USA: US Law Package Limitation Defence


Published: 23 April 2014

The Association is grateful to Lyons & Flood for permission to republish their legal news update.

Key points

The reported legal decision is beneficial to Owners and Operators, including NVOCCs, who may be shipping goods subject to the U.S. COGSA terms, as it strengthens the application of those terms and the limitations of liability that the terms set out.

Lyons & Flood news update

Last week a decision was issued by the Second Circuit affirming a lower court's grant of summary judgment in favor of one of our NVOCC clients. The case was captioned OOO "Garant-S" v. Empire United Lines Co., Inc. We were attorneys for the NVOCC.

The decision is important because it provides further clarity for carriers regarding the applicability of COGSA's package limitation.

The case involved the alleged theft of two cars while they were being stored at a NVOCC's rented warehouse prior to being loaded into a container for ocean carriage to Europe. The shipper, who was not insured, sued the NVOCC for recovery of the value of the cars and raised a plethora of arguments in order to try to avoid the application of COGSA and the package limitation to its claim.

It argued that COGSA should not be applied because the theft occurred prior to the ocean carriage of the cars, and further because a bill of lading was never issued for the shipment. The shipper also alleged that the NVOCC had been somehow involved in the theft and argued that this complicity should strip the NVOCC of the COGSA package limitation defense under a theory of quasi-deviation. The shipper further argued that it had been denied a fair opportunity to declare an excess value for the cars, on the basis that the NVOCC's bill of lading lacked a space on its front to enter an excess value.

In affirming the lower court's grant of summary judgment in favor of the NVOCC, finding that the package limitation was applicable, the Second Circuit established, for the first time, its support for the proposition that a bill of lading can be binding on a shipper even if it has not actually been issued, on the strength of a prior course of dealing between the shipper and the carrier. The Second Circuit also reaffirmed its prior cases from the mid-1980s in which it refused to extend the doctrine of unreasonable deviation any further, even in the situation of a loss caused by criminal acts on the part of a carrier.

Finally, the Second Circuit provided some support for the proposition that a carrier can meet its prima facie burden of demonstrating fair opportunity merely by properly incorporating COGSA in the terms and conditions of a bill of lading, even in the absence of a space on the front of the bill of lading to declare excess value. The last time the Second Circuit addressed this issue, which was in 1985, it said only that incorporation of COGSA and an empty space to declare excess value were sufficient, leaving unresolved the question of whether a reference to COGSA in the bill alone would suffice. Since then the lower courts in New York have answered this question in the affirmative, but this decision is the first time the Second Circuit has shown any support for this conclusion.

In sum, the decision further strengthens the position of carriers and NVOCCs when handling cargo claims, and goes a long way towards providing much needed clarity on the application of COGSA's package limitation defense.

If you have any questions about this decision or any of the issues discussed above, please feel free to contact Edward Flood at or Jon Werner at

If Members have further queries, they are asked to contact the Association.