Schramm v. Shipco Transport

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DMC/SandT/04/40
Schramm, Inc. v. Shipco Transport, Inc
United States Court of Appeals for the Fourth Circuit: Judges: Wilkinson, Michael, and Shedd: No. 03-1075: 2004 U.S. App. Lexis 7288: 15 April 2004
rig CARRIED AS CARGO: restowage AT INTERMEDIATE PORT: rig damaged WHILST ON DOCKSIDE: WHETHER US$500 LIMITATION PER UNIT UNDER US CARRIAGE OF GOODS BY SEA ACT 1936 APPLIED
Summary
In this case, the Court of Appeals affirmed a ruling of a South Carolina District Court limiting to US$500 a shipper’s recovery of damages pursuant to the US Carriage of Goods by Sea Act 1936 ("COGSA") for damages suffered by a drilling rig when it was off-loaded at an intermediate port so it could be restowed on a lower deck for security purposes. The Court held that COGSA’s limitation of liability applied until the goods were released from the ship at the final port of destination and that the restowage of goods at an intermediate port did not constitute a discharge within the meaning of COGSA. The Court limited its ruling, however, to make clear COGSA would apply to goods transported by sea but damaged on land only if there was a sufficient connection between the activity which caused damage to the goods and their carriage by sea.

DMC Category Rating: Developed

Case Note Submitted by Nikki Lee, an attorney with Healy & Baillie, LLP, New York. Healy & Baillie are the International Contributors to the website for the United States of America

Facts
The shipper, Schramm, sued the carrier, Shipco Transport, in the District Court to recover damages for destruction of a mobile drilling rig. The shipper sold a mobile drilling rig to a South American company and arranged to have the carrier, a non-vessel operating common carrier, transport the rig from the Port of Baltimore, Maryland, to the Port of Arica, Chile, via an oceangoing vessel. The carrier subcontracted with the owner of the m/v "CSAV Guayas" to transport the rig to Chile. The drilling rig consisted of a large drill and the truck on which it was mounted. The rig was secured on a flat rack container. The carrier issued a clean bill of lading to the shipper to cover transport of the rig and, in a paragraph entitled "Package or Shipping Unit Limitation", the parties "agreed that Shipco’s liability would be limited to US$500 per package wherever COGSA was applicable, ‘unless a declared value has been noted’ by the parties." The shipper left the space for "Shippers Declared Value" blank.

During a stop at an intermediate port in Charleston, South Carolina, the vessel’s operator had ordered the rig off-loaded so that it could be restowed on a lower deck of the vessel to avoid pilferage of goods at subsequent ports and damage to them during the voyage. The rig, still attached to its flat rack container, was placed on a chassis for dockside transport. While it was being moved, the rig fell off the chassis and was damaged beyond repair. Schramm claimed the amount of approximately US$176,800, which represented the purchase price and related costs paid by Schramm’s insurance carrier to the buyer of the rig, whereas the carrier claimed that its liability was limited to US$500 either by COGSA 46.U.S.C. app. § 1304(5) or by the contractual bill of lading.

At first instance, the South Carolina District Court found in favour of the carrier. The shipper appealed.

Judgment
COGSA covered "the period from the time when the goods are loaded on to the time when they are discharged from the ship." 46 U.S.C. app. § 1301(e). This period is commonly referred to as "tackle to tackle." The Appeal Court, upholding the District Court, interpreted the term "discharged" under COGSA to mean the removal of goods from the ship at their final port of destination, and not the temporary removal of goods for restowage operations. The Court found that its interpretation of "discharge" under COGSA was consistent with (i) the language of COGSA itself, (ii) COGSA’s interplay with the Harter Act, 46 U.S.C. app. § 1311; and (iii) the realities of maritime practice.

First, COGSA provided that a carrier must "properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried." The court concluded that this provision easily included - as one of the carrier’s duties - the restowage of goods at an intermediate port, since COGSA specifically applies to stowage activities. Second, the court concluded that the construction of COGSA in light of the Harter Act suggests that the point of discharge under COGSA is at the final port of destination. Absent a contractual agreement to the contrary, the Harter Act applies prior to loading, COGSA applies from the loading of the goods until the discharge of the goods from the vessel, and the Harter Act then again applies from discharge until the goods are delivered to the consignee. Third, with the advent of containerized shipping, restowage of goods at intermediate ports is now a customary activity in the maritime trade.

While the Court ruled that COGSA covered the temporary unloading of goods at an intermediate port, it limited its ruling to cases where there existed a sufficient link between the activity which caused the damage and the carriage of the goods by sea. The Court noted that this would have been an altogether different case if, for instance, the cargo had been damaged in circumstances far removed from customary maritime activities.

 

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