Nippon Fire & Marine Insurance Co (the plaintiff-appellant) paid Komori America Corp (the shipper) USD 1,186,467.87 under a marine cargo insurance policy. The plaintiff sought recovery of the same sum from the carrier, Wilhelmsen Lines AS, and the stevedore, Maher Terminals Inc. The carrier had transported a printing press on the MV Tourcoing from Japan to the United States. When the stevedore unloaded the printing press, several parts of the press (which had been disassembled into 13 containers) were damaged.

The carrier and the stevedore admitted liability. The only issue was whether either the carrier, or the stevedore, or both, were entitled to limit liability to USD 500 per package under the Carriage of Goods by Sea Act (COGSA) and cl 11 of the bill of lading. Clause 11, which closely tracked the operative language of 46 USC § 1304(5), provided:

Package Limitation.

Neither the Carrier, its servants or subcontractors nor the vessel 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 U.S. $500 per package ... unless the nature and value of such goods have been declared by the shipper before shipment and inserted in this bill of lading (Box 16) AND the shipper has paid the additional charges on such declared value ...

Box 16 on the front of the bill of lading was labelled 'DECLARED VALUE (SEE CLAUSE 11 RE: $500 LIMIT)' and provided a space for the shipper to insert a higher value. No such higher value was declared.

Clause 7 of the bill of lading (the clause paramount) stated:

With respect to water transportation, this Bill of Lading shall be subject to the provisions of the Carriage of Goods by Sea Act of the United States, approved April 16, 1936, which Act is incorporated herein, or to any law similar to the 1924 Hague Rules or Hague-Visby Rules if such Law is compulsorily applicable to this Bill of Lading in the country where suit is brought ...

Following cross-motions for summary judgment, the District Court for the Southern District of New York held that the clause paramount did not create any ambiguity concerning the application of the USD 500 per package limit; nor did it deprive the shipper of a fair opportunity to pay a higher rate for a higher liability limit. The District Court therefore held that the USD 500 per package liability limit applied to the carrier. The District Court found that this limit extended to the stevedore's liability, but dismissed the claim against the vessel which had been named but not arrested. Accordingly, the District Court entered judgment and ordered recovery of USD 3,750 by the plaintiff from the carrier and the stevedore. See Nippon Fire & Marine Insurance Co v MV Tourcoing 979 F Supp 206 (SDNY 1997).

The plaintiff appealed.

The plaintiff argued that a higher liability limit applied and relied upon several cases from the Southern District of New York which involved paramount clauses referring to the Hague-Visby Rules: Francosteel Corp v M/V Pal Marinos 885 F Supp 86, 90 (SDNY 1995); Daval Steel Prods v M/V Acadia Forest 683 F Supp 444, 447 (SDNY 1988); Francosteel Corp v M/V Kapetan Andreas G 1993 AMC 1924, 1993 WL 496893 *2 (SDNY 1993); Associated Metals & Minerals Corp v M/V Arktis Sky 1991 AMC 1499, 1991 WL 51087 *3-4 (SDNY 1991); Francosteel Corp v M/V Deppe Europe 1990 AMC 2962, 1990 WL 121683 *4 (SDNY 1990).

The plaintiff also argued that the clause paramount was an invalid 'floating choice of law' clause incorporating the varying liability limits of approximately 100 different Hague and Hague-Visby countries. In particular, the plaintiff contended that the shipper could not have been certain, at the time the bill of lading was issued, where suit would be brought and which rules would apply.

Held: Judgment affirmed.

COGSA, which is based upon the Hague Rules, applies ex proprio vigore to all contracts for carriage of goods by sea between the ports of the United States and the ports of foreign countries: 46 USC §§ 1300, 1312. COGSA applies in this case because the printing press was shipped from Japan to the United States.

COGSA § 1304(5) provides that the carrier's liability is limited to USD 500 per package unless a higher value is declared by the shipper and inserted in the bill of lading, or the parties agree to a higher limit. Under the 'fair opportunity' doctrine, however, the COGSA limit is inapplicable if the shipper does not have a fair opportunity to declare a higher value and pay an excess charge for additional protection: General Electric Co v MV Nedlloyd 817 F 2d 1022, 1028 (2d Cir 1987).

In addition to COGSA, cl 11 of the bill of lading expressly limits liability to USD 500 per package.

Clause 11 and Box 16 demonstrate that the parties did not contract to avoid the COGSA liability limit. Furthermore, cl 11 and Box 16 demonstrate that the shipper had a fair opportunity to declare a higher value in order to increase the carrier's liability: General Electric 1029; Binladen BSB Landscaping v MV Nedlloyd Rotterdam 759 F 2d 1006, 1017 n 12 (2d Cir 1985) (CMI1621).

As for the cases relied on by the plaintiff involving paramount clauses referring to the Hague-Visby Rules, the judges in some of these cases held that the incorporation of the Hague-Visby Rules does not conflict with a specific provision (such as cl 11 in this case) tracking the USD 500 per package language of COGSA, because the latter type of provision is meant to apply only when COGSA applies: Pal Marinos 88-89; Daval 447. Moreover, in cases where it was unclear from the bill of lading whether the Hague-Visby Rules were meant to apply, several of these judges resolved the ambiguity against the carrier and adopted the higher liability limit: Pal Marinos 89-90; Deppe Europe *4; Daval 447. However, in this case the references in cl 7 to the Hague-Visby Rules create no ambiguity. Clause 7 expressly incorporates COGSA, and simply acknowledges that suit might be brought in a country where rules other than COGSA compulsorily apply. Given that COGSA and its USD 500 per package liability limit unquestionably governs this case, the cases relied on by the plaintiff are inapposite.

The plaintiff's argument that cl 7 is an invalid 'floating choice of law' clause is rejected. While the shipper could not have been certain, at the time the bill of lading was issued, where suit would be brought and which rules would apply, such uncertainty is inherent to international shipping, and it in fact explains the longstanding efforts, embodied in the various multilateral Conventions, to create greater uniformity in liability limits and other rules relating to bills of lading. Contrary to the plaintiff's strained interpretation, cl 7 does not increase this uncertainty by somehow incorporating otherwise inapplicable rules; cl 7 merely recognises the potential for application of differing rules depending upon where suit is brought. Therefore, many shippers face the same asserted uncertainties faced by the plaintiff's insured, but the COGSA limitation routinely applies nonetheless.

In any event, on a shipment from Japan to the United States, the shipper could hardly avoid recognition of the United States as a likely forum for suit. More importantly, the very fact that the shipper insured its cargo through the plaintiff demonstrates that it appreciated the substantial likelihood of a relatively low limit on the carrier's liability: Vision Air Flight Service Inc v M/V National Pride 155 F 3d 1165, 1169 (9th Cir 1998) (CMI1577). In sum, the shipper had a fair opportunity to contract for greater protection.