In cargo claims we rarely have to stop to consider the meaning of the word “goods”. Consider, however, a claim for cargo damage following a casualty in which the only physical damage sustained was to the packaging of the goods, while the contents of those packages remained undamaged. Does the carrier’s liability for damage to goods cover losses alleged to arise from damage to packaging only?

Specific Facts: Consumer Goods

In the case of consumer goods, packing and packaging are specifically included in the scope of the Canada Consumer Product Safety Act, S.C. 2010, c. 21 and in its definition of goods. Section 2 describes the scope of the act and affirms its application to:

(a) a consumer product;

(b) anything used in the manufacturing, importation, packaging, storing, advertising, selling, labelling, testing or transportation of a consumer product… [emphasis added]

[…]

consumer product means a product, including its components, parts or accessories, that may reasonably be expected to be obtained by an individual to be used for non-commercial purposes, including for domestic, recreational and sports purposes, and includes its packaging. [emphasis added]

So, if the cargo is consumer goods and the law or forum is Canada, the answer is “Yes, certainly, packaging is part of the cargo.” Cargoes intended for commercial use are not, of course, captured by the Consumer Product Safety Act, and many countries will not have similar consumer product safety regimes in place, so for all other cases we must turn our attention to the two chief international frameworks for carriage of goods by sea.

Hamburg Rules

Under the Hamburg Rules, the answer is a clear “yes”. The liability of the carrier is set out at Art 5(1):

“The carrier is liable for loss resulting from loss or damage to the goods….”

While this phrasing appears awkward at first glance, it is constructed to make it clear that the liability is not restricted to loss or damage to the goods, but also includes e.g. economic or consequential losses that are the result of loss or damage to the goods.

“Goods” is defined at Art.1 (5) and includes

“…where the goods are consolidated in a container, pallet or similar article of transport or where they are packed, goods includes such article of transport or packaging if supplied by the shipper.”

Accordingly, under the Hamburg Rules, shipper provided packing or packaging – including the container itself – are part of the “goods” being transported and damage to packing or packaging constitutes damage to the goods notwithstanding the goods contained in the package or packaging are not damaged. And further, economic losses resulting from decreased value or necessary remediation are clearly captured as “loss arising from loss or damage to goods”.

However, according to the Government of Canada, trade under the Hamburg rules accounted for barely 4% of ocean trade in 2015; for this reason, Canada has ratified the Hamburg Rules but has not brought them into force – and likely never will. Accordingly, we consider the somewhat less clear status of packaging under the Hague-Visby Rules.

The Hague-Visby Rules

“Goods” is defined at Art.1 (c) of the Rules as follows:

‘Goods’ includes goods, wares, merchandise and articles of every kind whatsoever except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried.

This definition is extremely broad – articles of every kind whatsoever – with exceptions provided for live animals and for on deck cargo. Applying the maxim inclusio unius est exclusio alta, we can safely conclude that if the package or packaging of cargo was intended to be excluded from the definition it would have been. Only live animals and on deck cargo are excluded from the definition, not packaging or packing, and therefore packaging and packing are included in the definition of “goods”.

In this light, the Hamburg rules may be seen not as adding packaging to the definition of goods, but as clarifying that this was already and always the case.

The Bill of Lading

The case for packing and packaging to be captured under the definition of “goods” is strengthened further by the bill of lading, which of course is the best evidence of the contract for carriage between the parties. Bills of lading must contain a description of the cargo, including a description of its packaging, including the number of packaged units, and they must contain a statement of the verified gross mass of the cargo, which again includes the weight of packaging and packages. The carrier undertaking to carry the goods in the same order and condition as they were tendered must therefore be just as responsible for the state of the packaging as for its contents.

The Thorco Lineage

The English case of Trafigura PTE Ltd v TKK Shipping Ltd (The Thorco Lineage) [2023] EWHC 26 (Comm) was reviewed here by our friend John Habergham. The vessel suffered a power loss and had to be salved. The cost of salvage was significant – over USD$7 million – but only a very small proportion of cargo had suffered any physical damage whatsoever. The cargo interests had to contribute millions to salvors, suffering an economic loss, but the carrier argued that those must be limited according to the weight of the damaged portion of the cargo, which would have effectively precluded recovery, as there had been essentially no physical damage to the cargo.

The Court held, however, that the reduction in value of the cargo was “a loss”, and while the salved cargoes were not “worthless” they were clearly “worth less”, and that whether a claim for damage was based in physical damage or economic loss the damage limitation applies and is determined with reference to the weight of the goods in connection with which the loss has been suffered. Since all cargo suffered a loss paying salvage, the damage limitation was calculated with respect to the total weight of all cargoes on board.

Applying this to our question, clearly if a reduction in the cargo value (economic loss) gives rise to a valid claim even where there is no physical damage at all, then clearly claims for a reduction in value of a cargo arising out of damage to packaging only, without physical damage to cargo, gives rise to a stronger claim.  The damages would be limited with reference to the total weight of the cargo that suffered a reduction in loss; unlike the salvage case, a claimant would have to show what portion of the cargo had damaged packaging and suffered a diminution in value, if not all packages were affected.

Conclusion

Packaging is clearly included in the definition of goods under the Hamburg rules, and is not one of exclusions from the definition of goods under the Hague-Visby rules. Regardless of which regime is in place, physical and economic losses may be recovered for loss of value of cargo that became ‘worth less’ because of a casualty that damaged the packaging only, or even where cargo lost value without physical damage at all.