Schramm, Incorporated; Atlantic Mutual Insurance Company v. Shipco Transport, Incorporated, in Personam

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
 SCHRAMM, INCORPORATED; ATLANTIC
MUTUAL INSURANCE COMPANY,
Plaintiffs-Appellants,
v.
SHIPCO TRANSPORT, INCORPORATED, IN
PERSONAM,
Defendant-Appellee,
and No. 03-1075 
M/V CASV GUAYA, her engines,
tackle, boilers, furniture, apparel,
etc., in rem; COMPAGNIE
CHILEANA DE NAVIGANCION
INTEROCEANAICA; CSAV-CHILEAN LINE,
INCORPORATED; STEVEDORING
SERVICES OF AMERICA,
Defendants. 
Appeal from the United States District Court
for the District of South Carolina, at Charleston.
Patrick Michael Duffy, District Judge.
(CA-00-3336-2-23)
Argued: January 21, 2004
Decided: April 15, 2004
Before WILKINSON, MICHAEL, and SHEDD, Circuit Judges.
Affirmed by published opinion. Judge Wilkinson wrote the opinion,
in which Judge Michael and Judge Shedd joined.

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COUNSEL
ARGUED: S. Scott Bluestein, RALEY & BLUESTEIN, Charleston,
South Carolina, for Appellants. Stephen Peterson Groves, Sr., NEX-
SEN, PRUET, JACOBS, POLLARD & ROBINSON, L.L.C.,
Charleston, South Carolina, for Appellee. ON BRIEF: Bradish J.
Waring, NEXSEN, PRUET, JACOBS, POLLARD & ROBINSON,
L.L.C., Charleston, South Carolina, for Appellee.
OPINION
WILKINSON, Circuit Judge:
Appellant Schramm, Inc. contracted with Shipco Transport, Inc. to
transport a mobile drilling rig from the Port of Baltimore, Maryland,
to the Port of Arica, Chile. When the vessel carrying the rig stopped
at an intermediate port in Charleston, South Carolina, the ship’s mas-
ter ordered for security reasons that the rig be offloaded so that it
could be restowed on a lower deck. While the rig was dockside during
the course of restowage, it was severely damaged. The district court
found that Shipco was liable for the damage, but it limited appellants’
recovery to $500 pursuant to the Carriage of Goods by Sea Act
("COGSA"). See 46 U.S.C. app. § 1304(5) (2000).
We affirm. COGSA’s liability limitation continued to apply when
the cargo was being restowed at Charleston. Even though the rig was
damaged while on land, the restowage operation at the intermediate
Charleston port was a customary activity in the carriage of goods at
sea and did not constitute a "discharge" from the vessel under
COGSA. In addition, the parties’ bill of lading did not otherwise limit
COGSA’s applicability.
I.
In October 1999, Schramm sold a mobile drilling rig to Perforac-
iones San Rafael S.R.L. of Cochabamba, Bolivia. The drilling rig
consisted of a large drill and the truck on which it was mounted. The
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total cost of the rig was $160,725.42, which included freight and
insurance charges.
Schramm arranged to have Shipco transport the rig from the Port
of Baltimore, Maryland, to the Port of Arica, Chile, via an ocean-
going vessel. Shipco is a "non-vessel-operating common carrier,"
which is "a common carrier that does not operate the vessels by which
the ocean transportation is provided, and is a shipper in its relation-
ship with an ocean common carrier." 46 U.S.C. app. § 1702(17)(B).
Thus, Shipco never actually handles the cargo, but instead subcon-
tracts with other parties to carry the cargo and deliver it to its destina-
tion. Here, Shipco contracted with the owner of the M/V CSAV
GUAYAS to transport the rig from the United States to Chile.
Shipco issued a clean bill of lading to Schramm to cover transport
of the rig. The bill of lading designates Schramm as the "Shipper" and
Shipco as the "Carrier." In a paragraph entitled "Package or Shipping
Unit Limitation," the parties agreed that Shipco’s liability was limited
to $500 per package wherever COGSA was applicable, "unless a
declared value has been noted" by the parties. A space was provided
on the front of the bill of lading for "Shippers Declared Value," where
Schramm was entitled to avoid COGSA’s liability limitation of $500
and declare the value of its goods in order to receive greater protec-
tion. However, Schramm left this space blank, and it obtained inde-
pendent cargo insurance from appellant Atlantic Mutual Insurance
Company.
