1 11-0486-cv LMAN Ferrostaal, Inc v. M/V Akili, UNITED STATES COURT OF APPEALS 1 FOR THE SECOND CIRCUIT 2 August Term,…

1
11-0486-cv(L)
MAN Ferrostaal, Inc. v. M/V Akili,
UNITED STATES COURT OF APPEALS 1
FOR THE SECOND CIRCUIT 2
August Term, 2011 3
(Argued: January 9, 2012 Decided: December 6, 2012) 4
Docket No. 11-0486-cv(L), 11-0567-cv(XAP) 5
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MAN FERROSTAAL, INC., 7
Plaintiff-Appellee-Cross-Appellant, 8
9
v. 10
11
M/V AKILI, her engines, boilers, tackle, etc., 12
Defendant-Cross-Claimant-Appellant-Cross-Appellee 13
14
AKELA NAVIGATION CO., LTD., ALMI MARINE MANAGEMENT SA, 15
Defendants-Third-Party Plaintiffs-Cross- 16
Claimants-Appellees, 17
18
SM CHINA CO., LTD., 19
Defendant-Third-Party Defendant-Cross-Defendant. 20
21
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23
B e f o r e: WINTER, KATZMANN, and LYNCH, Circuit Judges. 24
Appeal from a judgment of the United States District Court 25
for the Southern District of New York (Denise Cote, Judge), after 26
a bench trial, holding the M/V Akili liable in rem for damage to 27
cargo shipped aboard the vessel. Appellants argue that the 28
district court erred in holding that the vessel was liable in 29
rem, and in holding that the Carriage of Goods by Sea Act applied 30

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2
to the vessel as a “carrier” under that act. Man Ferrostaal 1
cross-appeals the judgment for failing to hold Almi Marine 2
Management and Akela Navigation Co. liable in personam for the 3
damage under a bailment theory. We affirm. 4
VINCENT M. DEORCHIS, 5
Deorchis & Partners, LLP, New York, 6
NY, for Defendant-Cross-Claimant- 7
Appellant-Cross-Appellee. 8
9
STEVEN P. CALKINS, Kingsley 10
Kingsley & Calkins, Hicksville, NY, 11
for Plaintiff-Appellee-Cross- 12
Appellant. 13
14
15
WINTER, Circuit Judge: 16
The M/V Akili, its owner, Akela Navigation Co., and manager, 17
Almi Marine Management, appeal from Judge Cote’s decision, after 18
a bench trial, holding the M/V Akili liable in rem for damage to 19
cargo shipped aboard the vessel. Appellants claim that the 20
district court erred in holding the vessel liable in rem. Man 21
Ferrostaal (“Ferrostaal”) cross-appeals from the holding that 22
Almi Marine Management (“Almi”) and Akela Navigation Co. 23
(“Akela”) are not liable in personam under a bailment theory. We 24
write at length to clarify both the issues and our analysis, 25
which differs somewhat from that of the district court. However, 26
we affirm. 27
28

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1The USA Clause Paramount is a clause designating the
Carriage of Goods by Sea Act, or COGSA, as the controlling law
with respect to the rights and liabilities of parties to a bill
of lading.
3
BACKGROUND 1
Ferrostaal’s business is accepting orders of steel from 2
customers in the United States, procuring steel from 3
international suppliers, and then arranging for the steel’s 4
transportation to the customer. The cargo at issue here was 5
9,960 “thin-walled” steel pipes, manufactured in China and sold 6
to Ferrostaal pursuant to a purchase order dated March 23, 2006 7
(“Purchase Order”). Ferrostaal in turn sold the pipe to McJunkin 8
Appalachian Oilfield of West Virginia and arranged for it to be 9
shipped to New Orleans. 10
A series of charters and sub-charters of the Akili were 11
executed before the cargo was loaded aboard. On June 19, 2006, 12
Akela time-chartered the Akili to Seyang Shipping, Ltd., which in 13
turn was permitted to sublet the vessel for all or any part of 14
the time covered by the charter (the “Time Charter Party”). The 15
Time Charter Party specified that all bills of lading issued 16
under the charter would incorporate “the General Clause Paramount 17
or U.S. or Canadian Clause Paramount whichever applicable as 18
attached.” 1 Thereafter, Seyang sub-chartered the vessel to S.M. 19

