2026 Snapshot: Has U.S. COGSA Package Limitation Been Reframed?

Shipping interests around the world know that in the U.S., the Carriage of Goods by Sea Act (COGSA) limits an ocean carrier's liability to $500 per "package" unless the shipper declares a higher value. The statute does not define "package," and this congressional choice has generated a consequential appellate split with direct dollar-value implications. For example, for a shipment described as 480 cartons on 24 pallets, the limitation is $240,000 if each carton counts, but only $12,000 if each pallet counts.

A recent U.S. Court of Appeals for the Second Circuit decision could bring significant changes to how trial courts sitting in admiralty with the appellate court overseeing New York consider and define a "package" and may forecast or, at a minimum, encourage carriers and shippers alike to consider how other appellate courts may align or differ in their approaches to package analysis. This is both when COGSA applies by ex proprio vigore – i.e. by force of law – or incorporation.

The Second Circuit (overseeing New York in particular) affirmed enforcement of a carrier's terms-and-conditions definition of a package as the palletized assemblages under COGSA, notwithstanding a contrary description on the face of the sea waybill. Just a month later, in Alle Processing, Case No. 24 Civ. 5604 (LLS), 2026 WL 948732 (S.D.N.Y. April 8, 2026), a trial court judge within the U.S. District Court for the Southern District of New York applied that framework but denied summary judgment because the record did not resolve the parties' intent or whether palletization was for the merchant's convenience. Other circuits take different approaches, creating a landscape in which forum selection – and the evidentiary record surrounding cargo preparation – may be outcome-determinative.

This Holland & Knight alert explains the current state of the law in key federal circuits and identifies the practical considerations that shippers, carriers and cargo interests should address in structuring maritime transactions and resolving disputes.

The Statutory Framework

As an overview, the statutory framework is simple but incomplete. COGSA § 4(5) provides that neither the carrier nor the ship shall be liable for loss or damage in an amount exceeding $500 per package or per customary freight unit for goods not shipped in packages unless the shipper declares the nature and value of the goods before shipment and inserts that declaration in the bill of lading. COGSA § 3(8) voids clauses that relieve or lessen the carrier's liability otherwise than as provided in COGSA. Crucially, COGSA nowhere defines "package," leaving courts to develop multiple analytical approaches shaped by different assumptions about statutory purpose and party autonomy.

The principal divergences in U.S. appellate analysis are:

1. whether COGSA § 3(8) voids unreasonable contractual package definitions
2. the weight given to bill-of-lading language versus other shipping documents
3. how ambiguity in defining package is resolved
4. how fair opportunity interacts with package definition
5. what factual showing is needed when a pallet- or unit-as-package clause applies only to cargo prepared for the merchant's convenience

The Second Circuit's Recent Position

The initial considerations by New York trial courts must first ask how COGSA is engaged – by force of law or contractual incorporation – and which transport document governs. If COGSA applies ex proprio vigore, COGSA § 3(8) supplies the statutory floor. The court then reads the operative bill of lading or waybill to identify the parties' intended package, with container/non-container status functioning as an important sub-inquiry rather than the organizing principle.

This fits the Second Circuit's baseline rule that what constitutes a COGSA package is "largely and in the first instance" a matter of contract interpretation and that "the most obvious place to look first for the intent of the contracting parties is the bill of lading." Companhia de Navegacao Lloyd Brasileiro, 775 F.2d 476 (2d Cir. 1985).

The Second Circuit's Enforcement of Pallet-as-Package Clauses

In the recent Second Circuit decision, the cargo concerned foreign ocean carriage to the U.S.: A container holding 24 pallets overboard was loaded in Barcelona, Spain, and the cargo was destined for Charleston, South Carolina. The waybill defined the movement as "U.S. Carriage" and incorporated COGSA "regardless of whether said Act would apply of its own force." The court nevertheless treated COGSA as contractual because the operative documents were sea waybills rather than bills of lading or similar documents of title. It therefore interpreted Clause 6.1(c) – which defined "package" as a palletized or unitized assemblage of cartons prepared for the merchant's convenience – as a maritime contract term, held it clear and unambiguous and limited liability to $500 per pallet.

The Second Circuit affirmed on that contract-centered footing, holding that Clause 6.1(c) contradicted and displaced the face-of-waybill number under Seguros Illimani S.A. v. M/V Popi P, 929 F.2d 89 (2d Cir. 1991). The clause did not undermine COGSA's minimum-liability policy because the pallets were bona fide COGSA packages prepared by the shipper and the definition was not repugnant to COGSA. The operative package analysis turned on the waybill's specific limitation language and the parties' intended package unit, not on the mere fact that the cargo traveled in a container.

