Second Circuit Holds Damages under COGSA Limited to Actual Freight Unit of Each Item

by International Law Firm Chalos & Co.

On March 20, 2012, the US Court of Appeals for the Second Circuit reversed the District Court’s grant of partial summary judgment in Edso Exporting LP v. Atlantic Container Line AB, holding that under the Carriage of Goods by Sea Act (COGSA) a customary freight unit for the purposes of a damage calculation is the actual freight unit used by the parties to calculate freight for the shipment at issue.

This action was brought after a crane was damaged while in transit from Baltimore to Tripoli. COGSA limits a carrier’s liability for damages in connection with the transportation of goods to $500 per package, or in the case of goods not shipped in packages, per customary freight unit, unless the nature and value of such goods have been declared by the shipper before shipment and inserted into the bill of lading. The crane was not packaged and the Plaintiff failed to declare its value in the bill of lading. The District Court concluded that the customary freight unit was each cubic meter of the crane. On appeal, Atlantic Container Line argued that the customary freight unit was each crane shipped.

The Second Circuit found that both the bill of lading and the tariff established that freight was charged on a per-item basis rather than a per-cubic meter basis. The Second Circuit held that the District Court erred by considering extrinsic evidence as to how the parties calculated the freight charge where the bill of lading and the tariff read together unambiguously established that the actual freight unit in this case was each crane shipped. Therefore, because the parties calculated freight for the shipment on a per-item basis and because only one item was damaged, liability under COGSA was limited to $500.

For more information concerning this decision, please contact the Claims department.