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4
China for the voyage from Shanghai to Houston and then to New 1
Orleans. Prior to chartering the Akili from Seyang, S.M. China 2
had executed a part-cargo charter (the “Voyage Charter Party”) 3
with Ferrostaal for the carriage of the thin-walled pipes from 4
Shanghai to New Orleans. The Voyage Charter Party did not 5
identify the vessel on which the cargo was to be shipped, stating 6
instead that the ship was “TBN” -- “to be named” in landlubbers’ 7
lingo -- by S.M. China. 8
The Voyage Charter Party placed responsibility for loss 9
“caused by improper or negligent stowage, or discharge, or care 10
of the goods” on the “Owners” of the vessel. It further 11
specified that “[s]towage is to be under the Master’s supervision 12
and responsibility as Owners’ agent.” The “Owner” was defined as 13
S.M. China. It also contained a “free-in-and-out” provision that 14
stated that the handling of cargo was to be “free of risk . . . 15
to the vessel.” 16
The Voyage Charter Party also contained a “Clause Paramount” 17
that stated in part, “[n]otwithstanding any other provisions in 18
this contract, any claims for loss or damage to cargo shall be 19
governed by the Hague-Visby rules as if comprehensively 20
applicable by law.” The Hague-Visby rules are an international 21
convention that are in all pertinent respects literally identical 22
to rules established by the Carriage of Goods by Sea Act, 46 23

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2The Clauses Paramount in the Bill of Lading reads as
follows:
This Bill of Lading shall be subject to the
Hague Rules contained in International
Convention for the Unification of Certain
Rules of Law Relating to Bills of Lading,
dated at Brussels the 25 th August, 1924, or
the corresponding legislation of the flag
state of the ship. If the stipulations of
the bill of lading are wholly or partly
contrary thereto, this bill of lading shall
be read as if such stipulation or part
thereof, as the case may be, were deleted.
Because the contract of affreightment is the Voyage Charter Party
for reasons stated infra, the differences between the Voyage
Charter Party Clause Paramount and the Bill of Lading Clause
Paramount do not affect the disposition of this case.
5
U.S.C. § 30701 (“COGSA” or “the Act”). This is no coincidence 1
because the convention requires signatory nations to pass 2
legislation embodying these rules. 3
A bill of lading was issued by China Ports International 4
Shipping Agency Ltd., as the agent of S.M. China, to Zhongqing, 5
the shipper, and then was transferred to Ferrostaal through 6
banking channels pursuant to the “cash against documents” term of 7
the Purchase Order. The bill of lading contained a Clause 8
Paramount that incorporated the Hague rules. 2
9
The pipe was carried from China to New Orleans aboard the 10
Akili. Upon arrival in New Orleans, it was discovered that the 11
steel pipes had been placed at the bottom of a cargo hold and 12

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3Akela and Almi filed a motion to dismiss for lack of
personal jurisdiction on January 23, 2009, which was stayed
pending trial on the issues of in rem and in personam liability.
4On February 9, 2009, Ferrostaal made an emergency motion to
sever the in rem action and transfer it to the Eastern District
of Louisiana because the Akili was expected to call at a
Louisiana port. The motion was granted. Then, the Owners’
insurance company wrote a Letter of Undertaking seeking to avoid
the arrest. Pursuant to a Stipulation and Consent Order entered
by the parties, the in rem action was transferred back to the
Southern District of New York, where it was assigned a new case
number. Although the in rem and in personam claims were tried
together, disposed of by a single opinion and order, and resolved
by a combined judgment bearing both case numbers, the two cases
were never formally consolidated.
Because the Akili filed its notice of appeal only under the
docket number of the in personam action, Ferrostaal argues that
we lack jurisdiction to consider appellant’s arguments insofar as
they pertain to the in rem action. We are unpersuaded. The
Akili timely filed notice in the district court of its intent to
appeal the “judgment, order or decree” entered by the district
court as it pertains to the in rem action. 28 U.S.C. § 2107(a).
Ferrostaal received notice of the Akili’s intent to appeal, and
it claims no prejudice as a result of the Akili’s failure to file
the notice in both actions or to caption it with both district
court case numbers. Accordingly, the Akili’s oversight is not
fatal to its appeal. See Marrero Pichardo v. Ashcroft, 374 F.3d
46, 54-55 (2d Cir. 2004); Conway v. Village of Mount Kisco, N.Y.,
750 F.2d 205, 211-12 (2d Cir. 1984).
6
damaged when heavier pipes were placed on top. The pipes were 1
repaired by Houston Tubulars, Inc., which was paid $286,078.32 by 2
Ferrostaal. 3
On July 9, 2007, Ferrostaal filed the present action in rem 4
against the Akili and in personam against Akela, Almi, and S.M. 5
China. Akela and Almi filed a cross-claim against S.M. China. 3
6
After a bench trial, Judge Cote held the Akili liable in rem 4 and 7

