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07 January 2015
Cargo damage is sometimes caused by the packaging of the cargo being insufficient to prevent damage to the cargo during transportation. Whether the carrier is liable for such damage depends on the nature of the packaging and the care which is reasonably required to be exercised by the carrier.
The question of cargo packaging stands at the intersection between carriers' functions and shippers' functions regarding contracts of carriage. On the one hand, it is a shipper's duty to make sure that cargo is packed in such a way that it is suitable for transportation. On the other hand, it is a carrier's duty to carry cargo properly and carefully, taking into account the cargo's packaging. If a carrier has agreed to carry the cargo with its existing packaging, it must provide whatever care necessary to protect the cargo.
A carrier's liability for cargo damage is governed by Sections 274-289 of the Maritime Code. The general rule on liability is Section 275, which states that a carrier is liable for loss or damage to cargo, unless it proves that the loss or damage was not due to the "fault or neglect" of the carrier or any of its agents or servants. The question is to what extent the carrier may exempt itself from liability under this rule when the cargo has been insufficiently packed. Article IV 2(n) of the Hague Visby Rules has an express exemption from liability when loss or damage results from insufficiency of packing (assuming owners have exercised due diligence to make the vessel seaworthy in this respect on or before commencement of the voyage). The Maritime Code incorporates the Hague Visby Rules, but does not have the same express exemption in relation to packaging of the cargo. However, the exemption for insufficient packaging is deemed to be absorbed by the general liability provision under Section 275 of the code, described above.
To determine liability for cargo damage the nature of its packaging must be considered. As a starting point, normal or customary packaging in a particular trade is deemed to be sufficient packaging. For example, the Supreme Court (ND-1955-1) found a carrier liable for theft of cargo packed in cardboard boxes. Before World War II, similar cargo had been packed in wooden boxes, which provided better protection from theft. The court held that even though wooden boxes provided better security, cardboard packaging had become common in the trade. Since the carrier had accepted the cargo without any remarks regarding the packaging, it was held liable for the subsequent theft.
Some types of cargo are normally barely packed. For example, steel rods are normally tied in bundles without other packaging and automobiles are often only covered by wax or plastic foil. This is usually considered sufficient packaging for such cargo.
If cargo packed in a normal or customary way is damaged – and if it can be assumed that cargo packed in this way would not ordinarily be damaged – it can usually be concluded that the packaging was sufficient and that the carrier is at fault for failing to exercise proper care.
As an example, the Copenhagen Maritime and Commercial Court (ND-1989-123) found a carrier liable for damage to asphalt plates. It was emphasised that the packaging was the same as in several previous shipments of similar cargo, when no damage had been reported.
When determining whether cargo was insufficiently packed, each case must be decided on its facts. The degree of packing that can reasonably be expected from the shipper must be balanced against the degree of care that can reasonably be required from the carrier.
For example, Nord-Troms District Court (ND-2003-489) found that a carrier was liable due to bad stowage in a case where oil tanks packed in steel crates were damaged during heavy weather. The carrier had stacked the crates in three tiers. The crates were made for stacking, there was no stacking limit marked on the crates and it was not generally known that they could not be stacked. Nevertheless, the court found that the carrier should have understood that, taking into account the prospect of the bad weather, there would be a risk of damage if the crates were stacked in three tiers. Therefore, it held that the carrier had been negligent and that the packaging was not insufficient.
This decision (albeit rendered by a court of first instance) shows that normal handling of cargo may not be sufficient where the carrier should have understood that the packaging might not withstand normal handling.
Section 275 of the Maritime Code balances the interests of the shipper and carrier. It does not give a clear and direct solution to the question of liability, but allows for both the carrier's duty of care towards the cargo as well as the nature of the cargo's packaging to be taken into consideration. Thus, both shippers and carriers are encouraged to exercise a degree of caution in connection with the carriage.
For further information on this topic please contact Camilla Barr, Herman Steen or Gaute Gjelsten at Wikborg Rein by telephone (+47 22 82 75 00), fax (+47 22 82 75 01) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Wikborg Rein website can be accessed at www.wr.no.
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