This was an appeal from a claim for damage caused to plastic injection moulding machines shipped from Yokohama, Japan, to Norfolk, United States. SPM Corp had imported the machines to be sold onwards. At a stop before Norfolk, the carrier's stevedores moved the machines in a re-stowage operation. During that operation, a part of the machinery was damaged. On delivery, at Norfolk, the damaged machinery was declared a constructive total loss. The District Court found the carrier liable, but only for USD 500. The plaintiff appealed.

Held: The order of the District Court is affirmed in part, reversed in part, and the case is remanded for entry of a corrected judgment.

The Carriage of Goods by Sea Act (COGSA), 46 USC §§ 1300 ff, applied to the bill of lading by the terms of the Act itself. COGSA controls bills of lading that evidence a contract of carriage of goods by sea to or from the United States in foreign trade. 'Carriage of goods' is a reference to the period from when the goods are loaded onto the ship until they are discharged from the ship: 46 USC § 1301(e). 'Discharge' means the removal of the goods at their final port of destination. Hence, COGSA also covered the temporary unloading at Port Elizabeth. COGSA 46 USC § 1304(5) contains a default limitation of liability for issuers of bills of lading.

In this case, the plaintiff did not declare a higher value on the bill of lading, and therefore, COGSA limited the carrier's liability to USD 500 per package, unless carrier and plaintiff contractually agreed to a higher damage limitation. Part IV of the bill of lading was titled 'Liability'. Two of its boilerplate paragraphs were relevant. Paragraph 17 was titled 'Responsibility of the LINE', and subparagraph (A) covered 'Port to Port Shipment'. Paragraph 17(A)(1) essentially incorporated COGSA’s damage limitations into the contract. It stated:

When the carriage called for by this Document is a Port to Port shipment, then during any time when the LINE has any responsibility by law or otherwise with respect to the Goods, the liability of the LINE for loss of or damage to the Goods shall be determined in accordance with ... the US Carriage of Goods by Sea Act, 1936.

Paragraph 18, titled 'Limitation Amount', however, contained a specific liability limitation amount:

18.3. Compensation shall not exceed USD 2- per kilogram of gross weight of the Goods lost or damaged.

If the District Court was correct that paras 17(A) and 18.3 are consistent, those paragraphs are consistent in a different manner than the Court concluded. Paragraph 17(A) incorporates COGSA (which already applied by its own force to the bill of lading), and 46 USC App § 1304(5), the section limiting carrier's liability to USD 500 per package, expressly allows parties to agree to a higher limitation amount either by declaring a higher value on the bill of lading, or by contractual agreement. Thus, even though the plaintiff did not declare the full value of the goods on the bill of lading, and thereby abrogate the USD 500 per package limitation, arguably, para 18.3 is a contractual variation from the COGSA. Alternatively, one can read paras 17(A) and 18.3 simply as conflicting, the former providing the default USD 500 package limitation, and the latter providing a two dollar per kilogram limitation. If that reading is correct, the specific provisions override general ones. But if so, para 18.3 is the specific provision that controls. Paragraph 17 is titled 'Responsibility of the LINE', and mentions no specific liability limitation amount; the USD 500 package limitation was merely incorporated by reference. Paragraph 18.3, in contrast, is titled 'Limitation Amount', a far more specific appellation, and contains a precise dollar limitation.

At the very least, the bill of lading is an ambiguous form of contract, and must be construed against its drafter, the carrier: Mitsui Co v American Export Lines 636 F 2d 807 (2d Cir 1981). If the carrier wanted the USD 500 per package limitation to control, it could easily have imposed that limitation directly (in terms) or indirectly (by not including any clauses that appear to alter the COGSA default).

The carrier suggested that the two dollars per kilogram limitation of para 18.3 applied only to combined transports, while the COGSA limitation of USD 500 applied to port-to-port shipments under para 17(A). The problem with that argument is that nothing in para 18.3 suggests that it applies only to combined transports or to Hague-Visby Rules transports. In para 17, the drafter distinguished between the two types of shipments, yet no such limitation appears in para 18, implying that para 18 applies to all shipments. No mention of the Hague-Visby Rules appears anywhere in the bill of lading. Moreover, even if the contract was latently ambiguous on this score, it would be construed against its drafter. Thus, the bill of lading overrode the COGSA default liability limitation of USD 500 package limitation, and instead limited the carrier's liability to two dollars per kilogram, or USD 40,800.

The plaintiff also argued that no liability limitation should apply to any of the defendants because the re-stowage of its cargo constituted a 'deviation' from the carriage agreement that converted the carriers into quasi-insurers, liable in full for any damage incurred as a result. The defendants countered that the harsh doctrine of deviation should be limited to carriers' geographical departures from the course, and to unauthorised on-deck stowage of cargo, and should not be extended to a customary practice such as re-stowage at an intermediate port. At common law, deviation from a scheduled voyage stripped a carrier of many of its defences and made the carrier the insurer of the goods that it was carrying: see Berkshire Fashions Inc v The MV Hakusan II 954 F 2d 874 (3d Cir 1992).