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7
dismissed the claims for in personam liability against Akela and 1
Almi. This appeal and cross-appeal followed. 2
DISCUSSION 3
We review the district court’s findings of fact for clear 4
error and its conclusions of law de novo. Mobil Shipping & 5
Transp. Co. v. Wonsild Liquid Carriers Ltd., 190 F.3d 64, 67 (2d 6
Cir. 1999). Mixed questions of law and fact are reviewed de 7
novo. White v. White Rose Food, 237 F.3d 174, 178 (2d Cir. 8
2001). 9
a) The Appeal 10
Boiled down, the parties dispute whether: (i) an in rem 11
proceeding rendering the Akili liable for damage to, or loss of, 12
cargo is unavailable in this matter because a vessel is not a 13
“carrier” within the meaning of COGSA and (ii) the free-in-and- 14
out provision in the Voyage Charter Party purportedly absolving 15
the Akili of in rem liability is enforceable. We hold that the 16
first issue is essentially irrelevant because a vessel’s in rem 17
liability for damage to cargo exists under maritime common law, 18
not COGSA, for a violation of a carrier’s contractual or 19
statutory -- COGSA’s -- obligations. We resolve the second issue 20
against enforcement of the free-in-and-out provision so far as it 21
might be construed to prevent in rem liability of the vessel. In 22
doing so, we do not decide whether COGSA applied as a matter of 23

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8
law to this voyage because, even if it did not, the Voyage 1
Charter Party’s Clause Paramount contractually incorporates the 2
Hague-Visby rules prohibiting a carrier from contracting for a 3
waiver of its obligations regarding damage to cargo. See 46 4
U.S.C. § 30701 Note § 3(8). 5
1. The Vessel as a COGSA “Carrier” 6
COGSA sets out the obligations of “carriers” involved in the 7
shipment of goods into the United States from international 8
ports. It requires ocean carriers to “Properly and carefully 9
load, handle, stow, carry, keep, care for, and discharge the 10
goods carried,” id. § 30701 Note § 3(2), and forbids carriers 11
from contracting out of these obligations. Id. § 30701 Note § 12
3(8); see also Sogem-Afrimet. Inc. v. M/V Ikan Selayang, 951 F. 13
Supp. 429, 442-43 (S.D.N.Y. 1996), aff’d, 122 F.3d 1057 (2d Cir. 14
1997) (“COGSA does not permit the carrier to divest itself of the 15
duty to insure the proper stowage of the cargo.”). COGSA defines 16
a “carrier” to mean “the owner, manager, charterer, agent, or 17
master of a vessel,” 46 U.S.C. § 30701, including “the owner or 18
the charterer who enters into a contract of carriage with a 19
shipper.” Id. at Note § 1(a). 20
Appellant argues that because a “vessel” is not a carrier 21
under COGSA, the Akili cannot be liable in rem for damage to, or 22
loss of, cargo. We disagree. COGSA assumes the existence of the 23

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5The only portion of Section 3 that applies directly to
ships is Paragraph 8, which prevents parties from contracting
around the ship’s coextensive liability. § 30701 Note § 3(8),
discussed infra.
9
in rem proceeding rather than creates it. Section 3, the crux of 1
the Act, sets out duties applicable only to carriers but is 2
entitled “Responsibilities and Liabilities of Carrier and Ship.” 3
(emphasis added). The very title of Section 3 thus assumes that 4
maritime law supplies in rem liability coextensive with carrier 5
liability. 5
6
Well before enactment of COGSA and its predecessor, the 7
Harter Act, maritime law held ships liable in rem for cargo 8
damage due to improper stowage. The Water Witch, 66 U.S. 494, 9
500 (1862) (“The ship having received the cargo and carried it 10
. . . is estopped to deny her liability to deliver in like good 11
order as received . . . .”); Demsey & Assoc., Inc. v. S.S. Sea 12
Star, 461 F.2d 1009, 1014 (2d Cir. 1972) (“Every claim for cargo 13
damage creates a maritime lien against the ship which may be 14
enforced by a libel in rem.”), abrogated on other grounds by 15
Seguros Illimani S.A. v. M/V Popi P, 929 F.2d 89 (2d Cir. 1991); 16
Pioneer Import Corp. v. Lafcomo, 49 F.Supp. 559, 561-62 (S.D.N.Y. 17
1943), aff’d, 138 F.2d 907 (2d Cir. 1943) (“A lien arises against 18
the ship for damage to cargo caused by improper stowage.”); see 19
also Gilmore & Black, The Law of Admiralty § 3-45 at 165 (1957). 20