Companion Decisions and the Alle Processing Caveat

The trial court decisions show both the force and limits of that framework. In a ruling involving an ocean carrier, the court treated pallets as the COGSA packages, where incorporated terms unambiguously defined "package" as any palletized assemblage of cartons "regardless of whether said pallet or unit is disclosed on the front" of the contract. Hercules OEM Grp., No. 22-CV-02636 (JLR), 2023 WL 6317950 (S.D.N.Y. September 28, 2023), is especially instructive: COGSA governed foreign carriage under bills of lading, yet the court found the ocean carrier's pallet clause supported a 22-pallet limitation because a separate bill lacked a comparable pallet clause and resulted in the 1,336 cartons identified on the face of that bill being insufficient.

In the aforementioned case, Alle Processing, the evidentiary limit is evident. Mediterranean Shipping Co. relied on materially identical pallet-as-package language from the recent Second Circuit decision, but the bills described the cargo as cartons, other shipping records referred to both cartons and pallets, and the record did not resolve the shipper's contemporaneous understanding of the package count. The court also treated the "for the convenience of the Merchant" language as an independent requirement and denied summary judgment because the evidence conflicted on why the cargo was palletized.

Together, the recent court rulings within the New York region support a document-centered approach constrained by COGSA's statutory floor: Clear pallet-as-package clauses can be enforced when they define bona fide packages and the record satisfies the clause's factual predicates. But face-of-document language and disputed evidence could change the result.

Other Circuits

The Ninth Circuit: COGSA § 3(8) as a Check on Contractual Manipulation

The U.S. Court of Appeals for the Ninth Circuit, which oversees the California and Washington regions, is the clearest counterweight to the appellate views in New York because it challenges the concept that shipping interests can write their way into added protections contained within their terms and conditions. The controlling framework was established in All Pacific Trading, Inc. v. Vessel M/V Hanjin Yosu, 7 F.3d 1427 (9th Cir. 1993), which held that "COGSA § 3(8) provides that any contract agreement lessening the statutory liability of the carrier is null and void" and that a contractual package definition was "neither reasonable nor consistent with the language and purpose of the statute." The court rejected bills of lading purporting to limit liability to $500 per sealed container where the bills listed the number of individual packages within each container.

The Ninth Circuit subsequently clarified in M/V National Pride, 155 F.3d 1165 (9th Cir. 1998) – a reckless damage to cargo case – that COGSA § 3(8) does not void a limitation of liability provision altogether (nor render COGSA inapplicable) merely because a bill of lading misdefines "package;" rather, "COGSA's limitation of $500 per 'package' or 'customary freight unit' simply applies to each package or customary freight unit, properly defined."

A subsequent U.S. District Court for the Central District of California case adds further nuance. There the bill of lading listed both "1 Container(s)" and "33 Skids" in the "No. of Containers or Pkgs." column, while "177 Pieces" appeared only in the description-of-goods column. The court held that the parties were contractually bound by the 33 skids as the COGSA packages, reasoning that treating a shipping container as the package should not limit recovery when the bill discloses packages inside the container, but it does not prevent a skid from qualifying as a package merely because the bill also identifies smaller items within the skid. The court also found that the skids fell within the ordinary meaning of "package" because they consisted of cardboard sleeves enclosing the contents and banded to trays and wooden runners, and it distinguished shrink-wrapped transparent pallets where the underlying cartons remained suitable and visible packages.

Finally, a recent district court case out of the U.S. District Court for the Western District of Washington assesses contractual limitations narrower still. The shipment was from Korea to China, and the opinion applied a contractual definition governing circumstances in which COGSA did not apply; it did not conduct a COGSA § 3(8) anti-lessening analysis. The court applied ordinary federal maritime contract principles and gave effect to a liability-specific "Package or Shipping Unit" definition while denying summary judgment because the operative term "Container" remained ambiguous. The lesson is narrow: COGSA § 3(8) does its work when COGSA supplies mandatory law. As such, while in the ex proprio vigore context, the Ninth Circuit appears to more strictly enforce the prohibition against lessening COGSA § 3(8)'s statutory liability, where COGSA does not apply by force, as in the recent Washington case, the Ninth Circuit may be just as inclined as the Second Circuit to enforce a package limitation definition. However, the distinction between this decision and the recent Second Circuit decision is that the contract before the Second Circuit incorporated COGSA whereas in the Washington case, it did not. As such, whether the Ninth Circuit would enforce a package definition where the contract incorporated COGSA as seen in the Second Circuit's recent decision and its progeny remains to be seen.

