The Review of Package Limitation - Concerning Interpretation of Gold Value, Package and Customary Freight Unit -

Abstract

The Hague Rules 1924, which is the first international convention on the extent of ocean carrier’s liability, the Carriage of Goods by Sea Act (“COGSA”) of the United States, and the Hague‐Visby Rules 1968 are still effective as the paramount clause in the bill of lading issued by the carrier. However, the meaning of “gold value”, which is the monetary unit used in liability limitation under the Hague Rules, is interpreted in different way under legal system of countries. Also, the interpretation of U.S. Courts on the meaning and extent of “package” and “customary freight unit” under the COGSA has differed among U.S. Circuit courts. Therefore, the purpose of this article is to examine the core legal concept in the paramount clause mentioned above that limits carrier’s liability. 1) With respect to the meaning of “gold value” under Article IV(5) and IX of the Hague Rules, in Rosa S (1988) decision by the U.K. Court, the Court held that the gold value to be used in the liability limitation is the current value equivalent to the gold value at the time of legislating the Hague Rules. The Courts in Australia, Canada, etc. also followed the decision by the U.K. Court. The lower court in Korea rendered an opposite decision, but this interpretation of the law needs to be re‐evaluated considering that the U.K. decision is still valid. 2) With respect to the meaning of “package”, majority (the Second, Eleventh and Fifth Circuit) interpreted it as measures to facilitate transportation or protect the cargo regardless of cargo’s size, shape or weight and found that it does not have to completely conceal or surround the cargo, but the 9th Circuit held that cargo bolted to skid is not package in its plain meaning. Also, package can be determined documents other than bill of lading such as dock receipt or invoice. As for containerized cargo, small package (e.g carton) inside the container is often considered as package, but in some cases, the Court held a container itself as a package when package was not clearly stated but the cargo itself or number of the cargo such as plant or piece was used. Where a smaller unit such as carton is inside a larger unit such as pallet, the smaller unit is considered package. Customary freight unit, which is applied to cargo not shipped in packages, means the unit of quantity, weight or measurement of the cargo customarily used as the basis for the calculation of the freight rate to be charged. Even though The Rotterdam Rules was signed on September 23, 2009 based upon effort of several countries, the rules is still not in force. Therefore, in present, the rationales and court decisions in the United States concerning COGSA is worth the review by the Korean Court with respect to the interpretation of the law, and various discussion as well as development in this area of law is expected. In addition, further in depth analysis and study on the above conflict between the Paramount Clause and Governing Law Clause and their extent of application will be necessary. Active discussion and development on this issue is also expected.