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6The district court used a combination of maritime law and
COGSA to find the Akili liable in rem. See Man Ferrostaal v. M/V
Akili, 763 F. Supp. 2d 599, 612 (S.D.N.Y. 2011) (“The Akili, by
setting sail with the cargo, is deemed to have ratified the bill
of lading, and therefore is liable in rem as a [COGSA] carrier.”
(emphasis added)). We do not adopt this reasoning.
The “implied ratification” doctrine gives rise directly to
in rem liability. It does not render a vessel a carrier under
COGSA. See, e.g., Demsey, 461 F.2d at 1015. The ratification
doctrine is directly traceable to pre-COGSA maritime law
precedent. For example, the seminal implied ratification case,
The Esrom, 272 F. 266, 270 (2d Cir. 1921), cites The Schooner
Freeman v. Buckingham, 59 U.S. 182 (1855), a case that preceded
COGSA and its predecessor, the Harter Act. In Freeman, the
Supreme Court stated:
[W]hen the general owner [of a vessel]
intrusts the special owner with the entire
control and employment of the ship, it is a
just and reasonable implication of law that
the general owner assents to the creation of
liens binding upon his interest in the
vessel, as security for the performance of
contracts of affreightument made in the
course of the lawful employment of the
vessel. The general owner must be taken to
know that the purpose for which the vessel is
hired, when not employed to carry cargo
belonging to the hirer, is to carry cargo of
third persons; and that bills of lading, or
charter-parties, must, in the invariable
regular course of business be made, for the
performance of which the law confers a lien
on the vessel.
Id. at 190.
10
In rem liability is derived from a pre-COGSA maritime law 1
doctrine to the effect that, once cargo is aboard a vessel, the 2
vessel is deemed to have impliedly ratified the underlying 3
contract of affreightment and is answerable for nonperformance. 6
4

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7Akili argues that Insurance Company of North America v. S/S
American Argosy, 732 F.2d 299 (2d Cir. 1984), demands a different
conclusion. It does not. American Argosy governs bills of
lading issued by non-vessel operating common carriers (“NVOCCs”),
which “do not . . . own or charter the ships that actually carry
the cargo.” Id. At 301. We recognized that the ratification
doctrine applies where a bill of lading has been issued “by a
charterer of the vessel,” and decline to extend the doctrine to
situations involving NVOCCs. Id. at 303-04. Unlike an NVOCC,
S.M. China operated the ship for the purpose of carrying cargo
pursuant to a charter agreement, as authorized by the ship’s
owner, and the ratification doctrine therefore applies. See
Freeman, 59 U.S. at 190.
8The fact that a vessel is operated under charter does not
absolve it of in rem liability. Demsey, 461 F.2d at 1014;
Pioneer Import, 138 F.2d at 908 (“[T]he maritime lien against the
ship . . . obtains whether or not [the ship] was under
charter.”). Even if a charterer enters into a contract of
affreightment unauthorized by the vessel owner, the vessel is
liable in rem for non-performance even if the vessel owner is
absolved of in personam liability. See Demsey, 461 F.2d at 1015;
see The Water Witch, 66 U.S. at 500 (holding ship liable for
improper stowage by charterer despite master’s refusal to sign
the bill of lading because “the ship having received the cargo
and carried it to the consignees . . . is estopped to deny her
liability to deliver in like good order as received.”).
11
Demsey, 461 F.2d at 1014-15; see also Kraus Bros. Lumber Co. v. 1
Dimon S.S. Corp., 290 U.S. 117, 121 (1933). The Akili, by 2
setting sail with the cargo on board, impliedly ratified the 3
contract of affreightment between S.M. China and Ferrostaal. See 4
Freeman, 59 U.S. at 190 (noting that where a shipowner allows a 5
special owner to carry cargo of third persons, the law confers a 6
lien for the performance of bills of lading or charter parties). 7
7
As between S.M. China and Ferrostaal, the contract of 8
affreightment was the Voyage Charter Party rather than the bill 9
of lading. 8 A carrier may not alter its contractual obligations 10

