COGSA “Package” by Agreement in Non-Container Shipments: A Pallet-Definition Clause Can Override the Face of the Sea Waybill

1. Introduction

HDI Glob. Ins. Co. v. Kuehne + Nagel, Inc. is a Second Circuit summary order arising from a cargo loss during overseas transport. Non-party Mahle Behr Charleston, Inc. (“Mahle”) purchased electrical wire harnesses (the “Cargo”) from non-party Electrical Components International S.L.U. (“ECI”). Mahle retained Kuehne + Nagel, Inc. (“K+N”), a non-vessel-operating common carrier, to move the Cargo from Zaragoza, Spain to Charleston, South Carolina under four sea waybills (the “Sea Waybills”). The Cargo—480 cartons secured onto 24 pallets—fell into the sea while being loaded in Spain and was destroyed.

HDI Global Insurance Co. (“HDI”), Mahle’s insurer, sued K+N in subrogation seeking the value of the lost Cargo. The dispute narrowed to a single, economically decisive question under the Carriage of Goods by Sea Act (“COGSA”): for the $500-per-package limitation, were the “packages” the 480 cartons or the 24 pallets?

2. Summary of the Opinion

The Second Circuit affirmed the district court’s post-bench-trial judgment limiting K+N’s liability to $12,000 (24 pallets × $500 per package). Although the face of the Sea Waybills listed the number of “packages” as the number of cartons, the court held that the reverse-side terms—especially Clause 6.1(c)—unambiguously defined “package” for COGSA limitation purposes as a palletized assemblage of cartons prepared for the merchant’s convenience, even if the pallet count was not shown on the front.

3. Analysis

3.1. Precedents Cited

  • Hamilton Int'l Ltd. v. Vortic LLC, 13 F.4th 264 (2d Cir. 2021): The court relied on it for the standard of review after a bench trial—clear error for factual findings and de novo review for legal conclusions. That framing mattered because HDI challenged both contract interpretation (legal) and course-of-dealing findings (factual).
  • Phillips v. Audio Active Ltd., 494 F.3d 378 (2d Cir. 2007): Cited for the principle that contract interpretation is reviewed de novo, reinforcing the appellate court’s freedom to assess the Sea Waybills’ language without deference.
  • Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14 (2004): Provided the choice-of-law anchor: federal law governs interpretation of maritime contracts when the dispute is not “inherently local.” That placed the package-definition problem squarely within federal maritime contract doctrine rather than state contract rules.
  • Allied Chem. Int'l Corp. v. Companhia de Navegacao Lloyd Brasileiro, 775 F.2d 476 (2d Cir. 1985): Supplied the governing lens: what constitutes a COGSA “package” is “largely and in the first instance a matter of contract interpretation.” This legitimized the court’s focus on the Sea Waybills’ allocation of the package unit.
  • Seguros "Illimani" S.A. v. M/V Popi P, 929 F.2d 89 (2d Cir. 1991): Delivered the key methodology: the number under “NO. OF PKGS.” is the “starting point,” but it does not control when “plainly contradicted” by evidence of the parties’ intent. The court used Seguros to justify departing from the cartons count on the face once Clause 6.1(c) clearly pointed to pallets.
  • Monica Textile Corp. v. S.S. Tana, 952 F.2d 636 (2d Cir. 1991): HDI invoked Monica Textile to argue that boilerplate on the back of a bill of lading “carry little weight toward establishing intent.” The court distinguished Monica Textile as a container case (where courts scrutinize attempts to define the container as the package) and reaffirmed that non-container cases generally defer to the parties’ intent as manifested in the bill of lading/waybill.
  • Allied Int'l Am. Eagle Trading Corp. v. S.S. "Yang Ming,", 672 F.2d 1055 (2d Cir. 1982): Used to mark the boundary: the court was not confronted with an agreed definition of “package” that would be “repugnant to [COGSA].” This supported enforcing Clause 6.1(c) as a permissible contractual specification rather than an unlawful evasion.
  • Sompo Japan Ins. Co. of Am. v. Norfolk S. Ry. Co., 762 F.3d 165 (2d Cir. 2014): Cited for the interpretive canon that contracts should be read to give “reasonable and effective meaning to all terms.” That principle drove the court’s reconciliation of Clause 1 (general definition tied to the face of the document) with Clause 6.1(c) (specific COGSA-limitation definition tied to palletization for the merchant’s convenience).
  • Crescent Oil & Shipping Servs., Ltd. v. Phibro Energy, Inc., 929 F.2d 49 (2d Cir. 1991): Supported the use of course-of-dealing evidence to confirm intent, bolstering the district court’s alternative holding that the parties’ longstanding practice treated pallets as the operative shipping unit.

