Court Opinion

ID: 31280
Source: CourtListenerOpinion
Date Created: 2010-04-25 10:14:21+00
Date Added: 2024-06-11T16:47:20.072155
License: Public Domain

United States Court of Appeals
                                                             Fifth Circuit
                                                          F I L E D
                      IN THE UNITED STATES
                        COURT OF APPEALS                    May 13, 2003

                      FOR THE FIFTH CIRCUIT           Charles R. Fulbruge III
                                                              Clerk

                          No. 02-30006

STEEL COILS, INC.,

          Plaintiff-Appellee–Cross-Appellant,

                              versus

M/V LAKE MARION, her engines, boilers, etc., in rem; LAKE MARION,
INC.; and BAY OCEAN MANAGEMENT, INC., in personam,

          Defendants-Appellants-Cross-Appellees,

                              versus

WESTERN BULK CARRIERS K/S OSLO,

          Defendant-Third Party Plaintiff-Appellant-Cross-
          Appellee,

                              versus

ITOCHU INTERNATIONAL, INC.,

          Third Party Defendant-Appellee.

          Appeals from the United States District Court
              for the Eastern District of Louisiana

Before HIGGINBOTHAM, EMILIO M. GARZA, and DENNIS, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:
     This is a Carriage of Goods by Sea Act1 claim for rust damage

to steel coils which their owner alleges was caused by seawater

when shipped from Latvia to the United States on the M/V Lake

Marion. The district court awarded damages against the vessel, its

owner, Lake Marion, Inc., its manager, Bay Ocean Management, Inc.,

collectively    the   “vessel   interests,”   and   the   time   charterer,

Western Bulk Carriers K/S Oslo.      Finding no error, we affirm.

                                    I.

     The plaintiff, Steel Coils, Inc., is an importer of steel

products with its principal office in Deerfield, Illinois.               It

ordered flat-rolled steel from a steel mill in Russia.              Itochu,

which then owned ninety percent of the stock of Steel Coils,

purchased the steel and entered into a voyage charter with Western

Bulk for the M/V Lake Marion to import the steel to the United

States.2    Western Bulk had time chartered the vessel from Lake

Marion, Inc.3    As Lake Marion, Inc.’s manager, Bay Ocean employed

the master and crew of the vessel.

     1
         46 U.S.C. § 1300 et seq.
     2
      “A voyage charter is a contract for the hire of a vessel for
one or a series of voyages....” Citrus Mktg. Bd. of Israel v. J.
Lauritzen A/S, 943 F.2d 220, 221 n.3 (2d Cir. 1991) (internal
quotation marks omitted).
     3
       “A time charter is a contract to use a vessel for a
particular period of time, although the vessel owner retains
possession and control.” Id. at 221 n.2 (internal quotation marks
omitted).

                                    2
      The Lake Marion took on the steel coils at the Latvian port of

Riga between February 26 and March 2, 1997.           The steel had traveled

to port by rail from the Severstal steel mill 400 miles north of

Moscow.     At Riga, the hot rolled coils were stored outside, while

the cold rolled and galvanized coils were encased in protective

steel wrappers and stored in a warehouse at the port.4

      After departing Riga, the vessel stopped at another Latvian

port, Ventspils, where it took on more steel coils.5                The ship

departed Ventspils on March 7, 1997 and arrived at Camden, New

Jersey, on March 28, 1997.       After Camden, the ship stopped at New

Orleans and Houston.       Steel Coils alleged that the coils unloaded

at   New   Orleans   and   Houston   were   damaged    by   saltwater,   which

required Steel Coils to have the cargo cleaned and recoated.

                                     II.

      Steel Coils filed suit under COGSA6 against the M/V Lake

Marion in rem and against Lake Marion, Inc., Bay Ocean Management,

and Western Bulk Carriers in personam, requesting $550,000 in

damages, with a separate claim of negligence against Bay Ocean.

The vessel interests and Western Bulk filed cross-claims against

      4
       Evidence at trial showed that cold rolled and galvanized
coils are susceptible to corrosion if exposed to any type of
moisture, while hot rolled coils corrode only if exposed to
saltwater.
      5
          These coils are not the subject of the present suit.
      6
          46 U.S.C. § 1300 et seq.

                                      3
each other for indemnification, and Western Bulk filed a third

party complaint for indemnification against Itochu.

     After a bench trial, the district court held the defendants

jointly and severally liable to Steel Coils for $262,000, and Bay

Ocean liable for an additional $243,358.94.           The court further

found that Western Bulk was entitled to indemnity from Lake Marion,

Inc. for any amount it pays to Steel Coils.           It dismissed with

prejudice   Lake   Marion’s   cross-claim   against   Western   Bulk   and

Western Bulk’s third party complaint against Itochu.            From this

judgment the vessel interests appeal, and Steel Coils and Western

Bulk cross-appeal.    Steel Coils’s and Western Bulk’s cross-appeals

become relevant only if we find the vessel interests’ points of

error meritorious.

                                  III.

     Defendants M/V Lake Marion, Lake Marion, Inc., and Bay Ocean

contend that the district court improperly shifted the burden to

them to prove that the steel cargo was not in good condition prior

to loading or was in undamaged condition at discharge, that it

erred in finding that they failed to exercise due diligence to

ensure that the vessel was seaworthy at the commencement of the

voyage, and that it was wrong in disregarding their defenses to

COGSA liability of peril of the sea and latent defect.          They also

assert the district court should not have held Bay Ocean liable to

Steel Coils in tort separate from the COGSA claim, depriving Bay

                                   4
Ocean of the COGSA $500-per-package limitation on damages. We find

these arguments unavailing.

                                  IV.

     In admiralty cases tried by the district court without a jury,

we review the district court’s legal conclusions de novo, and its

factual findings under the clearly erroneous standard.7         “The

clearly erroneous standard of review does not apply to decisions

made by district court judges when they apply legal principles to

essentially undisputed facts.”8

     COGSA      provides   a   complex   burden-shifting   procedure.

