippers that under this approach all packages were not created equal.
When Congress enacted Cogsa, containers did not exist. With containerization, courts were faced with the dilemma of determining what Congress would have thought about a subject it never considered.

Courts began searching for criteria to determine if containers were packages. The criteria included information obtained from bills of lading, the nature of the goods and the ownership of the container.
Early cases held that containers were rarely packages because the purpose of Cogsa was to set a reasonable liability limit. In later cases, the package concept was briefly applied to containers based upon a “functional economic test.”

If goods could be shipped in packages, these parcels were considered functional packages. If not, the container was deemed the package.

The test was abandoned in 1981 when the 2nd Circuit Court of Appeals decided the Mitsui case (636 F.2d 807).

Mitsui held that the container is not a package when the bill of lading discloses the container’s contents, and those contents may reasonably be considered packages. The 2nd Circuit decided the Yang Ming case (672 F.2d 1055) in 1982, holding that container and pallet cases were different and rejected the notion that container and non-container case law was interchangeable.

The latest and possibly the last major skirmish in the container package controversy occurred on Dec. 23, 1991, in New York. In the S.S. Tana case (1991 U.S. App. Lexis 29901) the 2nd Circuit reaffirmed Mitsui and held that although the face of the bill of lading described the container of 76 cotton bales as the package, it was not.

More importantly, the court dismissed the carrier’s argument that two microscopic boilerplate clauses on the reverse side of the bill set for the parties’ agreement that the container was the package.

“Clauses. . .printed on the back of a form bill of lading, carry little weight towards establishing intent, being unilateral, self-serving declarations by the carrier which were not negotiated by the parties.”

The appeals court concluded that Mitsui continues to provide a simple rule in container cases that “should assist carriers, shippers and the courts to avoid the pains of litigation.”


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