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12
to a shipper under a Voyage Charter Party by issuing a bill of 1
lading with different terms, Asoma Corp. v. SK Shipping Co., 467 2
F.3d 817, 823-24 (2d Cir. 2006), albeit when the bill of lading 3
is negotiated to a good faith third party, which did not occur 4
here, the bill governs the third party’s rights. Id. at 824. 5
To sum up, even if a vessel is not a “carrier” within the 6
meaning of COGSA, maritime law renders vessels liable in rem for 7
a carrier’s violations of its obligations. Therefore, while 8
COGSA, if applicable, may affect or alter a carrier’s obligations 9
and thereby determine the outcome of an in rem proceeding against 10
a carrier’s vessel, the in rem remedy is a creature of maritime 11
law, not COGSA. 12
2. Enforceability of a Waiver of the Vessel’s In Rem 13
Liability 14
The applicability of COGSA in this appeal arises in a second 15
and different context. Appellants argue that the free-in-and-out 16
provision of the Voyage Charter Party relieves the vessel of 17
liability for improper stowage. The free-in–and-out provision 18
reads: 19
The cargo to be loaded, stowed, lashed, 20
secured, and dunnaged free of risk and 21
expenses to the vessel in accordance with 22
local regulations for steel cargoes, under 23
deck only. 24
25
Appellee disagrees with this interpretation of the 26
provision, but we need not resolve that issue in light of our 27

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13
disposition. As discussed above, COGSA and its predecessor, the 1
Harter Act, were meant to modify, not displace, in rem liability 2
under maritime law. A principal modification was to prohibit 3
carriers from contracting out of their obligations under maritime 4
law and out of their vessel’s exposure to in rem liability. § 5
30701 Note § 3(8). 6
As the classic admiralty treatise states, “The general law 7
of maritime carriage made the public carrier of goods by sea 8
absolutely responsible for their safe arrival,” with a few 9
exceptions. Gilmore & Black, supra § 3-22 at 139. “When the 10
bill of lading came into general use as a receipt for goods and 11
document of title, [however], shipowners [and other carriers] . . 12
. began to set out on the face of the bill various ‘exceptions’ 13
[to liability].” Id. § 3-22 at 140. “Bills came to include 14
stipulations that the carrier was not to be liable even for the 15
results of his own negligence or that of the ship’s people. . . 16
Instead of being absolutely liable, irrespective of negligence, 17
[the carrier] enjoyed an exemption from liability, regardless of 18
negligence, as wide as his bargaining position enabled him to 19
contract for.” Id. § 3-23 at 142. The dissatisfaction of 20
American cargo interests with these exemptions from liability 21
prompted Congress to enact the Harter Act of 1893, the 22
predecessor to COGSA. Id. § 3-24 at 142-43. 23

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14
COGSA, therefore, prevents international ocean carriers from 1
contracting out of certain specified obligations, including the 2
responsibility to stow cargo properly. See Nichimen Co. v. M.V. 3
Farland, 462 F.2d 319, 327 (2d Cir. 1972); see also § 30701 Note 4
§ 3 (setting forth carrier duties); id. Note § 3(8) (preventing 5
carriers and ships from contracting out of the duties set forth 6
therein). These obligations are deemed as a matter of law to be 7
incorporated by reference into every bill of lading where COGSA 8
applies. See § 30701 Note (“Every bill of lading . . . in 9
foreign trade, shall have effect subject to the provisions of 10
this chapter.”); Gilmore & Black, supra § 3-25 at 145. 11
The relevant COGSA provision reads: 12
Any clause . . . in a contract of carriage 13
relieving the carrier or the ship from 14
liability for loss or damage to or in 15
connection with the goods, arising from . . . 16
obligations provided in this section . . . 17
shall be null and void and of no effect. 18
19
§ 30701 Note § 3(8). 20
The Hague-Visby Convention sets out an identical rule –- in 21
haec verba –- and the parties here have incorporated the 22
Convention and its rules into the Clauses Paramount of the Voyage 23
Charter Party and the bill of lading. If COGSA applies as a 24
matter of law, the free-in-and-out provision is unenforceable 25
insofar as it is a waiver of in rem liability. If the cargo 26
damage rules of Hague-Visby apply as a matter of contract, the 27
same result is reached. 28