Initially, the plaintiff must establish a prima facie case by

demonstrating that the cargo was loaded in an undamaged condition

and discharged in a damaged condition.9         “For the purpose of

determining the condition of the goods at the time of receipt by

the carrier, the bill of lading serves as prima facie evidence that

the goods were loaded in the condition therein described.”10 If the

plaintiff presents a prima facie case, the burden shifts to the

defendants to prove that they exercised due diligence to prevent

the damage or that the damage was caused by one of the exceptions

     7
      Sabah Shipyard Sdn. Bhd. v. M/V Harbel Tapper, 178 F.3d 400,
404 (5th Cir. 1999).
     8
          Id. (internal quotation marks omitted).
     9
          Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir.
1995).
     10
          Id.

                                   5
set   forth    in   section   1304(2)      of   COGSA,   including     “[p]erils,

dangers, and accidents of the sea or other navigable waters” and

“[l]atent defects not discoverable by due diligence.”11                      If the

defendants     show   that    the   loss     was   caused   by   one    of    these

exceptions, the burden returns to the shipper to establish that the

defendants’ negligence contributed to the damage.12               Finally, “if

the shipper is able to establish that the [defendants’] negligence

was a contributory cause of the damage, the burden switches back to

the [defendants] to segregate the portion of the damage due to the

excepted cause from that portion resulting from the carrier’s own

negligence.”13

                                        A.

      The vessel interests first assert that the district court

reversed the burden of proof, requiring them to demonstrate that

the goods were loaded in a damaged condition or were unloaded in an

undamaged condition instead of requiring Steel Coils to prove that

the coils were loaded undamaged and discharged damaged.                       These

defendants mischaracterize the district court’s decision.                       The

      11
           46 U.S.C. § 1304(2).
      12
       Tubacex, 45 F.3d at 954. This is true except for defendants
who argue the peril of the sea defense under section 1304(2)(c) of
COGSA. “[I]n order to establish an exception under this clause,
the ship would have to establish freedom from negligence” as well
as prove that rough weather encountered on the voyage was a sea
peril. J. Gerber & Co. v. S.S. Sabine Howaldt, 437 F.2d 580, 588-
89 (2d Cir. 1971) (internal quotation marks omitted).
      13
           Tubacex, 45 F.3d at 954.

                                        6
district court properly explained that under COGSA a plaintiff must

establish a prima facie case by “proving that the cargo for which

the   bills   of   lading    were      issued    was   loaded   in   an   undamaged

condition, and discharged in a damaged condition.”                   Applying this

law the trial court determined that Steel Coils demonstrated its

prima facie case by proving that “the cargo was delivered to the

LAKE MARION in good order and condition” and “was unloaded at the

ports of New Orleans and Houston in a damaged condition.”

      The district court cited specific evidence proffered by Steel

Coils to support these conclusions.              In determining that the coils

were loaded in good condition, it examined “mates receipts, bills

of lading containing comments on the condition of the cargo, and a

cargo   survey     taken    at   the    load    port   in   Riga   that   contained

commentary about and photographs of the cargo.”                 It explained that

although some of these documents contained notations regarding

“atmospheric rust on the hot rolled coils and damage to the

wrapping of the cold rolled and galvanized coils,” the evidence

showed that “these conditions did not damage the coils” and were

not the result of exposure to seawater prior to embarkation.

      In looking at the evidence of the coils’ unloading, the court

found that “[a]ll of the surveyors at the discharge ports testified

that the cargo was damaged when it was discharged ... and their

survey reports support their testimony.”                    Moreover, relying on

these surveyors’ reports, as well as those of chemists who tested

the rust on the coils, the court concluded that the rust damage was

                                          7
a result of seawater contamination.           The trial court affirmatively

rejected the testimony of the defendants’ expert, Sanchez, who

testified that the cargo was not contaminated by seawater.

     The trial court correctly placed the burden upon Steel Coils

to prove a prima facie case and examined the evidence to determine

whether in fact this had been done.           Although the vessel interests

couch their complained-of error as improper burden shifting, their

argument attacks the district court’s factual findings that the

cargo was undamaged before loading and damaged at unloading.               They

assert that the district court wrongly determined the coils were

undamaged at loading because the bills of lading noted that the hot

rolled coils were rust stained and wet and noted that the condition

of the cold rolled and galvanized steel coils, which were encased

in steel wrappers, was unknown.         They also argue that the district

court did not rely on competent evidence in determining that the

cargo was damaged at discharge.

     The district court found from the evidence presented that the

notations on the bills of lading indicating rust staining and

moisture   on   the   hot   rolled    coils   did   not   affect   their   good

condition prior to loading.          Evidence in the record supports this

conclusion.     Captain Sparks, Steel Coils’s expert on carriage of

steel cargo by sea, explained that the notations regarding rust on

the bills of lading were “non-restrictive clause[s] indicating that

the goods [were] undamaged but affected by a form of atmospheric

rust normal on all mild steel surfaces which are untreated against

                                        8
oxidation.”      This atmospheric rust, which he also termed “fresh

water rust,” is caused by the storage of hot rolled coils in open

air prior to loading onto the vessel.    Sparks stated that this type

of rust does not result in harmful deterioration of the material,

and only if the hot rolled coils come into contact with “an

electrolyte more aggressive than fresh water[,] e.g. saltwater,”

does permanent damage to the plating occur. Moreover, he explained

that “[i]t is not unusual for the goods to be shipped in an

apparent rusty condition and wet,” and despite the notations on the

bills of lading, all of the bills of lading were signed clean, and

therefore “all cargo when shipped was in apparent good order and

condition.”

     Despite this evidence, the vessel interests argue that the

rust found on the hot rolled coils prior to loading was probably

caused by exposure to saltwater, because the coils were stored

outdoors   for    an   indefinite   amount   of   time   in   a   “marine

environment.” They maintain that saltwater could have been carried

by the wind from the sea to the place at which the coils were

stored. However, as the district court noted, the hot rolled coils

loaded at Ventspils, which were also noted as being rust stained on

their bills of lading and, in accordance with custom, had likely

also been transported and stored outdoors, tested negative for

exposure to saltwater when subjected to silver nitrate tests prior

to loading.   The vessel interests argue that these silver nitrate

tests are irrelevant because they were conducted at Ventspils, not

                                    9
Riga. Nevertheless, that the hot rolled coils at Ventspils had the

same notations on their bills of lading and tested negative for

saltwater     exposure       prior        to    loading      clearly      bears    on   the

plausibility of the defendants’ theory that the pre-loading rust on

the Riga hot rolled coils was seawater rust caused by the marine

environment.

