Noe S. Hamra and Thomas H. Belknap Jr. ●
Introduction
In April 2022, we published an article titled “Carriage of Cargo on Deck: Carriers Be Aware,” in which we discussed the legal risks carriers face when transporting cargo on deck under bills of lading governed by United States law. That article highlighted a critical but frequently overlooked point: neither the Hague Rules nor the United States Carriage of Goods by Sea Act (“COGSA”) applies to cargo that the contract of carriage states is being carried on deck and is so carried. We recommended that carriers include express language in their bills of lading incorporating COGSA into on-deck carriage so as to avail themselves of the statute’s defenses and limitation of liability. Since that article was published, the United States District Court for the Southern District of New York has issued a significant ruling in AGCS Marine Insurance Co. v. M/V Imabari Logger, No. 22-CV-9283 (S.D.N.Y. 2024), that reinforces the very concerns we raised and offers new practical guidance for carriers and their counsel.
Background
The dispute in the Imabari Logger case arose from the shipment of 50 large pumping units from China to the United States. The machines, which had a total cost value of approximately $5.85 million, were carried on the vessel’s deck. During the transpacific voyage, 26 of the machines were lost overboard and others sustained damage. The cargo interests, the purchaser, and its subrogated insurer, brought claims in admiralty against the vessel, the non-vessel operating common carrier (“NVOCC”), and the freight forwarder.
Two bills of lading governed the shipment: one issued by the vessel owner and one issued by the NVOCC. Both bills of lading contained broad “shipper’s risk” clauses purporting to exonerate the carriers from any liability for loss or damage to on-deck cargo, “howsoever caused and even if caused by owners’ negligence or unseaworthiness of the vessel.” Critically, neither bill of lading expressly extended COGSA to on-deck cargo.
The Harter Act Governs On-Deck Cargo
Consistent with our prior article, the Court confirmed that because both bills of lading stated the cargo was being carried on deck, COGSA, by its own terms, did not apply. The Court then addressed a question left somewhat open in the precedent: whether the Harter Act continues to apply to on-deck cargo during the tackle-to-tackle period, notwithstanding COGSA’s general supersession of the Harter Act for international shipments. Relying on Second Circuit authority in Sompo Japan Insurance Co. v. Union Pacific Railroad Co., 456 F.3d 54 (2d Cir. 2006), and district court decisions including Saudi Pearl Insurance Co. v. M.V. Aditya Khanti[1] and Blanchard Lumber Co. v. S.S. Anthony II,[2] the Court held that the Harter Act continues to regulate on-deck cargo in international trade during the tackle-to-tackle period where COGSA does not apply.
Exoneration Clauses Voided, but Limitation Clauses Upheld
Having determined that the Harter Act governs, the Court reached a conclusion that should give every carrier pause. The broad exoneration clauses in both bills of lading were declared void under the Harter Act. The Harter Act prohibits carriers from inserting provisions in a bill of lading that avoid liability for loss or damage arising from negligence or fault in loading, stowage, custody, care, or proper delivery. The Court also held that even if the Harter Act did not apply, the exculpatory clauses were void under federal common law, as they eliminated any possibility for the cargo owner to obtain compensation and gave the carrier an excuse to exercise less caution.
However, and this is the critical distinction, the Court drew a line between exoneration and limitation of liability. While the Harter Act prohibits complete exoneration, it does not prohibit a carrier from limiting the monetary extent of its liability. Accordingly, the Court upheld the limitation clauses in both bills of lading, one limiting liability to £100 per package and the other to $500 per package, as valid and enforceable under the Harter Act.
What Constitutes a “Package” Under the Bills of Lading
One of the most instructive aspects of the decision is the Court’s analysis of what constitutes a “package” for the purposes of applying per-package limitations. The machines at issue were not boxed or fully enclosed; rather, each was outfitted with bubble wrap, a shipping cover consisting of sheet metal and packaging foam, braided cables, internally placed wooden wedges, hood guards, struts, and support rails. Additionally, the units had to be collapsed from a vertical position into a horizontal position for shipping purposes.
Applying Second Circuit precedent, the Court held that a “package” need not be fully enclosed or concealed. Rather, cargo qualifies as a package if “some packaging preparation for transportation has been made which facilitates handling, but which does not necessarily conceal or completely enclose the goods.” The Court found that the preparations made to each machine were more than sufficient to render them packages, and no reasonable inference could be drawn otherwise.
The Court also turned to the bills of lading themselves, noting that both repeatedly referred to the cargo as “50 packages” under headings specifically designated for that purpose. Citing the Second Circuit’s holding in Seguros Illimani S.A. v. M/V Popi P, 929 F.2d 89 (2d Cir. 1991), the Court observed that the number appearing under the heading “No. of Pkgs.” is both the starting and ending point of the inquiry, unless plainly contradicted. A lone reference to “50 units” in the ship’s remarks was insufficient to overcome the multiple references to “packages.”
The Court also rejected the argument that the NVOCC’s bill of lading freight calculation, based on cubic meters rather than packages, undermined the per-package limitation. The Court distinguished the case from Allied Chemical International Corp. v. Companhia de Navegacao Lloyd Brasileiro, 775 F.2d 476 (2d Cir. 1985), noting that in this case there was no ambiguity in the bills of lading, and the freight calculation did not carry the same evidentiary weight regarding the parties’ intent.
Key Takeaways for Carriers
The Imabari Logger decision reinforces the guidance from our 2022 article with added urgency:
- Carriers must not rely on broad “shipper’s risk” or exoneration clauses in on-deck bills of lading. Such clauses will be struck down under both the Harter Act and federal common law as void against public policy.
- Carriers should include clear limitation of liability clauses in their bills of lading. While exoneration is prohibited, reasonable per-package limitations are enforceable, even under the Harter Act.
- Carriers should ensure that bills of lading consistently describe cargo as “packages” under the appropriate headings, and that any packaging preparation, even partial, is documented. The Court’s analysis confirms that the bill of lading’s characterization of cargo as “packages” is given significant weight, and that partial packaging preparations are sufficient to trigger per-package limitations.
- As we emphasized previously, carriers should strongly consider expressly incorporating COGSA into on-deck carriage. Had the carriers in this case done so, they would have had the benefit of COGSA’s defenses, including its $500 per-package limitation, the one-year statute of limitations, and the error in navigation defense, tools that would have significantly streamlined the dispute.
This article is one in a series of articles written for Blank Rome’s MAINBRACE: August 2026 edition.
[1] No. 95 Civ. 2174, 1997 WL 291834 (S.D.N.Y. June 2, 1997).
[2] 259 F. Supp. 857, 865 (S.D.N.Y. 1966).