The rig, secured on a flat rack container with a bottom and two
sides, was loaded onto the vessel M/V CSAV GUAYAS in Baltimore
on October 21, 1999. While en route to Chile, the vessel stopped at
an intermediate port in Charleston, South Carolina. There, on October
22, 1999, the vessel’s operator ordered the rig offloaded so that it
could be restowed on a lower deck of the vessel. The vessel’s master
wanted the rig and one other container to be restowed under deck to
avoid pilferage of the goods at subsequent ports and damage to them
during the voyage. The master retained Stevedoring Services of
America ("SSA") to handle the offloading, transportation, storage,
and reloading of the rig in Charleston. SSA offloaded the rig, still
attached to its flat rack container, and placed it on a chassis for dock-
side transport. While it was being moved, the rig fell over onto the
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concrete dock and was damaged beyond repair. It was later declared
a total loss by marine inspectors.
Pursuant to its insurance obligations, Atlantic Mutual paid Per-
foraciones San Rafael S.R.L. the purchase price and related costs, on
Schramm’s behalf. Then, on October 20, 2000, Schramm and Atlantic
Mutual filed suit against Shipco, among other parties, to recover
breach of contract damages from the destruction of the rig. They
claimed losses in excess of $176,797.96, which represented the
amount that Atlantic Mutual paid to Perforaciones San Rafael S.R.L.
Shipco filed for partial summary judgment, claiming that its liabil-
ity was limited to $500 either by COGSA or by the contractual bill
of lading. At first, the district court denied Shipco’s motion. It held
that COGSA did not apply to the period of time during which the rig
was destroyed — while the rig was being transported on land in
Charleston and was not "hooked up" to the vessel. Moreover, the
court held that the bill of lading did not extend COGSA beyond this
limited period except where the goods were in the "actual custody"
of Shipco.
Upon reflection, however, the district court granted Shipco’s Rule
59(e) motion for reconsideration and concluded that COGSA did
indeed apply to the period of time during which the rig was destroyed.
It held that the "tackle-to-tackle" application of COGSA covers goods
from the port of loading until the final port of destination, and that
COGSA thus applies during restowage of cargo at intermediate ports
regardless of whether damage occurs while goods are on land or
aboard the vessel. Moreover, the district court held that the bill of lad-
ing did not limit COGSA’s application. The court thus granted appel-
lants’ motion for summary judgment against Shipco on the question
of liability and granted Shipco’s motion to limit its liability to $500.
Appellants now challenge the district court’s decision to limit Ship-
co’s liability under COGSA.1
1In addition, appellants contend that the district court abused its discre-
tion in granting Shipco’s Rule 59(e) motion for reconsideration and in
declining to award pre-judgment interest to Schramm. In our view, the
district court was within its discretion to correct its previous error of law
and to rule that COGSA limited Shipco’s liability to $500, as we con-
clude here. See Pac. Ins. Co. v. Am. Nat’l Fire Ins. Co., 148 F.3d 396,
402-03 (4th Cir. 1998). The district court also did not err in declining to
award prejudgment interest.
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II.
COGSA governs "every bill of lading . . . which is evidence of a
contract for the carriage of goods by sea to or from ports of the United
States [and] in foreign trade." 46 U.S.C. app. § 1300. And the statute
provides a default limitation of liability for carriers:
Neither the carrier nor the ship 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
$500 per package . . . unless the nature and value of such
goods have been declared by the shipper before shipment
and inserted in the bill of lading.
Id. § 1304(5). Here, there is no question that Schramm left blank the
space in the bill of lading for declaring a higher value on its goods.
It thus accepted COGSA’s limitation of liability, which was incorpo-
rated into the bill of lading, and chose to obtain independent cargo
insurance from Atlantic Mutual. Consequently, if we find that
COGSA applied at the time the rig was damaged, then Shipco’s liabil-
ity is properly limited to $500 under § 1304(5).
By its terms, COGSA covers "the period from the time when the
goods are loaded on to the time when they are discharged from the
ship." Id. § 1301(e). This period has been referred to as "tackle to
tackle." See, e.g., Mannesman Demag Corp. v. M/V Concert Express,
225 F.3d 587, 589 (5th Cir. 2000); B. Elliott (Can.) Ltd. v. John T.
Clark & Son of Md., Inc., 542 F. Supp. 1367, 1372 (D. Md. 1982).
The basic question, then, is whether the drilling rig was "discharged"
from the vessel, within the meaning of the term in COGSA, at the
time it was damaged. Appellants contend that the rig was in fact dis-
charged because it was damaged not on the vessel, but on land. How-
ever, this does not automatically mean that COGSA’s provisions are
inapplicable. When the rig was damaged, it was not unloaded onto the
dock at its final port of destination. Rather, for security reasons it was
being temporarily offloaded from the vessel and transported dockside
by a stevedore at an intermediate port of call in Charleston. The sole
purpose for the temporary offloading of the rig onto the dock was to
restow it below deck. Appellants have pointed us to no decisions that
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have found such restowage operations at intermediate ports to fall
outside the scope of COGSA.
