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Quote of the Day - When your ship comes in, make sure you are willing to unload it. - Dr. Robert Anthony
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Forget $600 Hammers - How About A $500 Damage Limit To Cover A $1.8 Millon Loader?

How does a $1.8 million Air Force truck that can hold 60,000 pounds qualify as a "package" subject to a $500 limit for damage during shipment from the US to a foreign country on the open seas? 

When the government says it does. 

Apparently the Air Force wanted to move seven of its Halverson Aircraft Loaders (a.k.a. "K-Loaders") from the United States to Oman, and hired Maersk, a shipping company, to put the trucks in the cargo hold of a ship and send them to Oman.  The Air Force even provided the contract to Maersk that would govern the terms of the shipment.

One of the K-Loaders sustained over $30,000 in damage during the long voyage, and when the Army made a claim for the damage, Maersk responded that its liability was limited to $500, per the terms of the contract.

That's right.  The Air Force's own contract, known as a Universal Services Contract, which is consistent with COGSA - the Carriage of Goods at Sea Act.

The issue turned on whether the K-Loader was a "package" under the terms of the contract.  Here's how the analysis goes that defines the  term package:  "a class of cargo, irrespective of size, shape or weight to which some packaging preparation for transportation has been made with facilitates handling, but which does not necessarily conceal or completely enclose the goods.  Next, a court should examine the parties' contract for carriage to determine whether the parties intended the goods to constitute a package."

Other courts look at things the same way:    here's the key language:  "In this circuit, a carrier may take advantage of COGSA's $500 liability limit if the shipper is given a fair opportunity to opt out of that limitation by declaring a higher value and paying a correspondingly higher freight rate. See Mori Seiki USA, Inc. v. M.V. Alligator Triumph, 990 F.2d 444, 448 (9th Cir. 1993)."

In a 26-page opinion in this situation, the court likewise held that the K-Loader qualified as a "package," and that Maersk's liability to the Air Force was limited to $500, despite the more than $30,000 damage to the K-Loader.

Thank god the thing didn't fall overboard or all seven of them sink with the ship.

Printer friendly page Permalink Email to a friend Posted by J. Craig Williams on Monday, January 22, 2007 at 14:09 Comments Closed (0) |
 
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