      In    Thyssen,     Inc.       v.    S/S    Eurounity,14     the     Second   Circuit

confronted similar facts.                The shipper sued the carriers for rust

damage to hot rolled steel coils.                      However, the bills of lading

contained notations such as “rust stained,” “partly rust stained,”

and “wet before shipment.”15                    The defendants urged that these

notations     prohibited        a    finding         that   the   coils    were    in   good

condition upon loading.                  The Second Circuit disagreed, finding

“ample evidence that the steel was in good condition.”16                                 For

instance, experts the district court found credible testified that

the   clauses    on    the   bills        of    lading      indicated     steel    of   good

condition.      One expert testified that “[t]he Port ... had used

these standardized notations for approximately thirty years to

refer to nondamaging, atmospheric rust that does not affect the

value of steel. [The expert further] testified that steel is

considered to be in ‘prime’ condition when the bills of lading

      14
           21 F.3d 533 (2d Cir. 1994).
      15
           Id. at 536.
      16
           Id. at 538.

                                                10
include these standardized notations.”17             On the basis of this

evidence,       the   Second   Circuit    affirmed   the   district   court’s

determination that the shipper had made out a prima facie case.18

     We conclude that the district court in this case did not

clearly err in finding that the hot rolled coils were in good

condition prior to loading.        That the rust noted on the coils was

atmospheric and nondamaging in nature, and that the moisture on the

coils also did not affect their good condition is supported by the

evidence.

     As for the cold rolled and galvanized coils, the vessel

interests argue that the bill of lading notation that the condition

of these coils was unknown fatally undermined Steel Coils’s attempt

to prove a prima facie case of good condition.             For this argument

they rely on Caemint Food, Inc. v. Lloyd Brasileiro Companhia de

Navegacao, in which the Second Circuit reasoned:

     Although a clean bill of lading normally constitutes
     prima facie evidence that cargo was in good condition at

     17
          Id.
     18
        Id. Similarly, in Couthino, Caro & Co. v. M/V Sava, 849
F.2d 166 (5th Cir. 1988), cold rolled and galvanized steel coils
were damaged, allegedly by seawater. Although we did not take up
the question of whether the plaintiff had presented a prima facie
case that the coils were in good condition upon loading, we did
summarize the district court’s findings on this issue. Id. at 168.
We explained that although the bills of lading contained numerous
exceptions noting rust and packaging damage, the district court
nonetheless found the coils to have been in good condition prior to
shipment, because the shipper’s expert opined that the coils were
loaded in mill condition and the bills of lading described only
“light atmospheric rust,” not “a problem affecting the coils.” Id.

                                         11
     the time of shipment ... it does not have this probative
     force where ... the shipper seeks to recover for damage
     to goods shipped in packages that would have prevented
     the carrier from observing the damaged condition had it
     existed when the goods were loaded.19

Caemint held that a plaintiff could not recover for corned beef it

claimed was ruined during the voyage because it could not present

evidence as to the condition of the corned beef, which was inside

metal containers, before shipment.20

     We    have   similarly   stated   that   “[w]here   because   of   the

perishable or intrinsic nature of the commodity, the internal

condition is not adequately revealed by external appearances, cargo

may have a considerable burden of going further to prove actual

condition.”21     That is not the case here.   Captain Sparks testified

that although the wrappers of the cold rolled and galvanized coils

loaded at Riga were wet due to condensation, there was no evidence

of “drip-down” or “run-down” of moisture to the coils and no

mention in the bills of lading of “white rust or white oxidation

marks,” which are normal preshipment clauses indicating possible

rust damage to the coils.        He concluded that “[t]he amount of

moisture on those coils must have been negligible” and “[t]here was

no damage to those coils.”

     19
          647 F.2d 347, 352 (2d Cir. 1981).
     20
          Id. at 355.
     21
       United States v. Lykes Bros. S.S. Co., 511 F.2d 218, 223
(5th Cir. 1975) (internal quotation marks omitted).

                                   12
     The evidence at trial showed that, had the cold rolled or

galvanized coils been damaged by rust, their outer wrappers would

have revealed it.   Because the wrappers had no indication of rust,

and the moisture on the outside of the wrappers was not dripping

down into the coils, it was not clearly erroneous for the district

court to conclude that the cold rolled and galvanized coils were in

an undamaged state prior to loading.

     The vessel interests further assert clear error in the finding

that the steel coils were damaged upon unloading.    The contention

is that seawater could not have entered through the hatches because

the top-stowed cargo unloaded at Camden had no seawater damage, and

that perhaps the steel coils rusted on the way from the ship to

their ultimate inland destinations.

     The vessel interests’ arguments are belied by a wealth of

evidence relied upon by the district court that at unloading the

cargo was damaged by seawater rust.      For instance, the McLarens

Toplis survey conducted in New Orleans noted “rust stains to coils

to varying extents,” and “[r]andom tests on the rust stained areas

with a solution of silver nitrate proved positive” with respect to

chlorides, “indicating water ingress.”   The McLarens Toplis survey

in Houston similarly stated that “[t]he cargo was examined and

found to be extremely rusty,” and that “[e]xtensive silver nitrate

tests were conducted with strong positive results.       It is our

opinion [that] the ... cargo came into contact with sea water, most

likely through the poorly maintained hatch covers....”

                                 13
     The vessel interests have not cited any evidence in the record

that disputes these conclusions.           Their argument that the district

court “simply accepted plaintiff’s survey reports and testimony en

masse as setting forth the proper measure of damages, and that the

damage    was   proven     at   discharge”    implicitly       acknowledges   that

substantial evidence in the record supports the district court’s

conclusions as to the damage evident at unloading.

