COGSA and the $500 Mig

An interesting unpublished opinion out of the 9th Circuit wrestles with the question of what if any liability a carrier faces when their action, or inaction, causes cargo to be seized by port authorities. In M-Cubed LLC v. Maersk Line Ltd., the cargo in question was a de-militarized Mig fighter jet. Maersk, the carrier, had planed to transship the Mig at Hong Kong. However, under Hong Kong law such cargo must have special license for the import of such commodities as military equipment. Maersk did not obtain a special license, testimony indicated that Maersk's agents were unsure or believed they did not need the special license because the plane was demilitarized.

Hong Kong Customs was notified that a MiG fuselage would be offloaded without any import or export licenses. An hour before the vessel docked in Hong Kong, Maersk Yantian notified Maersk Hong Kong and Maersk Czechoslovakia that the fuselage would be offloaded and that, because no licenses had been obtained, the “aircraft will be detained by HKG Customs” and “there's no promised date when this container can be loaded. The fuselage was offloaded and detained by the port authorities. Several days after it had been detained, the cargo was forfeited and seized as an unlicensed “strategic commodity.”

When M-Cubed brought an action against Maersk for the loss of the Mig, Maersk responded with a motion for summary judgment based on the fact that the carriage agreement stated that it would fall under COGSA. As such Maersk's liability was limited to $500. The District Court in the Western District of Washington, granted Maersk's motion, and then denied M-Cubed's motion for reconsideration.

The 9th Circuit however decided that the District Court had erred in granting the motion. Pointing out that there was a triable issues of material fact as to whether or not Maersk sought to abandon the cargo when it offloaded it in Hong Kong. Prior to the cargo's arrival in Hong Kong, Maersk employees stated that the cargo “will be seized,” and “knew that this sort of thing was something called strategic commodity-a license was required.” Maersk employees also described the cargo to Hong Kong officials as a “military aircraft.” Considering this evidence, a reasonable fact finder could find that Maersk was substantially certain that the MIG was a strategic good subject to forfeiture.

I think the Court of Appeals has it right and the District Court was way off base. To interpret COGSA so broadly that it would protect Maersk in this situation is to invite abuse. If Maersk willfully abandoned the cargo then they are in violation of the carriage agreement and M-Cubed should be awarded just compensation.