The statutory text does not permit the view that restowage of the
rig constituted a "discharge" under COGSA. COGSA does not itself
define the term "discharge." When viewing the statute as a whole,
however, it is clear that goods are not "discharged" from a vessel
under COGSA until they are released from the ship at the final port
of destination, and thus that the restowage of goods at an intermediate
port does not constitute a discharge. For example, COGSA provides
that a carrier must "properly and carefully load, handle, stow, carry,
keep, care for, and discharge the goods carried." 46 U.S.C. app.
§ 1303(2); see also id. § 1302 (extending a carrier’s responsibilities,
as well as its rights and immunities, to the "loading, handling, stow-
age, carriage, custody, care, and discharge" of goods). This sweeping
statement of a carrier’s duties when transporting goods by sea easily
includes the restowage of goods at an intermediate port. For one
thing, its specifies that COGSA applies to stowage activities. And the
carrier’s duty to handle and care for the goods it transports readily
encompasses the decision to restow cargo based on security concerns.
In fact, the very notion of the "carriage of goods by sea," as the
statute is titled, suggests a comprehensive coverage that includes cus-
tomary activities like intermediate port restowage. It would be awk-
ward, given COGSA’s scope, if each restowage of goods at an
intermediate port would create a distinct period of time during which
COGSA was temporarily inapplicable. The most reasonable interpre-
tation of the statute is rather that a discharge of goods occurs under
COGSA when the goods are removed from the ship at the final port
of destination.
Moreover, this construction of COGSA is sensible in light of the
complementary frameworks provided by COGSA and the Harter Act.
The Harter Act also governs the common carriage of goods by sea,
but unlike COGSA it contains no default limitation of liability.
Appellants therefore want us to find that the Harter Act applied when
the rig was damaged. The Harter Act, which was superseded in large
part by COGSA, still applies "prior to the time when the goods are
loaded on or after the time they are discharged from the ship," 46
U.S.C. app. § 1311, and its application extends until "proper deliv-
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ery," id. § 190. See Wemhoener Pressen v. Ceres Marine Terminals,
Inc., 5 F.3d 734, 738-39, 741-42 (4th Cir. 1993); B. Elliot (Can.) Ltd.
v. John T. Clark & Son of Md., Inc., 704 F.2d 1305, 1307 (4th Cir.
1983).
Courts have consistently outlined the periods in which COGSA and
the Harter Act each apply by default as follows: the Harter Act
applies prior to loading, COGSA applies from the loading of goods
until the discharge of the goods from the vessel, and the Harter Act
then applies from discharge until the goods are delivered to the con-
signee. See, e.g., Mannesman Demag Corp., 225 F.3d at 592; Wem-
hoener Pressen, 5 F.3d at 738-39, 740; B. Elliot, 704 F.2d at 1307;
Caterpillar Overseas, S.A. v. S.S. Expeditor, 318 F.2d 720, 722-23
(2d Cir. 1963). The "discharge" of goods from a vessel thus marks the
transition of coverage from COGSA to the Harter Act, unless the par-
ties have agreed to extend COGSA, and the Harter Act then applies
until delivery is made.
This successive scheme of coverage suggests that the point of dis-
charge under COGSA is not every time the goods are taken off the
vessel — such as for restowage — but rather the discharge of goods
at their final port of destination, where delivery can be made. Indeed,
COGSA itself associates the point of discharge and the point of deliv-
ery in this way. For instance, COGSA states that notice about damage
to cargo must be given a carrier by a consignee "at the port of dis-
charge before or at the time of the removal of the goods into the cus-
tody of the person entitled to delivery thereof under the contract of
carriage." 46 U.S.C. § 1303(6). This provision further suggests that a
discharge under COGSA refers to release of the cargo at the destina-
tion port. And courts have uniformly used the term "discharge" in this
natural sense. See, e.g., SPM Corp. v. M/V Ming Moon, 965 F.2d
1297, 1300 (3d Cir. 1992) (holding that "discharge" under COGSA
means removal of the goods at their final port of destination); Phillip
Morris v. Am. Shipping Co., 748 F.2d 563, 566-67 (11th Cir.
1984)(using the term "discharge" to refer to removal of goods at the
destination port); B. Elliot, 704 F.2d at 1308 (noting that "the damage
to the cargo occurred one day after discharge but prior to delivery");
Pan Am. World Airways, Inc. v. Cal. Stevedore and Ballast Co., 559
F.2d 1173, 1177 n.5 (9th Cir. 1977) (stating that "COGSA has been
continuously interpreted as being applicable from the time the ship’s
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tackle is hooked onto the cargo at the port of loading until the time
when cargo is released from the tackle at the port of discharge.").