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15
The applicability of either approach, however, is not self- 1
evident. Both COGSA and Hague-Visby contain the following 2
provision: 3
“[C]ontract of carriage” applies only to 4
contracts of carriage covered by a bill of 5
lading or any similar document of title, in 6
so far as such document relates to the 7
carriage of goods by sea, including any bill 8
of lading or any similar document as 9
aforesaid issued under or pursuant to a 10
charter party from the moment at which such 11
bill of lading or similar document of title 12
regulates the relations between a carrier and 13
a holder of the same. 14
15
§ 30701 Note § 1(b); Hague-Visby Rules, Art. I. For convenience 16
sake, we will refer to this provision as “the Applicability 17
Provision” or “Provision”. 18
With regard to the applicability of COGSA as a matter of 19
law, the Applicability Provision has led to a division among 20
American courts. Although the provision does not specifically 21
mention a distinction between public and private carriage, most 22
American courts, including the district court in this case, treat 23
the Applicability Provision as calling for a determination of 24
whether the vessel was engaged in public -- roughly speaking, 25
multiple cargos and shippers -- or private -- again, roughly 26
speaking, a single cargo and shipper -- carriage. Akili, 763 F. 27
Supp. 2d at 609-10; see, e.g., Jefferson Chem. Co. v. M/T Grena, 28
413 F.2d 864, 867 (5th Cir. 1969); Pac. Vegetable Oil Corp. v. 29

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16
M/S Norse Commander, 264 F. Supp. 625, 627 (S.D. Tex. 1966); J. 1
Gerber & Co. v. SS Sabine Howaldt, 310 F. Supp. 343, 350 2
(S.D.N.Y. 1969), reversed on other grounds, 437 F.2d 580 (2d Cir. 3
1971). As we explained in Nichimen, the public-private carriage 4
distinction is a relic of case law applying COGSA’s predecessor, 5
the Harter Act. 462 F.2d at 327-28. COGSA’s language includes 6
no mention of the public-private distinction but states only that 7
the Act applies “from the moment at which such bill of lading or 8
similar document of title regulates the relations between a 9
carrier and a holder of the same.” 46 U.S.C. § 30701 Note § 10
1(b). 11
We have sometimes labored to treat charter parties and bills 12
of lading as proxies for private and public carriage, 13
respectively. See, e.g., Madow Co. v. S.S. Liberty Exporter, 569 14
F.2d 1183, 1186-87 (2d Cir. 1978) (arguing that the charter 15
arrangements deemed to be outside the reach of COGSA generally 16
involve engagement of the entire vessel by the charterer for the 17
purpose of shipping his own cargo). In Nichimen, however, we 18
noted that there is no necessary correlation between public 19
carriage and carriage pursuant to a bill of lading, or private 20
carriage and voyage charter parties. 462 F.2d at 328. Indeed, 21
in Nichimen, we declined to treat the applicability of COGSA as 22
turning on whether the vessel was engaged in public or private 23

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17
carriage, id. at 326-28, finding instead that COGSA applied of 1
its own force because the parties privately agreed that a 2
subsequently-issued bill of lading would govern relations between 3
them. Id. at 328-29; see Blommer Chocolate Co. v. Nosira Sharon 4
Ltd., 776 F. Supp. 760, 767-68 (S.D.N.Y. 1991) (discussing 5
Nichimen). 6
Application of the public-private carriage analysis probably 7
favors appellees, as the district court held, because the voyage 8
here involved multiple cargos and multiple shippers. However, 9
the Fifth Circuit has recently refused to treat carriers that 10
transport multiple shippers’ cargo as per se subject to COGSA. 11
See Tradearbed Inc. v. Western Bulk Carriers K/S, 374 Fed. App’x. 12
464, 473-74 (5th Cir. 2010). Instead, it treats the 13
applicability of COGSA as turning on which document -- charter 14
party or bill of lading -- governs relations between the 15
litigants. See Id. at 374; see also Thyssen, Inc. v. Nobility 16
MV, 421 F.3d 295, 297, 307 (5th Cir. 2005). 17
Based on the “governing-instrument” standard, appellants 18
argue that COGSA does not apply because the bill of lading here 19
was only a receipt and the Voyage Charter Party –- with the free- 20
in-and-out provision –- is the governing document. It is 21
established that a bill of lading issued under a charter party is 22
only a receipt when it remains in the hands of the shipper- 23

