Wallenius Wilhelmsen Lines (the defendant) carried four vehicles on separate ocean voyages between ports in Savannah, Georgia, Australia, Germany and Japan. These vehicles, owned by Caterpillar Inc (the cargo owner), were damaged in transit.

American Home Assurance Co (the plaintiff), as subrogee of Caterpillar Inc, brought an action against the defendant for the damage to the four vehicles, seeking USD 170,729.16. The defendant moved for partial summary judgment pursuant to the Carriage of Goods by Sea Act, 46 USC § 30701 (COGSA), to limit its liability to USD 500 per unpackaged vehicle.

The four vehicles were shipped pursuant to bills of lading which provided in cl 10:

[i]f US COGSA applies to the contract evidenced by this bill of lading, the carrier's liability is limited to USD 500 per package, or for Goods not shipped in packages, per customary freight unit, unless a higher value is declared in the Declared Value box on the face of the bill of lading and a higher freight is paid. Each unpackaged vehicle or other piece of unpackaged cargo on which freight is calculated constitutes, one customary freight unit.

Three bills of lading accompanied three of the shipments, and two documents - a dock receipt and shipper's packing list - were used for the fourth shipment. Each of the three bills of lading contained the sections labelled 'Declared Value' and 'Extra Charge'. Under the Declared Value section, nothing was written. Under the Extra Charge section, the word 'none' was inserted. The bills of lading did not recite a higher value for the cargo. The dock receipt and packing list did not indicate a declared value for the shipment.

The issue was whether the 'customary freight unit' for each of the four vehicles shipped was an unpackaged vehicle or a cubic metre. The vehicles were shipped unpackaged, and the freight for each was calculated by cubic metre. If the customary freight unit was each vehicle, the defendant's total liability would be capped at USD 2,000. If the customary freight unit was a cubic metre of volume, the defendant's liability would be higher.

The District Court for the Southern District of New York held that the defendant's total liability was limited to USD 2,000. The plaintiff appealed to the Court of Appeals.

Held: The judgment of the District Court is affirmed. The defendant's liability is limited to USD 500 per unpackaged vehicle. Accordingly, the defendant's total liability is capped at USD 2,000 for four vehicles.

Section 4.5 of COGSA provides:

[n]either the carrier nor the ship shall be liable for any loss or damage to goods in an amount over USD 500 per package, or in the case of goods not shipped in packages, per customary freight unit, unless the nature and value of the goods have been declared by the shipper before shipment and inserted in the bill of lading.

The purpose of COGSA was to limit liability of common carriers for damage to cargo where the value of the cargo is not known to the carrier: General Motors Corp v Moore-McCormack Lines Inc 451 F 2d 24, 26 (2d Cir 1971). If the cargo owner wanted to avoid the USD 500 limit, it could declare a higher value for its cargo, thereby 'alerting the carrier of its potential liability and allowing it to charge extra freight, if appropriate'. However, the cargo owner did not make a declaration here.

COGSA does not define the term 'customary freight unit'. To 'determine the customary freight unit for a particular shipment, the District Court should examine the bill of lading, which expresses the "contractual relationship in which the intent of the parties is the overarching standard"': FMC Corp v SS Marjorie Lykes 851 F 2d 78, 80 (2d Cir 1988), quoting Allied International v SS Yang Ming 672 F 2d 1055, 1061 (2d Cir 1982)).

The Court relied on the plain, express language of the bill of lading. The most natural reading of the relevant part of cl 10 - '[e]ach unpackaged vehicle or other piece of unpackaged cargo on which freight is calculated constitutes, one customary freight unit' - is that each unpackaged vehicle is a customary freight unit, regardless of whether the vehicle's freight charge is determined by reference to its volume: FMC Corp v SS Marjorie Lykes 851 F 2d 78, 81 (holding that each fire engine was a customary freight unit for COGSA purposes); Vision Air Flight Service Inc v M/V National Pride 155 F 3d 1165, 1170 (9th Cir 1998) (CMI1577) (each unpackaged refuelling truck was a customary freight unit); Caterpillar Overseas SA v Marine Transport Inc 900 F 2d 714, 723 (4th Cir 1990) (a tractor qualified as a customary freight unit).