Goods Shipped in Sealed Sea Containers Require Actual Proof of Good Order of the Contents

April 23, 2014

–A Carrier Has No Duty to Issue a Receipt for What It Cannot See–

Most dry cargo shipped in international trade these days may be moved along the way by several carriers – ships, trains, trucks, etc. – before arriving at destination. Most dry cargo is also shipped in sealed containers, which are not opened until final destination. Different laws, foreign and domestic, may apply to the various carriers that handled different segments of the through transport. To complicate matters further, shippers usually hire freight forwarders to arrange the logistics of through carriage with various carriers, and sometimes they will issue bills of lading themselves, which, under U.S. law, adds them to the list of participating carriers.

When the sealed containers are finally opened at destination and shortage or damage to the goods is discovered, which carrier does one sue? And, how about the freight forwarders?

If an ocean carrier issues a through bill of lading from warehouse to warehouse, and arranges to subcontract land segments of the through transport, that simplifies things and the ocean carrier can be sued.

But even then, cargo owners usually must prove that the full number of packages was loaded into the container in good condition as the place of origin. The ocean carrier’s bill of lading only acknowledges receipt of the number of containers received “in apparent good order and condition,” and the contents are described as “shipper’s load and count, not binding on the carrier.”

Since the shipper sealed the containers, a deposition of the shipper is usually required to prove the sound condition and quantity of the packages shipped.

Cargo’s Burden of Proof

A recent decision by the Fifth Circuit Court of Appeals demonstrates the cargo owner’s heavy burden of proof when cargo is shipped in sealed containers. A Mexican company purchased 11,490 boxes of Christmas lights shipped in 15 containers by a Chinese manufacturer.  The 15 containers arrived at the designated port in Western Mexico.

The importer ran into some difficulties arranging further transport into the interior of Mexico.  As a result, the containers remained in a bonded warehouse in Mexico for some time before the importer figured out a way to ship them by sea to Long Beach, California, where a freight forwarder would receive them and arrange overland transport to Laredo, Texas. The 15 containers would then be trucked to destination in Mexico.

The Mexican importer arranged transport by sea from the port in Mexico to Long Beach “in bond”, and it hired a freight forwarded at Long Beach to arrange the land transport to Laredo, Texas. The containers were held by U.S. Customs in bond until they could be shipped to Mexico.

The freight forwarder first submitted Customs Form 7512 on January 13, 2009, which included a description of the cargo as 11,490 boxes of Christmas lights in 15 containers.  This description was obtained from the ocean bill of lading. Form 7512 is filed with Customs for cargo in transit.

U.S. Customs released the containers for shipment to Mexico in bond.  The forwarder arranged to transfer the containers to its container freight station in Long Beach. Eight days later, the containers were unsealed, contents counted, and resealed for land transport to Laredo. According to the freight forwarder, the count revealed, the containers held only 9,578 boxes and 1,912 boxes were missing.

The freight forwarder notified U.S. Customs of the shortage.  Customs allowed the forwarder to file an amended Form 7512, without penalty.

The containers arrived at the freight forwarder’s facility in Laredo on January 22, 2009, when the shortage was again confirmed, and the cargo was finally delivered to importer in Mexico April 3 – 8, 2009.

The importer filed a suit not against the Chinese shipper or ocean carriers, but against the freight forwarder in Long Beach.  No testimony was taken of the Chinese shipper to prove the full quantity was shipped.  The plaintiff moved for Summary Judgment under the Carmack Amendment.  The District Court granted the Summary Judgment, but the Court of Appeals reversed.

The freight forwarder claimed that the plaintiff had not proven that the forwarder had received the full quantity of 11,490 boxes listed in the invoice and the bills of lading of the ocean carriers.

The District Court had found that Form 7512 provided “some evidence” that the forwarder had received the full number of boxes, and custody of the shipment for eight days before the forwarder made an inventory indicated the loss occurred while the shipment was at the forwarder’s custody.

However, the Appeals Court found that 7512 forms “alone do not carry the same weight as bills of lading.”  The 7512 forms were based solely on information copied from the ocean bill of lading, and, the forwarder “did not have the opportunity to inventory the goods prior to completing the Form 7512’s.”  Finally, 14 of the 15 containers had seals intact when delivered to the forwarder, but the loss was from four containers, not just one.

The Appeals Court found there was a genuine issue of fact, and Summary Judgment was reversed.  That issue was whether delivery of the cargo in full quantity of boxes had been made to the forwarder. Distribuidora Marijose, S.A. de CV. v. Transmaritime, Inc. (Fifth Cir., Dec. 20, 2013).