                                       B.

     Facing a prima facie case, a defendant may escape liability if

it shows that it exercised “due diligence ... to make the ship

seaworthy,      and   to   secure   that     the   ship   is   properly   manned,

equipped, and supplied, and to make the holds ... and all other

parts of the ship in which goods are carried fit and safe for their

reception, carriage, and preservation.”22 The vessel interests urge

that even if Steel Coils carried its initial burden, they exercised

due diligence in making the vessel seaworthy and thus should have

escaped liability.

     In making its determination that the defendants did not

exercise due diligence, the district court correctly noted that

seaworthiness is defined as “reasonable fitness to perform or do

the work at hand,”23 and explained that, under COGSA, the carrier’s

     22
          46 U.S.C. § 1304.
     23
       See Farrell Lines, Inc. v. Jones, 530 F.2d 7, 10 n.2 (5th
Cir. 1976) (internal quotation marks omitted).

                                       14
duty to exercise due diligence in making the vessel seaworthy is

nondelegable.24   It concluded that the ship was not reasonably fit

to perform the work at hand – shipping steel coils – because the

hatches were not maintained in good condition and had not been

tested for watertightness before embarkation, which had resulted in

an ingress of seawater during the voyage, and because the holds,

which had previously carried a cargo of rock salt, had not been

washed out with fresh water before the steel was loaded.

     The vessel interests dispute these findings, arguing that the

surveys done prior to embarkation show that the hatches were in

watertight condition. They further deny any obligation to test the

watertightness of the hatch covers prior to the voyage, because by

the voyage charter that obligation belonged to Itochu.     Finally,

they deny any contractual obligation to wash the holds with fresh

water instead of Baltic Sea water.

     Although preload surveys conducted at Riga found the hatches

sufficient, one of the surveys also noted deficiencies in the hatch

covers.   The SKS International Cargo Service survey found that

“[t]he hatch-cover tightening rubbers are deformed (pressed inside)

more or less everywhere.    Also[,] the ends of these rubbers are

pressed out or glued out on the extremes of hatch-covers.”     The

report further detailed that “[t]he condition of hatch trackways

     24
       See Jamaica Nutrition Holdings, Ltd. v. United Shipping Co.,
643 F.2d 376, 379 (5th Cir. 1981) (“COGSA ... imposed a
nondelegable duty on [the carrier] to exercise due diligence to
make the vessel fit for carriage of the cargo shipment.”).

                                 15
and coamings [was] found as satisfactory but rusty and with the

traces of corrosion. The compression bar is partly bent (deformed)

... due to wear and tear.”

      Captain Sparks explained that the description of the hatches

found in the SKS survey “indicates that the required maintenance

was   not   performed.”    Moreover,   he   opined   that   the   preload

surveyors’ conclusion that despite these deficiencies the hatches

were watertight is not reliable because the “watertight integrity

of the hatches was not determined [by a hose test or ultrasound

test], as is customary with steel cargoes in the industry prior to

commencement of the sea voyage.”

      That the hatches were insufficiently maintained is further

supported by the observations of the Seaspan Marine Consultants

surveyor who inspected the hatches after the vessel docked in

Camden.     He noted that the rubber gaskets of the hatch panels had

deep grooves in them, were worn out in several places, were heavily

rusted and bent or waved in certain areas, and that parts of the

gaskets were missing or cut in some places.

      In line with these observations, the McLarens Toplis surveyor

in Houston reported after inspection of the vessel:

      The vessel appeared to be very poorly maintained. Our
      inspection of the hatch covers noted them to be in
      extremely poor condition. We noted large amounts of rust
      flaking off at the slightest of touches. We noted the
      compression bars, channel bars, and general areas around
      the hatch coaming to be severely dented, gouged, and
      holed to varying degrees. We noted the hatch packings to
      be gouged, missing, and the general area around the hatch
      packings to be wasted severely.       We also noted the

                                  16
     channel areas to be bent. Severe drip downs were noted
     in all hatches.
           It is our opinion [that] the cargo hatches were
     poorly maintained and appeared to have severe sea water
     ingress in all cargo hatches that were of concern at this
     port.

     Captain Sparks concluded from these descriptions that “when

the vessel commenced the voyage from the Baltic Sea to Camden the

hatches were defective owing to lack of maintenance,” and as a

result    they    “were   not   weather    tight.”     Although   the   vessel

interests take issue with the competency of this evidence and argue

that the preload survey reports should have been given more weight

than Captain Sparks’ “hindsight” opinions, there was sufficient

evidence to support the district court’s conclusion that the

hatches    were   inadequately     maintained    and   it   was   not   clearly

erroneous.

     The vessel interests also argue that they were not responsible

for conducting a watertightness test on the hatch covers prior to

embarkation, because pursuant to the voyage charter Itochu was

supposed to “make an inspection of holds and test watertightness of

hatches.”    This argument ignores the COGSA carrier’s nondelegable

duty to ensure that the vessel is reasonably fit to carry steel

cargo.

     In Jamaica Nutrition Holdings, Ltd. v. United Shipping Co.,

Ltd., we rejected a similar argument.25          There the trial court had

     25
          643 F.2d 376 (5th Cir. 1981).

                                      17
found the defendant carrier liable for failing to adequately clean

out the pipes of the vessel before loading its cargo of soybean

oil.26    The ship’s previous cargo had been molasses.    Prior to

loading the oil, a surveyor had visually inspected the ship’s pipes

and tanks and determined that they were suitable for carrying the

oil.27    After the ship reached its destination, another surveyor

examined the oil and found it contaminated with molasses.28   Based

on this evidence, the district court concluded that the defendant’s

failure to clean adequately the vessel’s tanks, pipes, and pumps

rendered the vessel unseaworthy.29

     On appeal, the defendant argued it should escape liability

because the voyage charter party provided: “Vessel to clean tanks,

lines and pumps to Charterer’s surveyor’s satisfaction.”30      It

contended that because the charterer’s surveyor had inspected the

vessel’s tanks and found them suitable, the carrier’s obligation to

     26
          Id. at 377-78.
     27
          Id. at 378.
     28
          Id.
     29
          Id.
     30
          Id. at 379 (emphasis added).