COGSA, 46 USC § 1304(4), recognised the doctrine of deviation but circumscribed it:

Any deviation in saving or attempting to save life or property at sea, or any reasonable deviation shall not be deemed to be an infringement or breach of this Act or of the contract of carriage, and the carrier shall not be liable for any loss or damage resulting therefrom: Provided, however, that if the deviation is for the purpose of loading or unloading cargo or passengers it shall, prima facie, be regarded as unreasonable.

By negative implication, COGSA recognised that unreasonable deviations can violate the Act, and most courts have held that an unreasonable deviation also lifts a carrier’s liability limitations, including the USD 500 package limitation: see Ingersoll Milling Machine Co v MV Bodena 829 F 2d 293 (2d Cir 1987); Nemeth v General Steamship Corp 694 F 2d 609 (9th Cir 1982) (CMI1787); and Spartus Corp v SS Yafo, 590 F 2d 1310 (5th Cir 1979) (CMI1848). COGSA provides that reasonable deviations do not oust the contract of carriage (or COGSA limitations on liability), and the statute gives the courts guidance on which deviations should be considered reasonable. Unfortunately, COGSA does not define 'deviation' itself, which is a predicate for reaching the distinct issues of reasonableness and the consequences of an unreasonable deviation: see Sturley, Benedict on Admiralty § 122, emphasising that courts should not collapse the inquiries. Lacking a statutory definition of 'deviation', courts have offered various definitions of their own. This Court's pre-COGSA definition was:

To deviate, lexicographically, means to stray, to wander. As applied in admiralty law, the term 'deviation' was originally and generally employed to express the wandering or straying of a vessel from the customary course of the voyage, but in the course of time it has come to mean any variation in the conduct of a ship in the carriage of goods whereby the risk incident to the shipment will be increased, such as carrying the cargo on the deck of the ship contrary to custom and without the consent of the shipper, delay in carrying the goods, failure to deliver the goods at the port named in the bill of lading and carrying them farther to another port, or briging them back to the port of original shipment and reshipping them. Such conduct has been held to be a departure from the course of agreed transit and to constitute a 'deviation' whereby the goods have been subjected to greater risks, and, when lost or damaged in consequence thereof, clauses of exceptions in bills of lading limiting liability cease to apply: see GW Sheldon Co v Hamburg Amerikanische Packetfahrt A-G 28 F 2d 249 (3d Cir 1928).

Analysts distinguish between geographic deviations and other 'quasi-deviations'. There was no geographical deviation where the vessel followed its advertised course of voyage: see General Electric Co v SS Nancy Lykes 706 F 2d 80 (2d Cir 1983).

Quasi-deviation is a doctrine seemingly entrenched in the law, but not, apparently, expanding in scope. The usual example has been unauthorised on-deck stowage of cargo: see Constructores Tecnicos v Sea-Land Service Inc 945 F 2d 841 (5th Cir 1991); and English Electric Valve Co v MV Hoegh Mallard 814 F 2d 84 (2d Cir 1987). Plaintiffs have frequently pressed for expansion beyond that class of cases, but in recent years appellate courts have generally declined to do so. The doctrine of quasi-deviation should not be viewed expansively in the post-COGSA era. Although COGSA did not abolish the doctrine of deviation, the statute's very existence and broad scope obviate the need for an expansive concept of deviation to protect shippers. The statutory limitation on deviations suggests that courts should construe the doctrine narrowly. Gilmore and Black, The Law of Admiralty § 3-42 (2d edn, Foundation Press 1975) at 183, states:

It would seem unwise to extend analogically and by way of metaphor a doctrine of doubtful justice under modern conditions, of questionable status under COGSA, and of highly penal effect.

There is no need to decide that quasi-deviations can never encompass more than unauthorised on-deck stowage, because the plaintiff's claim would be an unprecedented expansion of the doctrine. Intentional re-stowage of the cargo at an intermediate port is not a quasi-deviation. Conduct that is customary in the trade is not a deviation from the contractual voyage because such contracts ordinarily presume that the parties will follow the customs and usages of the maritime trade: see Caterpillar Overseas SA v Marine Transport Inc 900 F 2d 714 (4th Cir 1990) (CMI1630); Encyclopaedia Britannica Inc v SS Hong Kong Producer 422 F 2d 7 (2d Cir 1969) (CMI1649). Here, the District Court had found that intermediate port re-stowage is customary and that finding is not clearly erroneous. Therefore, the District Court properly concluded that no quasi-deviation had taken place and thus, it did not deprive the defendants of their contractual and statutory limits on liability.

The plaintiff also sought to hold the negligent stevedore liable in tort for the full amount of damage, while the stevedore claimed to be a third-party beneficiary of a clause in the bill of lading that conferred the carrier's defenses on stevedores. The Supreme Court has interpreted COGSA to provide for damage limitations for the carrier and the ship, not for stevedores or other third parties involved in the handling of cargo: see Robert C Herd Co v Krawill Machinery Corp 359 US 297 (1959) (CMI1735). At the same time, however, the Court suggested that carriers could contractually extend their liability limitation to their employees, agents, and independent contractors, although such provisions, being in derogation of the common law of torts, are to be strictly construed and limited to intended beneficiaries. Carriers now typically include such liability limitation extension clauses in their contracts, known as Himalaya clauses. In this case, the bill of lading contained a Himalaya clause, by virtue of which the stevedore was entitled to the benefit of the USD 500 package limitation in COGSA.