3.2. Legal Reasoning

(a) Starting point: the face of the waybill. The court accepted that the “Number of Packages” column on the Sea Waybills reflected cartons and, under Seguros "Illimani" S.A. v. M/V Popi P, treated that as the initial reference point.

(b) Displacement by “plain contradiction” in the incorporated terms. The dispositive step was the conclusion that Clause 6.1(c) “plainly contradict[ed]” the cartons count by defining “package” for COGSA limitation as “any palletised assemblage of cartons” palletized for the merchant’s convenience, “regardless of whether said pallet ... is disclosed on the front.” Because the clause directly addressed (i) COGSA limitation, (ii) palletized cartons, and (iii) the possibility that pallets would not appear on the face, it functioned as a specific override provision.

(c) Distinguishing container skepticism from non-container deference. The court rejected HDI’s reliance on Monica Textile Corp. v. S.S. Tana by emphasizing the Second Circuit’s separate lines of authority: heightened scrutiny where carriers attempt to deem a container the COGSA package, versus greater deference to contractual intent in non-container cases such as palletized cargo.

(d) Harmonizing Clause 1 and Clause 6.1(c). HDI argued that Clause 1’s definition of “package” as the number entered on the face conflicted with Clause 6.1(c). Applying Sompo Japan Ins. Co. of Am. v. Norfolk S. Ry. Co., the court read Clause 1 as a general fallback definition and Clause 6.1(c) as a specific, situation-triggered definition (palletization for the merchant’s convenience in U.S.-port carriage). This preserved both provisions rather than nullifying the specific COGSA-limitation clause.

(e) Alternative support: parol evidence and course of dealing. Even assuming ambiguity, the court noted the district court’s parol-evidence findings: ECI palletized at Mahle’s request because pallets were safer and more efficient for Mahle’s receipt, and K+N’s obligations were tied to handling the pallets irrespective of carton count. Under Crescent Oil & Shipping Servs., Ltd. v. Phibro Energy, Inc., the parties’ course of dealing reinforced that pallets were the intended shipping unit.

3.3. Impact

Although the order is expressly non-precedential, its reasoning is likely to be persuasive in future maritime cargo disputes in the Second Circuit where: (1) the face of a bill/waybill suggests one package count (e.g., cartons), (2) reverse-side terms contain a specific COGSA package-definition clause keyed to palletization, and (3) the dispute is a non-container case.

Practically, the decision highlights that parties drafting or accepting sea waybills should not assume the face “Number of Packages” controls COGSA exposure. Carriers/NVOCCs may reduce limitation uncertainty by using explicit, scenario-specific package definitions like Clause 6.1(c), while cargo interests and insurers will likely scrutinize such clauses during contracting (and may seek declared-value arrangements if carton-level limitation is important).

4. Complex Concepts Simplified

  • COGSA $500-per-package limitation: COGSA generally caps a carrier’s liability at $500 for each “package” (unless the shipper declares a higher value). The entire case turned on what counted as a “package”: 480 cartons (much higher recovery) versus 24 pallets (much lower recovery).
  • NVOCC (non-vessel-operating common carrier): An intermediary that contracts as a carrier but does not operate the ship; it issues transport documents and arranges carriage.
  • Sea waybill: A transport document similar to a bill of lading, often used when negotiability is not needed; its terms can incorporate COGSA and define liability limits.
  • Boilerplate terms vs. intent: “Boilerplate” refers to standard printed terms. In container-package disputes, courts may distrust clauses naming the container as the package; here, because the dispute involved pallets (not containers), the court deferred more to the parties’ written allocation of the package unit.
  • Parol evidence / course of dealing: Evidence outside the document (like how the parties regularly shipped the goods) may be used to resolve ambiguity in contractual terms.

5. Conclusion

The Second Circuit affirmed a COGSA limitation award based on pallets, not cartons, because a specific reverse-side clause (Clause 6.1(c)) unambiguously defined “package” for limitation purposes as a palletized assemblage of cartons prepared for the merchant’s convenience—even when the face of the Sea Waybills listed cartons as the “Number of Packages.” The court harmonized general and specific definitions within the contract, distinguished container-case skepticism, and—alternatively—endorsed course-of-dealing findings that aligned the parties’ practical shipping unit with the contractual limitation unit.