                                  18
the shipper was fulfilled.31      However, we concluded otherwise,

reasoning:

     COGSA, whether applicable by its own force or by virtue
     of the clause paramount, imposed a nondelegable duty on
     [the carrier] to exercise due diligence to make the
     vessel fit for carriage of the cargo shipment. This duty
     was not abrogated by its covenant also to clean the
     vessel to the charterer’s satisfaction. By permitting
     molasses residue to remain in the system, [the carrier]
     violated its duty.32

     Because the duty to exercise due diligence to ensure the

seaworthiness of a vessel is nondelegable, the district court here

did not reversibly err in concluding that the vessel interests

failed to exercise due diligence in part because they did not test

the watertightness of the hatches.

     Finally, the vessel interests maintain that they had no

contractual duty to rinse out the holds with fresh water.    Again we

remind that the vessel interests need not be contractually bound to

perform a task for its omission to be a lack of due diligence.

They do not dispute that before transporting the steel coils the

vessel had transported coal, and before that, rock salt.    They also

do not deny that before loading the coils onto the ship the holds

were washed out with Baltic Sea water, which has a higher salt

content than fresh water. When asked whether the holds should have

     31
       Id.; see also id. at 379 n.4 (“COGSA allows a freedom of
contracting out of its terms, but only in the direction of
increasing the shipowner’s liabilities, and never in the direction
of diminishing them.” (internal quotation marks omitted)).
     32
          Id. (internal citations and footnote omitted).

                                  19
been washed out with fresh water before loading the steel cargo,

Captain Sparks explained, “as chlorides are, even in a reduced

form, so devastating to steel surfaces, ... we always advocate that

after washing out the holds, the final wash-down should be done

with fresh water.”

     The district court’s finding is supported not only by Captain

Sparks’s opinions but also by silver nitrate tests conducted both

at Riga and Ventspils after the holds were washed out that revealed

the presence of chlorides in the holds.     Even after these tests

proved positive for salt, the crew did not wash the holds out with

fresh water.   The results of the silver nitrate tests show not only

that the crew should have washed the holds out with fresh water to

begin with but also that the crew did not take the necessary

precautions to protect the cargo even after they knew salt was in

the holds.   We therefore can find no error in the district court’s

determination that the crew’s failure to wash out the holds with

fresh water was a lack of due diligence.

                                 C.

     The vessel interests contend that even if the district court’s

finding on due diligence can be sustained, the coils became damaged

due to causes for which COGSA liability is excepted.

                                 1.

     Under section 1304(2) of COGSA, “[n]either the carrier nor the

ship shall be responsible for loss or damage arising or resulting

from ... [p]erils, dangers, and accidents of the sea or other

                                 20
navigable waters.”33       At trial the defendants argued that a storm

encountered by the M/V Lake Marion on its transatlantic voyage

constituted a “peril of the sea” and caused the saltwater to enter

the holds.      The ship’s captain testified that he encountered very

rough       weather   during   the   journey,   with   strong   winds   that

occasionally reached Beaufort Scale Force 10 and, at their peak,

reached force 11 to 12 for approximately two hours on March 26.

       The trial judge rejected the peril of the sea defense for two

reasons.       First, such weather conditions were foreseeable in the

North Atlantic during the late winter months. Second, no damage to

the vessel resulted from the voyage, and the only conditions noted

in the surveys at the discharge ports indicated preexisting damage

as a result of prolonged neglect.

       The vessel interests contend that it is irrelevant that the

conditions encountered by the M/V Lake Marion were foreseeable,

because with their force 12 winds they were severe enough as to

have    been    unpreventable    even   if   foreseeable,   like   hurricane

weather.       They claim these conditions resulted in significantly

more movement of the hatch covers than is normal.

       The vessel interests rely upon J. Gerber & Co. v. S.S. Sabine

Howaldt, a case from the Second Circuit which concluded that

similarly rough conditions were a peril of the sea.34           The shipper

       33
            46 U.S.C. § 1304(2)(c).
       34
            437 F.2d 580, 588 (2d Cir. 1971).

                                        21
had chartered     the   vessel   to   carry   steel   products   across   the

Atlantic.35     Upon unloading, the steel showed extensive signs of

rust damage from exposure to seawater.36 The defendants claimed the

peril of the sea defense.37      The district court found the weather

conditions through which the ship sailed were not a peril of the

sea, and awarded damages to the shipper.38             The Second Circuit

reversed, finding that the conditions were sufficiently perilous.39

     The vessel in J. Gerber faced days of force 9 and 10 winds,

and over ten hours in which the winds reached force 11 and 12.40

It had to heave to and remain in that state for twelve hours.

These fierce winds twisted the ship’s hull and caused her to roll

violently and shudder and vibrate “as she was pounded and wrenched

by the heavy seas.”41 After the storm abated, the crew found damage

to the ship in several areas: a piece of equipment was torn off the

deck, leaving a hole; a porthole in the galley was smashed; a

     35
          Id. at 583.
     36
          Id.
     37
          Id.
     38
          Id. at 583-84.
     39
          Id. at 584.
     40
          Id. at 584-86.
     41
          Id. at 586.

                                      22
gangway was destroyed; two winch covers were ripped off; and the

vessel had several dents.42

     In determining whether the storm constituted a peril of the

sea, the court found of great importance “the wind velocity in

terms of the Beaufort Scale.”43       Although it explained that “[n]o

exact Beaufort Scale wind force can be referred to as the dividing

line which will determine those cases in which a peril of the sea

is present and those, below that mark, in which it is not,” it

found “few cases in which the winds are force 9 or below ... in

which there has been found to have been a peril of the sea, whereas

there are many where the force has been 11 or above.”44

     It also cautioned that wind velocity is “a rough measure at

best and not sufficient standing by itself.”45         There are other

indicia.46      Assuming a seaworthy ship, they include the “nature and

extent of the damage to the ship itself, [or] whether or not the

ship was buffeted by cross-seas which wrenched and wracked the hull

and set up unusual stresses in it.”47          Looking to these other

considerations, the court concluded that the damage to the cargo

     42
          Id.
     43
          Id. at 596.
     44
          Id.
     45
          Id.
     46
          Id.
     47
          Id.

