Akiyama Corp of America (Akiyama) and Vigilant Insurance Co claimed for damage to a printing press carried from Long Beach, California, to Tokyo, Japan, by Hanjin Shipping Co Ltd (Hanjin) on the MV Hanjin Marseilles. Hanjin contracted Total Terminals (Total), the terminal operator at the destination, to unload the cargo. Total, in turn, hired the stevedoring services of Marine Terminals Corp (Marine) for the unloading operations. Hanjin Shipping issued a bill of lading stating that the press was packed in four separate cases. The bill of lading also provided the application of the Carriage of Goods by Sea Act, 46 USC §§ 1300 ff (COGSA) and contained a Himalaya clause extending the limitation of liability to certain entities including subcontractors. The lawsuit was filed against the MV Hanjin Marseilles, Hanjin, Total, and Marine.

Total and Marine filed a motion for partial summary judgment arguing that their liability should be limited to USD 500 per package as they were entitled to protection under the terms of the bill of lading. The District Court for the Northern District of California admitted the application and ordered them to pay USD 2,000 (USD 500 per package). The plaintiffs appealed to the Court of Appeals, Ninth Circuit.

Held: The District Court decision is affirmed.

Under COGSA, a carrier may limit its liability to USD 500 per package if the shipper is given a fair opportunity to opt out of the limitation by declaring an excess of value and paying a higher rate: Mori Seiki USA Inc v MV Alligator Triumph 990 F 2d 444, 448 (9th Cir 1993). Akiyama did not argue that it did not have a fair opportunity to opt out of the limitation. In any event, Akiyama's decision to insure the cargo constitutes a 'conscious decision of not to opt out of COGSA's liability limitation': Travelers Indem Co v Vessel Sam Houston 26 F 3d 895, 900 (9th Cir 1994). The parties did not dispute the application of COGSA, or that the bill of lading contained a Himalaya clause. The question was whether the Himalaya clause extended the limitation of liability to Total and Marine.

Himalaya clauses must be 'strictly construed and limited to intended beneficiaries': Certain Underwriters at Lloyds' v Barber Blue Sea Line 675 F 2d 266 (11th Cir 1982) (quoting Robert C Herd & Co v Krawill Machinery Corp 359 US 297, 305, 79 S Ct 766, 3 L Ed 2d 820 (1959) (CMI1735)). The intent to extend COGSA benefits must be clearly expressed. When a party is not specifically mentioned therein, the party should, at minimum, be included in a well-defined class of readily identifiable persons to which COGSA benefits are extended under the terms of the Himalaya clause: Taisho Marine & Fire Ins Co v Vessel Gladiolus 762 F 2d 1364, 1366, 1367 (9th Cir 1985). In Mori Seikii, 450, the Court identified three factors to consider in determining the contracting parties' intent:

1. Whether a bill of lading extends limitation of liability to a third party depends on whether the clarity of the language used to express such to be the understanding of the contracting parties;
2. the contractual relationship between the party seeking the protection and the ocean carrier; and
3. the nature of the services performed compared to the carrier's responsibilities under the carriage contract.

The bill of lading identifies terminal operators and stevedores and the agents of each of them as subcontractors, and the Himalaya clause specifically extends the bill of lading benefits to subcontractors.

The appellants argued that the entities identified as 'subcontractors' in the Himalaya clause must be in privity of contract with the ocean or inland carrier. The Court rejected this argument. The proper test to consider is 'the nature of the services performed compared to the carrier's responsibility under the carriage contract'. Terminal operations and stevedoring are services that are Hanjin's responsibility. Total was an independent contractor as outlined in the Himalaya clause, and Marine acted as an agent of Total, and is thus also covered by the Himalaya clause: see Barber Blue Sea Line 270. If these two companies were excluded from the extension of the COGSA coverage, 'the Himalaya Clause would be rendered extraordinarily empty': Institute of London Underwriters v Sea–Land Service Inc 881 F 2d 761, 767 (9th Cir 1989) (CMI1437). The Himalaya clause is unambiguous and clearly extends COGSA's limitation of liability to Total and Marine, and the USD 500 per package limitation applies to them.