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18
charterer. See Nichimen, 462 F.2d at 328; see Asoma, 467 F.3d at 1
824. In such a case, the charter party continues to govern 2
relations between the parties. See Asoma, 467 F. 3d at 823-24; 3
The Fri, 154 F. 333, 336-37 (2d Cir. 1907). Otherwise, as we 4
have noted, a carrier could alter the terms of the charter party 5
by issuing inconsistent bills of lading. Asoma, 467 F.3d at 824 6
(citing Hellenic Lines, Ltd. v. Embassy of Pakistan, 467 F.2d 7
1150, 1154 (2d Cir. 1972)). Therefore, the bill of lading 8
becomes the governing instrument only after it is negotiated to a 9
subsequent holder who is not bound by the charter party. Id.; 10
see Ministry of Commerce v. Marine Tankers Corp., 194 F. Supp. 11
161, 162-63 (S.D.N.Y. 1960). The governing instrument test, 12
therefore, would favor appellants’ theory of this case. 13
The adoption of either the “public/private carriage” or the 14
“governing instrument” interpretation of the Applicability 15
Provision might well, therefore, affect the outcome in this 16
matter. However, we need not resolve the various issues raised 17
because the Voyage Charter Party’s Clause Paramount incorporates 18
the Hague-Visby Rules. Even if COGSA does not apply, therefore, 19
the Voyage Charter Party provides rules regarding the 20
impermissibility of a waiver of in rem liability –- Hague-Visby 21
–- identical to those of COGSA. 22
23

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19
The Clause Paramount of the Voyage Charter Party reads: 1
Notwithstanding any other provisions in this 2
contract, any claims for loss or damage to 3
cargo shall be governed by the Hague-Visby 4
rules as if compulsorily applicable by law, 5
and any other clauses herein repugnant to the 6
Hague-Visby rules shall be null and void and 7
of no force or effect as respects cargo 8
claims. Any clauses in this contract 9
allocating responsibility or risk with 10
respect to loading, stowing, stevedoring, 11
lashing, securing, dunnaging, discharging and 12
delivery shall be deemed to apply only as 13
price terms and shall not be interpreted to 14
alter in any way the responsibilities of the 15
owner and the ship as carriers as defined in 16
the Hague rules as respects claims for cargo 17
loss and damage. 18
19
In maritime law, a Clause Paramount “identifies the law that 20
will govern the rights and liabilities of all parties to the bill 21
of lading,” Sompo Japan Ins. Co. Of America v. Union Pac. R.R. 22
Co., 456 F.3d 54, 56 (2d Cir. 2006) abrogated on other grounds by 23
Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 130 S.Ct. 2433 24
(2010), and, therefore, supersedes the free-in-and-out provision. 25
See Asoma Corp. v. M/V Seadaniel, 971 F. Supp. 140, 143 (S.D.N.Y. 26
1997) (finding in a similar case, with similar contractual 27
provisions, that the Clause Paramount governed). Indeed, the 28
Clause Paramount itself states that its provisions govern 29
“[n]otwithstanding any other provisions in this contract.” 30
The Clause Paramount, therefore, incorporates Hague-Visby’s 31
prohibitions on waivers of in rem liability into the Voyage 32

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20
Charter Party. See Koppers Conn. Coke Co. v. McWilliams Blue 1
Line Inc., 89 F.2d 865, 866 (2d Cir. 1937) (noting that the 2
Harter Act [COGSA’s predecessor] could apply where the parties to 3
a charter incorporated it, even in instances where it did not 4
apply of its own force); see also Nichimen, 462 F.2d at 328 5
(finding that parties may render COGSA applicable through 6
contractual arrangements where it does not apply of its own 7
force); see also Thyssen, 421 F.3d at 307(noting that parties may 8
incorporate COGSA into a private carriage agreement using a 9
Clause Paramount). To the extent that the free-in-and-out 10
provision might relieve the Akili of liability for improper 11
stowage it is, therefore, of no effect because it is prohibited 12
by Hague-Visby. 13
A final matter. We noted above a concern that the 14
applicability of Hague-Visby’s rules invalidating a waiver of a 15
carrier’s obligations was not self-evident. That was perhaps a 16
tad of an overstatement, but it might be argued that the Voyage 17
Charter Party’s contractual incorporation of Hague-Visby includes 18
the Applicability Provision, thereby requiring us to interpret 19
that provision and address the complexities explored above in the 20
interpretation of the identical provision in COGSA. However, the 21
language of the Clause Paramount in the Voyage Charter Party 22
states that “any claims for loss or damage to cargo shall be 23