                                    23
was caused by a violent peril of the sea that, “through wrenching

and twisting the vessel, set up torsions within the hull which

forced up the hatch covers and admitted sea water to the holds.”48

The vessel interests argue that we should reach the same conclusion

as the J. Gerber court, because the wind force encountered by the

ship in that case was in line with that faced by the Lake Marion.

     Although the conditions experienced by both vessels contain

some parallels, they were not identical.     In J. Gerber the ship

faced force 11 to 12 winds for approximately ten hours;49 the Lake

Marion only encountered such winds for two hours.    Captain Sparks

testified that because the ship’s exposure to those winds was

short, the wave height likely did not build up to that normally

encountered with force 11 to 12 winds.        He explained, “[s]ea

condition builds up slowly as the wind increases” and therefore

“the wind force is way ahead of it.”   As a result “it’ll take three

to four hours to build up to what it should be.”      Although with

force 12 winds the accompanying sea height is typically fourteen

meters, Sparks opined that the highest it reached with the Lake

     48
          Id. at 597.
     49
        Id. at 584-85 (“By 0200 on December 23rd [the wind force]
went up to force 11 with gusts at force 12 in ‘hurricane-like rain
squalls.’ By 0500, due to the criss-cross running swells and high
breaking seas, the ship was badly strained in her seams and sea
water was breaking over forecastle deck, hatches and upper works.
It was necessary for the vessel to heave to and she so remained for
12 hours. At 0900 the force 11 wind with gusts in squalls of force
12 steadied at a constant hurricane force of 11/12 or about 63
knots, which continued to a time between 1200 and 1300.”).

                                24
Marion was eleven and a half to twelve meters before the wind force

started to reduce.

     The vessel interests also overlook the fact that the strength

of the wind is but one among several factors that should be

considered in determining the applicability of the peril of the sea

defense.    As emphasized by J. Gerber, the extent of damage to the

vessel is also important.     The vessel in that case sustained a

great deal of damage, while the captain of the Lake Marion reported

none.     Captain Sparks confirmed that the ship was not damaged by

the weather, as the only problems noted in the discharge surveys

referred to preexisting damage as a result of prolonged neglect.

     We, like the district court here, find telling that the ship

sustained no reported damage as a result of the stormy conditions.

As one court has noted,

     [t]he absence of damage to the vessel itself is always an
     important consideration. Indeed, the courts have often
     required that the structural damage be substantial....
     [I]f there was no structural damage or if the damage was
     limited to one fitting, such as a hatchway or a
     ventilator cowl, which led to damage to the cargo, courts
     will find with reluctance that the damage resulted from
     a peril of the sea.50

     We sustain the district court’s refusal to find the rough

weather encountered by the M/V Lake Marion to have been a peril of

the sea given the ship’s lack of injury.     We cannot conclude on

     50
       Kane Int’l Corp. v. MV Hellenic Wave, 468 F. Supp. 1282,
1286 (S.D.N.Y. 1979) (internal quotation marks and citations
omitted).

                                  25
this record that the noted storm, even with its force 12 winds,

constituted a peril “of an extraordinary nature or aris[ing] from

irresistible force or overwhelming power” which could not “be

guarded against by the ordinary exertions of human skill and

prudence.”51

                                    2.

     The vessel interests also urge another exception to COGSA

liability.     COGSA exempts any damage caused by “[l]atent defects

not discoverable by due diligence.”52    Defendants argued at trial

that a crack found in Hold No. 1 while the vessel was docked in New

Orleans, which ruined 123 coils in that hold, was a latent defect

that could not have been discovered through due diligence.      The

trial judge rejected the contention that the fracture was a latent

defect.

     “A true latent defect is a flaw in the metal and is not caused

by the use of the metallic object” or by “gradual deterioration.”53

Such a defect “is one that could not be discovered by any known and

     51
       J. Gerber & Co., 437 F.2d at 588 (internal quotation marks
omitted).
     52
          46 U.S.C. § 1304(2)(p).
     53
       Waterman S.S. v. U.S. Smelting, Ref. & Mining Co., 155 F.2d
687, 691 (5th Cir. 1946).

                                    26
customary test.”54    The ship owner has the burden to demonstrate

that the defect was not discoverable.55

     The vessel interests posit that since a latent defect is one

not discoverable in the ordinary course of surveys or inspections,

and the M/V Lake Marion’s holds were inspected during the loading

process, the crack was by definition a latent defect.           However,

Marine    surveyor   Captain   Rasaretnam   inspected   the   crack   and

determined that it was old, and had existed in some form since

crews installed a doubling plate at the fracture site.                The

district court concluded that the crack was an extension of an old

crack, and at least part of it had been present since the doubling

plate had been put in place. Moreover, Captain Sparks hypothesized

that the crack was caused by gradual deterioration, not by a defect

in the metal.    We cannot conclude that the district court clearly

erred in finding that the fracture was old and in rejecting the

latent defect defense.

                                   V.

     In addition to its COGSA claims, Steel Coils asserted a

general maritime negligence claim against Lake Marion, Inc.’s

managing agent, Bay Ocean.     The claim is that Bay Ocean, as vessel

manager, hired the crew and was responsible for maintaining the

vessel’s condition, and that it was negligent in maintaining and

     54
          Id.
     55
          Id.

                                   27
testing the hatch covers, failing to repair the crack in Hold No.

1, and in washing the holds with seawater.   Bay Ocean contended at

trial that Steel Coils could not assert a negligence claim against

it outside of COGSA.

     The district court disagreed, holding Bay Ocean liable in tort

for its negligence separate from the COGSA claim, and finding Bay

Ocean liable for the entire amount requested by Steel Coils because

Bay Ocean was not entitled to claim the $500-per-package limitation

on liability found in COGSA.    These are conclusions of law and we

conduct a de novo review.

