August 2007 | Commentary | Risks and Rewards

Seeing the Value in 'Seaworthy' Packaging

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Q: My company is a logistics service provider. We recently shipped a container of machine parts to Brazil under an arrangement that included the packing and stuffing of six crates. We received instructions from the customer that the packaging needed to be "seaworthy," and we hired a subcontractor to perform the packaging and stuffing. When complete, the subcontractor inspected the shipment and determined that the packing was sufficient for transport. When the container arrived in Brazil, however, the machinery had suffered corrosion. The shipper is now holding us responsible for the damage, claiming it resulted from "unseaworthy" packing. I believe that we and our partners acted properly. What can we do to prove this? Do standards exist for this type of incident?

A: The general court rule governing ocean shipments is that goods must be packed to "withstand the normal rigors of ocean transit."

Because this is a very general standard, and because each case can differ substantially, courts examine various factors to determine whether shipment packaging is adequate in each particular case.

Courts typically begin by considering the generally accepted industry standards for packaging the type of commodity that is the subject of the claim; they examine the packaging of the damaged goods in light of those standards.

Courts also examine the custom and usage among operators in that particular trade, being especially mindful of any prior dealings between the parties on similar shipments.

You Said, They Said

In this case, your customer claims the shipment was delivered to your subcontractor free of corrosion, but was not packed in a manner sufficient to withstand the normal rigors of ocean transit.

Interestingly, your customer provided instructions that the packaging be "seaworthy," which suggests the company may have been concerned about moisture damage to the machinery.

If the machinery possesses particular attributes that make it especially vulnerable to corrosion, your customer has a duty to inform you of that fact.

Because manufacturers maintain specialized knowledge of their products, courts pay special attention to the care they take in preparing their goods for transport.

In one case, a European confectionery company shipped chocolate products to the United States in non-refrigerated dry containers during an unusually warm autumn season. On arrival, the goods had suffered significant melting damage. T

he court denied the confectioner's claim against the steamship line because it could not determine with any certainty whether the damage occurred before or after the containers were delivered to the steamship line.

Because your customer's shipment was booked through your office, you are primarily responsible to your customer for the damage in question. But your subcontractor is in the best position to address the sufficiency of the packaging.

For this reason, I recommend asserting a corresponding claim against the subcontractor - its actions will be judged in line with the standards adopted by the courts.

Avoid Confusion in Advance

It is also wise to consider placing your ocean carrier on notice in case your subcontractor can demonstrate that it did, in fact, deliver the goods to the carrier in good order and condition.

You can avoid cases such as this by agreeing on detailed procedures with your customer and your subcontractor regarding the handling, packing, and transportation of your customer's goods before they are shipped.

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