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21
governed by the Hague-Visby rules as if cumpulsorily applicable 1
by law.” (emphasis added). This clearly applies the substantive 2
rules in question without regard to the proper interpretation of 3
the Applicability Provision. 4
We also note that courts have read charter parties 5
incorporating COGSA to incorporate the substantive rules of COGSA 6
governing cargo damage claims whether or not the Applicability 7
Provision would normally render COGSA inapplicable. See e.g., 8
Itochu Int’l, Inc. v. M/V Western Avenir, 1997 WL 537698, *5 9
(E.D. La. 1997); Horn v. CIA de Navegacion Fruco, 404 F.2d 422, 10
429 n.6 (5th Cir. 1968); Hartford Fire Ins. Co. v. Calmar 11
Steamship Corp., 404 F. Supp. 442, 445 (W.D. Wash. 1975); cf. 12
Koppers, 89 F.2d at 866. This seems to us a common sense 13
interpretation. If COGSA or Hague-Visby apply by force of law, 14
contractual incorporation into a charter party or bill of lading 15
is unnecessary. Incorporation of the substantive rules governing 16
cargo damage without regard to the Applicability Provision makes 17
sense largely as a protection against judicial rulings that the 18
statute and convention are not applicable as a matter of law. 19
b. The Cross Appeal 20
Ferrostaal argues in its cross-appeal that the district 21
court erred in holding there was no in personam liability for 22
Akela and Almi. We disagree. 23

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22
One can recover for damage to cargo under COGSA or under a 1
bailment theory. See Rationis Enters. Inc. of Pan. v. Hyundai 2
Mipo Dockyard, Co., Ltd., 426 F.3d 580, 587 n.3 (2d Cir. 2005). 3
Ferrostaal does not contend it is entitled to recover under the 4
former theory. To prevail under the latter theory, there must 5
have been a bailment relationship between the claimant and the 6
ship owner or manager. A “bailment does not arise unless 7
delivery to the bailee is complete and he has exclusive 8
possession of the bailed property.” Thyssen Steel Co. v. M/V 9
Kavo Yerakas, 50 F.3d 1349, 1355 (5th Cir. 1995). When a 10
charterer has taken responsibility for stowage of cargo aboard a 11
ship, the ship owner does not have exclusive possession and 12
cannot be held liable as a bailee. Id. at 1354-55. Therefore, 13
“no inference of negligence against the bailee arises if his 14
possession of the damaged bailed property was not exclusive of 15
that of the bailor.” United States v. Mowbray’s Floating Equip. 16
Exchange, Inc., 601 F.2d 645, 647 (2d Cir. 1979) (citing Pan-Am. 17
Petrol. Transp. Co. v. Robins Dry Dock & Repair Co., 281 F. 97, 18
107 (2d Cir. 1922)). 19
Neither Akela nor Almi authorized S.M. China to issue bills 20
of lading on their behalf. Ferrostaal could not have believed 21
such authorization to exist when the bill of lading named only 22
S.M. China as carrier and did not purport to be a document signed 23

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9Both David Crystal, Inc. v. Cunard Steamship Co., Ltd., 339
F.2d 295 (2d Cir. 1964), and Leather’s Best, Inc. v. S.S.
Mormaclynx, 451 F.2d 800 (2d Cir. 1971) are relied upon by
Ferrostaal for the proposition that a bailment exists even when
the cargo has been turned over by a carrier to stevedores,
despite non-exclusivity. However, these cases both address the
special question of the liability of a carrier to a shipper post-
discharge but pre-delivery where the bill of lading is silent as
to the exact time at which the carrier’s obligations cease. They
are, therefore, inapposite.
23
“for the master.” See Demsey, 461 F.2d at 1015 (finding that 1
ship owner could not be made personally liable when charterer had 2
no actual or apparent authority to so bind it); Yeramex Intern. 3
v. S.S. Tendo, 595 F.2d 943, 948 (4th Cir. 1979) (same). 9
4
The carriers remained responsible for delivery of the goods 5
and maintained exclusive control and custody over the cargos 6
through agents they hired directly. Akela and Almi, on the 7
contrary, did not issue receipts for the subject cargo, enter 8
into contracts of carriage with Zhongquing or Ferrostaal, hire 9
the stevedores, or have any agreement to load or to stow the 10
cargo. See OT Trading, L.P. v. M/V Saga Morus, 641 F.3d 105, 11
109-10 (5th Cir. 2011) (even though the charter’s agent had 12
authority to sign bills of lading on behalf of the ship owner, it 13
signed on behalf of the sub-charterer carrier, and that therefore 14
the owner and the charterer were both in possession of the cargo, 15
and thus did not have exclusive control over the cargo). Akela 16
and Almi are, therefore, not liable. 17

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24
CONCLUSION 1
We affirm for the reasons stated. 2

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