     “One of COGSA’s most important provisions limits a [vessel or]

carrier’s liability to five hundred dollars ... per package unless

a higher value is declared by the shipper.”56    The term “carrier”

includes “the owner or the charterer who enters into a contract of

carriage with a shipper.”57   We have held that as long as an entity

is a party to the contract of carriage, it is a carrier.   In Sabah

     56
       Mannesman Demag Corp. v. M/V Concert Express, 225 F.3d 587,
589 (5th Cir. 2000); see 46 U.S.C. § 1304(5) (“Neither the carrier
nor the ship shall in any event be or become liable for any loss or
damage to or in connection with the transportation of goods in an
amount exceeding $500 per package lawful money of the United
States, or in case of goods not shipped in packages, per customary
freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been declared by the
shipper before shipment and inserted in the bill of lading. This
declaration, if embodied in the bill of lading, shall be prima
facie evidence, but shall not be conclusive on the carrier.”).
     57
          § 1301(a).

                                 28
Shipyard    Sdn.   Bhd.    v.   M/V   Harbel   Tapper,58   we   stated,   “[t]o

determine whether a party is a COGSA carrier, we have followed

COGSA’s plain language, focusing on whether the party entered into

a contract of carriage with a shipper.... [A] party is considered

a carrier under COGSA if that party ‘executed a contract of

carriage.’”59

     It is undisputed that Bay Ocean is not explicitly named in the

applicable contract of carriage, the voyage charter between Western

Bulk and Itochu.60        Nevertheless, Bay Ocean maintains that it was

a party to the time charter between Lake Marion, Inc. and Western

Bulk, and therefore Western Bulk acted as Bay Ocean’s agent, as

well as Lake Marion’s, in entering into the voyage charter with

Itochu.     The district court rightly concluded that Bay Ocean was

not a carrier.

     58
          178 F.3d 400 (5th Cir. 1999).
     59
          Id. at 405 (internal quotation marks omitted).
     60
       The district court concluded that the voyage charter party,
rather than the bill of lading, was the applicable contract of
carriage because if a bill of lading is held by the same shipper
that executed the voyage charter party, the charter party governs
the transaction. See In re Marine Sulphur Queen, 460 F.2d 89, 103
(2d Cir. 1972). The trial court found that Itochu, in entering
into the voyage charter, acted as Steel Coils’s agent. Since Steel
Coils was the shipper that held the bills of lading and was a party
to the voyage charter by virtue of its agency relationship with
Itochu, the voyage charter party was the contract of carriage.
Steel Coils did not argue in its original brief that Itochu was not
its agent, and thus waived the argument. See Peavy v. WFAA-TV,
Inc., 221 F.3d 158, 179 (5th Cir. 2000).

                                       29
       The time charter states that it is between “Lake Marion, Inc.

– Managers: Bay Ocean Management, Inc.” and Western Bulk. However,

the charter party only recites the duties and rights of the time

charterer, Western Bulk, and the owner, Lake Marion, Inc.                   It does

not bind Bay Ocean in any way.                  Bay Ocean’s presence in the

contract is simply as a signing agent of the owner, as evidenced by

the signature line, which provides that Bay Ocean signed the time

charter for Lake Marion Inc. “As Agents Only.”                 Because the time

charter party was solely between Western Bulk and Lake Marion,

Western Bulk did not enter into the voyage charter party with

Itochu on Bay Ocean’s behalf, but rather only on Lake Marion’s, and

Bay Ocean’s only status in this case is as an agent of the carrier,

Lake Marion, Inc.

       In Robert C. Herd & Co. v. Krawill Machinery Corp.,61 the

Supreme Court clarified that agents of a carrier do not qualify for

the $500-per-package limitation.              The precise question presented

was    whether    the      limitation   “also    appl[ied]    to   and   likewise

limit[ed]      the    liability    of   a     negligent     stevedore.”62       The

stevedore’s employees had, while loading the plaintiff’s cargo onto

the vessel, dropped one of the cases, which contained a press

weighing nineteen tons, into the harbor. After the plaintiff filed

suit    against      the   stevedore,   the     stevedore    asserted    that   its

       61
            359 U.S. 297 (1959).
       62
            Id. at 298.

                                         30
liability was limited to $500 by COGSA.63      In determining whether

the package limitation applied, the Supreme Court first looked to

the language and legislative history of COGSA to determine whether

Congress intended to limit the liability of “negligent agents of a

carrier.”64     It observed:

     The Act is clearly phrased.        It defines the term
     “carrier” to include “the owner or the charterer who
     enters into a contract of carriage with the shipper.” It
     imposes particularized duties and obligations upon, and
     grants stated immunities to, the “carrier.” Respecting
     limitation of the amount of liability for loss of or
     damage to goods, it says that “neither the carrier nor
     the ship” shall be liable for more than $500 per package.
     It makes no reference whatever to stevedores or agents.65

Moreover, “[t]he legislative history of the Act shows that it was

lifted almost bodily from the Hague Rules of 1921,” which “do not

advert to stevedores or agents of a carrier,” and “[t]he debates

and Committee Reports in the Senate and the House upon the bill

that became the Carriage of Goods by Sea Act likewise do not

mention stevedores or agents.”66      The Court concluded that nothing

in the language or the legislative history of the Act either

“expressly or impliedly indicates any intention of Congress to

regulate stevedores or other agents of a carrier, or to limit the

     63
          Id. at 298-99.
     64
          Id. at 301.
     65
          Id. (citations omitted).
     66
          Id.

