                                                                     United States Court of Appeals
                                                                              Fifth Circuit
                                                                             F I L E D
                                                                               May 14, 2003
                  IN THE UNITED STATES COURT OF APPEALS
                                                                          Charles R. Fulbruge III
                            FOR THE FIFTH CIRCUIT                                 Clerk



                                   No. 02-30856
                                 Summary Calendar



      INDUSTRIAL MARITIME CARRIERS
      (BAHAMAS), INC.,

                                                    Plaintiff-Appellee,

                                      versus

      SIEMENS WESTINGHOUSE POWER
      CORPORATION; ET AL.,

                                                    Defendants,

      SIEMENS WESTINGHOUSE POWER
      CORPORATION,

                                                    Defendant-Appellant.


                  Appeal from the United States District Court for
                         the Eastern District of Louisiana
                            (USDC No. 01-CV-726-I)
          _______________________________________________________


Before REAVLEY, BARKSDALE and CLEMENT, Circuit Judges.

PER CURIAM:*

      *
       Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion
should not be published and is not precedent except under the limited circumstances
      Siemens Westinghouse Power Corp. (“SWPC”) contracted with Industrial

Maritime Carriers (Bahamas), Inc. (“IMC”) for the carriage of two generators from

Masan, Korea to Houston, Texas on the vessel the M/V INDUSTRIAL BRIDGE. When

the goods were offloaded, IMC discovered that the hold in which the generators were

stored had flooded. SWPC contends the flood damage resulted in a total loss of the

generators, valued at approximately $3,100,000 each.

      IMC sought a declaratory judgment that its liability for the loss of the generators

was limited to $500 per package under the Carriage of Goods by Sea Act, 46 U.S.C. §§

1300 et seq. (“COGSA”). See id. § 1304(5). SWPC filed a counterclaim alleging that

IMC breached the contract of carriage and was liable for the full value of the two

generators. The district court granted summary judgment in favor of IMC. SWPC

appealed. We affirm the district court for the following reasons:

1.    We review a district court’s grant of summary judgment de novo. Blanks v.

      Southwestern Bell Communications, Inc., 310 F.3d 398, 400 (5th Cir. 2002).

      Summary judgment is appropriate if the record discloses that there is no genuine

      issue as to any material fact and that the moving party is entitled to judgment as a

      matter of law. FED. R. CIV. P. 56(c).

2.    COGSA entitles a carrier to limit its liability for damage to or loss of packages in

      their care to $500 so long as the carrier provided the shipper with a fair



set forth in 5TH CIR. R. 47.5.4.

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     opportunity to eliminate the package limit by declaring the package’s actual value

     and paying additional ad valorem freight. See 46 U.S.C. § 1304(5); Brown &

     Root, Inc. v. M/V Peisander, 648 F.2d 415, 420 (5th Cir. 1981). It is undisputed

     that IMC gave SWPC an opportunity to declare excess value and pay ad valorem

     freight, as both the bill of lading and IMC’s tariff on file with the Federal

     Maritime Commission so provided. The sole issue presented by this appeal is

     whether that opportunity was fair, as a carrier must offer a shipper a reasonable ad

     valorem charge to satisfy fair opportunity doctrine. Gen. Elec. Co. v. M/V

     Nedlloyd, 817 F.2d 1022, 1028 (2d Cir. 1987) (citing Hart v. Penn. R.R. Co., 112

     U.S. 331, 341-42 (1884)). SWPC contends that, because the cost to IMC of

     insuring a package is 0.2568% of the cargo’s actual value, IMC’s 6% ad valorem

     freight is excessive and unreasonable and thus did not provide a fair opportunity to

     eliminate the $500 limit.

3.   We find this case indistinguishable from General Electric Co. v. M/V Nedlloyd.

     In Nedlloyd, the court determined that “because [the carrier’s] ad valorem rate

     exceeded what it cost [the shipper] to insure its cargo, it was not the ad valorem

     rate but the economics of insuring the cargo that prevented [the shipper] from

     declaring excess value.” Id. at 1025. Moreover, the shipper “had no intention of

     declaring an excess value for its cargo,” because it had made a business judgment

     long before the particular shipment not to explore the possibility of obtaining



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     greater protection at a higher rate. Id. at 1025, 1029. Accordingly, the Second

     Circuit held that it was the shipper’s own cost-benefit analysis that prevented it

     from declaring excess value. Id. at 1029.

