Legal Lookout March 2008
Shippers who load and seal their own containers may have tough burden of proof in ocean cargo claims.
by Steve Block
The law just doesn’t like uncorroborated he-said-she-said contests.
Plaintiff shippers typically have a burden of proof to demonstrate by a “preponderance of the evidence,” i.e., substantiation that each element of their claims – on a more likely than not basis – is true. If they have no evidence supporting an element of their claim, well, they often get tossed out of court.
An entity owned by Victoria’s Secret, Mast Industries (“Mast”), recently said that a container it loaded and sealed contained 106,000 bras worth some 580 grand. Everybody agreed that container was lost or stolen en route from Israel to Columbus, Ohio. Mast wanted to recover its losses, and sued its transportation providers in the U.S. District Court for the Southern District of Ohio.
After the shipper, its intermediary and a Danmar Lines sorted out who had what legal status in their transactions with each other, the court took a look at the elements of a cargo claim governed by the U.S. Carriage of Goods by Sea Act, 46 USC App. §1303 et seq (“COGSA”). COGSA requires carriers to issue a bill of lading for each cargo it transports. Among other things, a bill of lading must describe a cargo’s content and volume. Danmar issued to Mast a bill of lading that confirmed the same cargo count Mast claimed. All were missing, and the value per bra was documented. End of story, right?
Wrong. Historically, and in keeping with COGSA’s historical intentions, a carrier’s bill of lading that stated a cargo’s count was prima facie evidence of the quantity of items within that freight. Latin for “at first appearance,” a plaintiff’s demonstration of an element of its case by prima facie evidence served to shift the burden of proof – as to that one element – to the defendant. In other words, if a carrier issued a bill of lading confirming volume, it was stuck with that concession unless it had (or could get) controverting evidence of a smaller volume.
But COGSA was enacted in 1936, long before the advent of containerization. At that time, carriers could take easy look-sees at just what their shippers were tendering. The risk of error was small and entirely within the carrier’s control. Now, however, shippers often load and seal their own containers, and tender them to steamship lines (or, as here, a non-vessel operating common carrier) without giving them a chance to confirm the contents. Additionally, modern day shipping volumes render carrier attention to each container impractical.
The court surveyed various precedents which had held bills of lading stating cargo counts of freight loaded and sealed by shippers are not prima facie evidence of what actually was tendered. According to those earlier cases, even if a carrier issues a bill of lading stating quantity, the shipper still must come forward with evidence to demonstrate exactly what was tendered.
And that burden of proof is a “high” one, observed the court. Citing those other precedents, the court ruled that “direct evidence” – meaning eyewitness testimony – was needed to confirm the volume of tendered freight. Mast came forward with packing lists, invoices, certificates of origin customs documentation, and weight reports, all demonstrating the quantity of its cargo. In dismissing Mast’s claims, the court found those documents were inadequate.
For years, carriers have recognized the problems created by COGSA’s bill of lading requirement and the impossibility of confirming the contents of each container. They’ve taken creative steps to remedy those problems. First we saw the awkward notation “said to contain” before the cargo description in shipping documentation, and then the more specific “shipper’s load, stow and count.” But it’s never been clear under prevailing law whether these notations satisfy COGSA, or whether courts should recognize them.
This case demonstrates the critical need for cargo liability reform. Courts have gone in different directions on these issues (yes, the Mast court could have followed different precedents to the opposite conclusion). A modified version of COGSA was discussed, drafted, and proposed to congress nearly a decade ago. It would have dealt with the shipper-packaged freight count issue.
That draft was tabled due to disinclination of the ocean carrier industry, which is now almost exclusively foreign, to bless an American regime that had unfavorable provisions and might be at odds with international regimes. Negotiations toward a uniform regime subsequently fired up before the United Nations, and have appeared near completion a number of times in the past few years. Nothing has emerged yet, but the latest word is that negotiations before the U.N. will continue in earnest this summer. Meanwhile, shippers, intermediaries and their insurers should be mindful of evidentiary burdens of proof that govern potential cargo claims, and have appropriate procedures in place during loading of containers. Otherwise, they may lose an expensive he-said-she-said contest.
Ref: Limited Brands, Inc., et al v. F.C. (Flying Cargo) International Transportation, Ltd., 2008 WL 859013 (S.D. Ohio 2008).