                                     31
amount of their liability for damages caused by their negligence.”67

     Despite this language in Herd, Bay Ocean argues that even if

it is nothing more than an agent of the carrier it may avoid

liability altogether on Steel Coils’s separate negligence claim

because COGSA is the exclusive remedy for suits for damage to

cargo.     However, in a similar case, Citrus Marketing Board of

Israel v. J. Lauritzen A/S,68 the Second Circuit held that a

plaintiff may sue a ship’s manager in tort for damage to cargo and

that COGSA does not govern such an action.      The Citrus Marketing

court rejected the manager’s argument and the district court’s

holding that COGSA controlled the claim, explaining that COGSA only

applied to disputes between shippers and carriers.69     Relying on

Herd, the court concluded that COGSA did not preclude a separate

action against the      manager.70    It explained, however, that a

Himalaya Clause,71 which extends a carrier’s rights under COGSA to

     67
          Id. at 301-02.
     68
          943 F.2d 220 (2d Cir. 1991).
     69
          Id. at 222.
     70
          Id. at 222-23.
     71
       The Himalaya Clause included in the bill of lading in Citrus
Marketing provided:

     Benefit to Third Parties. Every agent or employee of the
     Carrier or Shipowner and every independent contractor who
     performs any part of the services provided by the Carrier
     or Shipowner, including the vessel’s officers and crew,
     stevedores, shore side employees, draymen, crane and
     other machinery operators, shall have the same rights,

                                     32
agents of the carrier, might apply to save the manager from

liability   and   remanded   that   issue   for   the   district   court   to

consider at trial.72   In finding that COGSA did not prohibit Steel

Coils’s negligence claim against Bay Ocean, the trial judge relied

upon Citrus Marketing.73

     privileges, limitations of liability[,] immunities and
     powers provided for the Carrier by this contract, by
     [COGSA], or by any other statute or regulation, the
     foregoing contract provisions being made by the Carrier
     and Shipowner for the benefit of all other persons and
     parties performing services in respect of loading,
     handling, stowing, carrying, keeping, caring for,
     discharging, and delivering the Goods or otherwise.

Id. at 221.
     72
       Id. at 223-24; see      also Cerro Sales Corp. v. Atl. Marine
Ent., 403 F. Supp. 562,        568 (S.D.N.Y. 1975) (holding that a
vessel’s manager was “not       covered by the limitations of COGSA
available to a carrier, and    ... may be fully liable for its acts of
negligence”).
     73
        The trial judge also relied upon Associated Metals and
Minerals Corp. v. Alexander’s Unity MV, 41 F.3d 1007 (5th Cir.
1995).   In that case, we explained that while “COGSA governs
certain aspects of claims for damages to cargo and provides
carriers with certain defenses,” it does not “preclude claims in
tort for negligent damage to cargo.” Id. at 1017. The district
court here interpreted Alexander’s Unity as holding that COGSA does
not prohibit separate negligence claims.       However, whether a
noncarrier may be sued in tort outside of COGSA was not broached by
the Alexander’s Unity court, which instead dealt with the question
whether a shipper’s cause of action under COGSA against the vessel
in rem for damage to steel cargo was properly categorized as
sounding in tort or contract. Id. at 1014-17. If the claim was
“for damage arising out of maritime tort,” it was entitled to
preferred maritime lien status. Id. at 1011-12. The defendant
argued that COGSA provided the plaintiff’s exclusive remedy for
damage to cargo, and that, under COGSA, a plaintiff’s claims sound
only in contract.     Id. at 1013.    We rejected the defendants’
argument, explaining that although COGSA certainly applied to the
claim at issue, which was between a shipper and a vessel, “the Act

                                    33
     Bay Ocean charges that the district court’s ruling that Bay

Ocean cannot take advantage of the $500-per-package limitation

“ignores the reality of maritime commerce,” because it is common

for one-vessel corporations such as Lake Marion, Inc., who have no

employees, to act solely through their managing agents.         It also

argues that this result will “allow shippers to circumvent not only

the package limitation, but all of COGSA, when contracting with a

vessel with a separate managing agent.”        However, Bay Ocean chose

to separate itself from Lake Marion by binding only Lake Marion to

the time charter.     In doing so Bay Ocean chose that only Lake

Marion    would   become   a   carrier   for    purposes   of   COGSA.74

does not abrogate the long-standing rule of admiralty allowing
certain cargo claims to sound both in tort and in contract.” Id.
at 1016.     Therefore, the court discussed only the proper
categorization of the plaintiff’s COGSA claim, not whether tort
claims against noncarriers for damage to cargo could fall outside
of COGSA.
     However, Alexander’s Unity also does not hold, as Bay Ocean
contends, that a shipper can never set forth a tort claim for
damage to cargo against a noncarrier outside of COGSA. Although it
quotes a statement from St. Paul Fire & Marine Insurance Co. v.
Marine Transportation Services Sea-Barge Group, Inc., 727 F. Supp.
1438, 1439 (S.D. Fla. 1989), that COGSA provides an “exclusive
remedy, barring all other theories of liability, including theories
of negligence,” it quotes it in the context of discussing a claim
for cargo damage against a vessel, not against a noncarrier.
Alexander’s Unity, 41 F.3d at 1017. Moreover, a plain reading of
St. Paul makes clear that it was only explaining that, when COGSA
applies, which is in the context of a shipper’s suit against a
carrier or vessel for cargo damage, it provides the exclusive
remedy. See St. Paul, 727 F. Supp. at 1442. It did not reason
that a shipper cannot sue a noncarrier outside of COGSA.
     74
          Bay Ocean also ignores the availability of a Himalaya
Clause.

                                  34
     We agree with the Second Circuit that a noncarrier can be held

liable in tort outside of COGSA.75    Steel Coils’s negligence action

against Bay Ocean was not subject to the COGSA package limitation.

                                VI.

     For these reasons, we AFFIRM the district court’s judgment.76

     75
        Neutax, S.A. v. Global Freight Services, Inc., 2002 A.M.C.
2576 (S.D. Fla. 2002), does not change our conclusion. Although
Bay Ocean submitted this case after oral argument on the basis that
it constituted further pertinent authority with regard to this
issue, it does not address whether COGSA is the exclusive remedy
for a shipper who wishes to sue a noncarrier for damage to cargo.
See id.
     76
         We do not take up the issues presented in either Steel
Coils’s or Western Bulk’s cross-appeals.    Both Steel Coils and
Western Bulk wished the court to address their cross-appeals only
if we found the vessel interests’ points of error meritorious.

                                35