Our construction of COGSA also comports with the realities of
maritime practice. The maritime trade changed considerably with the
advent of containerized shipping. See Grant Gilmore and Charles L.
Black, Jr., The Law of Admiralty §§ 1-5, 3-24 (2d. ed. 1975). Cargo
is now secured to large, standardized containers, as was the drilling
rig in this case. This "container revolution" allowed for combined
transport of goods between different modes of transportation, and it
also enabled ocean-going carriers to organize and reorganize cargo
more easily than before. See id. It has thus led to more frequent
restowage of goods at intermediate ports, which is reflected by the
findings of some courts that the restowage of goods at intermediate
ports is a customary activity in the maritime trade. See, e.g., Ming
Moon, 965 F.2d at 1304; Great Am. Ins. Cos. v. M/V Romeral, 934
F. Supp. 744, 747-48 (E.D. La. 1996); Anyangwe v. Nedlloyd Lines,
909 F. Supp. 315, 320-21 (D. Md. 1995). Given the breadth of
COGSA’s application, we find it reasonable to consider accepted
occurrences like restowage of cargo at intermediate ports as falling
within the statute’s purview.
In sum, we hold that the term "discharge" under COGSA "means
the removal of the goods at their final port of destination, and hence
COGSA also cover[s] the temporary unloading" of goods at an inter-
mediate port. Ming Moon, 965 F.2d at 1300. However, our holding
is by no means open-ended. COGSA can apply to goods transported
by sea but damaged on land, but there must be a sufficient nexus
between the activity which caused damage to the goods and the car-
riage of goods by sea. This would be an altogether different case if
the cargo was damaged in circumstances far removed from customary
maritime activities. On the facts of this case, we find that appellants’
drilling rig had not been "discharged" from the vessel under COGSA
when it was damaged during restowage at the intermediate Charleston
port, and therefore that Shipco’s liability was properly limited to
$500.
III.
Appellants also appear to argue that, even if COGSA would typi-
cally apply during restowage of cargo at intermediate ports, the bill
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of lading here rendered COGSA inapplicable to this case. The con-
tract’s "Clause Paramount," after expressly incorporating COGSA’s
provisions, states that COGSA "shall also govern before the Goods
are loaded on and after they are discharged from the Vessel and
throughout the entire time the Goods are in the actual custody of the
Carrier or Participating Carrier." According to appellants, since the
rig was damaged while being handled by SSA — not Shipco —
Shipco cannot limit its liability pursuant to COGSA.
Appellants have this point exactly backwards. As a non-vessel-
operating common carrier, Shipco never has actual control over the
goods, but the cargo was indisputably in its legal custody for the dura-
tion of the voyage. Moreover, as the district court observed, the fun-
damental purpose of the Clause Paramount was not to restrict
COGSA but to extend it beyond its normal application: both before
the drilling rig was loaded onto the vessel and after it was unloaded
from the vessel. Parties to a bill of lading are entitled to contract for
extensions of COGSA beyond its customary scope, and specifically
to the periods "prior to the loading on and subsequent to the discharge
from the ship on which the goods are carried by sea." 46 U.S.C. app.
§ 1307; see also B. Elliot, 704 F.2d at 1307. That this was the purpose
of the Clause Paramount is clear from the language of the provision
itself, which states that COGSA "shall also govern" these periods.
Given that the Clause Paramount thus is meant to extend COGSA’s
protections, we certainly will not construe it to limit the statute’s nor-
mal application.2
IV.
The district court was therefore correct to limit Shipco’s liability
2Shipco also argues that, in the event that COGSA does not limit its
liability either by its own force or by contractual extension, a "savings
clause" in the bill of lading establishes a $500 limitation of liability. This
clause states that "if no limitation amount is applicable under either of
the Rules [such as COGSA] or legislation the limitation shall be US
$500." The district court did not address this claim because it found that
COGSA limited Shipco’s liability. Because the district court did not fully
consider the issue and because we affirm the court on other grounds, we
need not resolve the savings clause contention here.
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to appellants to $500. It is worth emphasizing that our decision today
deals with the default limitation of liability established by COGSA.
Schramm was surely entitled to opt for more liability coverage in the
bill of lading. There is no argument here that Schramm was unaware
of its ability to declare a higher value of coverage. Instead, Schramm
accepted the COGSA limitation and insured its cargo with Atlantic
Mutual. We will not relieve appellants of the consequences of this
decision through strained statutory and contractual interpretation. The
judgment of the district court is
AFFIRMED.
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