4.   SWPC’s attempts to distinguish Nedlloyd from the present case are unconvincing.

     First, the record reveals that during the 1980's SWPC’s Risk Manager investigated

     “whether it would be advantageous . . . to declare the higher value and pay the

     higher freight to eliminate the package limit.” The Risk Manager determined that,

     although it was desirable to declare the actual value of the cargo to procure safe

     and prompt shipment, carriers throughout the industry charged ad valorem rates of

     3% to 10% to eliminate the package limit. Because SWPC could purchase all-risk

     cargo insurance for between 0.2% and 0.3% of the insured goods’ value, the Risk

     Manager concluded that the “exorbitantly high rates charged by ocean carriers

     made it absolutely impossible as a matter of practical economies” to declare the

     actual value of the shipments and pay ad valorem freight. Second, the record is

     devoid of evidence that SWPC inquired about declaring the excess value of the

     two generators. Nor is there evidence that SWPC took any steps toward actually

     declaring the value of its cargo, such as attempting to negotiate a lower ad valorem

     rate. Accordingly, we conclude that SWPC’s policy not to declare excess value

     was a result of its own cost-benefit analysis, which revealed that the costs of

     declaring excess value outweighed the benefits. SWPC bears the burden of



                                           4
     proving that the rate was unreasonable, and the record lacks any evidence that

     SWPC’s decision was causally related to the freight IMC would have charged to

     eliminate the $500 per package limit. See Nedlloyd, 817 F.2d at 1029 (stating that

     while the carrier bears the initial burden of proving fair opportunity, the shipper

     must prove that a fair opportunity did not in fact exist). SWPC’s decision was

     instead based on the fact that it could ship its products for less if it self-insured.

5.   SWPC attempts to distinguish this case from Nedlloyd on the ground that its

     policy was not to refrain from paying ad valorem rates; it was only to refrain from

     paying such rates until carrier began charging reasonable rates (apparently

     meaning rates that resulted in smaller profit margins). This argument assumes

     that the reasonableness of an ad valorem rate is dependent upon the carrier’s profit

     margin. However, the reasonableness of an ad valorem charge depends only upon

     its relationship to the cargo’s value, and thus the risk assumed by the carrier. See

     Nedlloyd, 817 F.2d at 1028 (citing Hart, 112 U.S. at 341-42 and Adams Express

     Co. v. Croninger, 226 U.S. 491, 510 (1913)). There is no authority for the

     proposition that the reasonableness of a rate of carriage is determined by the ratio

     between the ad valorem freight and the insurance cost to the carrier; thus, SWPC’s

     cost-benefit analysis, which determined ad valorem rates were unreasonable in

     relation to insurance costs, does not support SWPC’s claim that it determined all

     carriers’ ad valorem rates were “unreasonable” as that term has been defined in the



                                             5
     fair opportunity doctrine by the Supreme Court.

6.   Moreover, the Risk Manager’s affidavit states that SWPC’s decision not to declare

     excess value was driven by the fact that it could obtain shipper’s insurance at a

     markedly lower rate than ad valorem freight charges. This was exactly the

     circumstance that faced the Nedlloyd court. See id. at 1025. Although SWPC

     vehemently asserts that its cost-benefit analysis hinged on the excessiveness of

     rates, the Second and Fourth Circuits have held that, absent evidence that the

     shipper attempted to obtain a reasonable ad valorem charge, it cannot now

     complain that the carrier’s ad valorem rate was excessive. Id. at 1029; Aetna Ins.

     Co. v. M/V Lash Italia, 858 F.2d 190, 194 (4th Cir. 1988). SWPC contends that it

     was not required to inquire as to the reasonableness of IMC’s ad valorem rate

     because “an axiomatic principle of law is that no party is required to do a vain and

     useless act,” and SWPC knew every carrier charged an unreasonable rate. We are

     not convinced that efforts to obtain a lower rate would necessarily have been in

     vain, as there is no evidence in the record that SWPC made any attempt to obtain

     what it considered a reasonable ad valorem rate.

7.   In any event, “it would be unjust and unreasonable, and would be repugnant to the

     soundest principles of fair dealing and of the freedom of contracting, and thus in

     conflict with public policy, if a shipper should be allowed to reap the benefit of the

     contract if there is no loss, and to repudiate it in case of loss.” Hart, 112 U.S. at



                                            6
     341. SWPC, an experienced shipper, was aware of the economic consequences of

     obtaining greater protection from the carrier at a higher rate or obtaining an

     insurance policy to cover its exposure. See Lash Italia, 858 F.2d at 194. It chose

     the later course. The fact that its choice will now result in larger insurance

     premiums in the future may be unfortunate for the company, but it does not mean

     it was not given a fair opportunity to make a different choice.

8.   Lastly, SWPC argues that the district court erred by applying Travelers Indemnity

     Co. v. Vessel Sam Houston, 26 F.3d 895 (9th Cir. 1994), to determine that

     SWPC’s procurement of insurance is evidence of “a conscious decision not to opt

     out of COGSA’s liability limitation.” Id. at 900. SWPC argues that, in light of the

     several defenses available to carriers under COGSA, see 46 U.S.C. § 1304(2), a

     prudent shipper will obtain all-risk insurance even if it declares the cargo’s excess

     value and pays ad valorem freight. Assuming without deciding that SWPC is

     correct, we conclude any error by the district court was harmless. SWPC’s own

     evidence demonstrates that its cost-benefit analysis, and not the excessiveness of

     IMC’s 6% ad valorem freight, prevented it from declaring the generators’ actual

     value. Accordingly, SWPC cannot establish that it was denied a fair opportunity

     to opt out of COGSA’s $500 per package liability limitation.

     AFFIRMED.




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