Thinking outside the Box: The Application of COGSA's $500 Per-Package Limitation to Shipping Containers (2001)

I. INTRODUCTION The introduction of the shipping container revolutionized the maritime shipping industry. Compared to the earlier break-bulk method of transporting goods, containerized shipping offered enhanced economy and efficiency in the handling, stowing, and discharge of cargo. (1) Despite these benefits, the use of shipping containers exacerbated the problem of determining the meaning of under section 1304(5) of the Carriage of Goods by Sea Act (COGSA). (2) Can massive metal shipping containers be considered packages for purposes of the $500 limitation of under section 1304(5)? This question has been the subject of judicial and scholarly debate for the past 30 years. Since the early container case of Leather's Best, Inc. v. The Mormaclynx (3) in 1971, courts have fashioned, followed, and abandoned a number of tests used to determine when a container is a COGSA package. The following is an overview of the courts' tortured search for predictability in applying COGSA's package limitation to shipping containers. Included in this discussion are sections on (1) the per-package limitation of under COGSA, (2) the container revolution, and (3) the application of the per-package limitation to maritime shipping containers. II. THE PER-PACKAGE LIMITATION OF LIABILITY UNDER THE CARRIAGE OF GOODS BY SEA ACT A. Before the Enactment of COGSA Before Congress passed COGSA, the Harter Act of 1893 (4) governed an ocean carrier's for cargo damages. Under the Harter Act, carriers were prohibited from inserting limitation clauses in bills of lading. (5) More specifically, carriers were prohibited from claiming relief from liability for loss or damage arising from negligence, fault, or failure in proper loading, stowage, custody, care, or proper delivery of the cargo. (6) Despite the Hatter Act's prohibition against limitation courts permitted ocean carriers to limit their through valuation clauses, in which carriers and shippers agreed that the cargo in question was worth some specified amount. (7) Courts allowed these clauses because they viewed them as establishing the value to be used in calculating damages in cargo disputes. (8) They did not interpret the valuation clauses as limitation clauses. (9) As a result, ocean carriers began including agreed valuation clauses in their bills of lading. (10) These clauses usually stated a cargo's value as a specific amount per package. (11) In Hart v. Pennsylvania Railroad Co., (12) the Supreme Court held that agreed valuation clauses were valid. The Court reasoned that the ocean carrier reduced its rate to compensate for the low agreed valuation amount placed on the bill of lading. (13) Conversely, the carrier could have raised its rate to compensate for a high agreed valuation amount stated on the bill of lading. (14) This rule, known as the Hart doctrine, developed over time and became a restriction on the carrier. (15) Under the Hart doctrine, the carrier had to offer the shipper a choice of rates. (16) If the carrier did not, then any agreed valuation clause inserted in a bill of lading was considered invalid. (17) The Supreme Court later applied the Hart doctrine to maritime cargo disputes under the Harter Act. (18) Despite the restrictions placed on carriers by the Hart doctrine, carriers were still at an advantage over shippers. Because of the superior bargaining power of carriers, shippers often had to accept bills of lading containing extremely low cargo valuation clauses. (19) Limitation of clauses between carriers and shippers received international attention when The International Convention for the Unification of Law Relating to Bills of Lading, (20) commonly known as the Hague Rules, was signed in Brussels, Belgium on August 25, 1924. The Hague Rules were created to establish international uniformity in matters relating to ocean bills of lading in a method fair to ocean carriers, cargo owners, insurers, and bankers. …