The Fifth Circuit: Fair Opportunity, Incorporation and the Operative Contractual Definition

The COGSA analysis in the U.S. Court of Appeals for the Fifth Circuit, which oversees the U.S. Gulf region, centers on overlapping inquiries such as whether COGSA is properly incorporated into the operative bill of lading and what the operative contractual documents reveal about the parties' mutual intent as to the meaning of "package."

On the package definition, the Fifth Circuit follows the Second Circuit's reasoning that where the shipper discloses the contents and number of packages or units, the container is not a COGSA package. Croft & Scully Co. v. M/V Skulptor Vuchetich, 664 F.2d 1277 (5th Cir. 1982). The Fifth Circuit does not apply a COSGA § 3(8) voidability framework; instead, it examines whether the shipper disclosed the contents and number of packages in the shipping documents.

Global Oil Tools Inc., 429 F. Supp. 3d 221 (E.D. La. 2019), illustrates the Fifth Circuit's combined framework. The court applied a burden-shifting rule: The carrier must first show the shipper could avoid the COGSA limit by declaring value and paying ad valorem freight, and if that showing is made, the shipper must prove no fair opportunity existed. On the package definition, the carrier's terms provided that where a container consolidated goods and was not stuffed by the carrier, "the Container shall be considered the package or Shipping Unit." Because the shipper purchased and stuffed the two containers and the bill of lading identified two containers, the court treated the containers as the COGSA packages and limited liability to $1,000. Global Oil Tools thus placed the Fifth Circuit closer to a contract-and-notice model than the Ninth Circuit's COGSA § 3(8) voiding approach, while preserving a strong fair-opportunity prerequisite. As of yet, analogous package definitions to those seen in the Second Circuit's recent decision and progeny and the Ninth Circuit cases do not appear to have reached the Fifth Circuit.

The Eleventh Circuit: Multifactor Analysis Resolving Ambiguity Against the Carrier

The U.S. Court of Appeals for the Eleventh Circuit (overseeing the Florida and Georgia region) is more bill-of-lading-centric. It adopted the Second Circuit's framework in Hayes-Leger Associates, Inc. v. M/V Oriental Knight, 765 F.2d 1076 (11th Cir. 1985), and refined it in Fishman & Tobin, Inc., 240 F.3d 956 (11th Cir. 2001), which makes the bill of lading the "touchstone" of the analysis. When the bill and other shipping documents conflict, the bill is construed to reflect the package count in the shipper's own documents; when the bill refers to both containers and smaller susceptible units, it is "inherently ambiguous" and resolved against the carrier absent a clear agreement.

The Eleventh Circuit therefore enforces clear pallet-as-package provisions in unambiguous bills, as in P&O Containers, 251 F.3d 1359 (11th Cir. 2001), but applies the limitation to disclosed inner cartons where the bill reveals them, as in Vegas v. Compania Anonima Venezolana De Navegacion, 720 F.2d 629 (11th Cir. 1983). As with the Fifth Circuit, the Eleventh Circuit does not appear to have decided cases with analogous package definitions to those seen in the Second Circuit's recent decision and progeny, and the Ninth Circuit's cases do not appear to have reached the Fifth Circuit.

Incorporation of Terms and Conditions: The Threshold Requirement

Proper incorporation of a package definition is a separate gateway issue. External terms generally must be incorporated through clear, specific and conspicuous language. For example, a short-form bill may incorporate a long-form bill "so long as the incorporated provisions are not special terms or exceptions that differ from the governing federal statutes." Starrag, 486 F.3d 607, 613 (9th Cir. 2007).

The absence or ambiguity of incorporated package definition terms can be dispositive. A bill that lacks a package-definition clause or incorporates terms ambiguously may leave the carrier with the face-of-bill package count and render a lower contractual limit void under COSGA § 3(8).

Practical Takeaways for Claims Handling and Conclusion

The question remains: Have claims assessments following recent rulings within the New York region forever changed claims handling? The answer is no, and recent commentaries to the contrary are overblown.

Carriers relying on clear, incorporated pallet- or container-as-package definitions may fare better in the Second Circuit and perhaps the Fifth Circuit, though recent cases confirm enforcement still requires a developed record. Shippers challenging aggregation of disclosed cartons may find stronger support in the Ninth Circuit, while the Eleventh Circuit occupies a middle position by resolving ambiguity against the carrier but enforcing unambiguous bill-of-lading language.

The hardest unresolved question remains whether a terms-and-conditions clause defining pallets as "packages" is an impermissible lessening of liability under COSGA § 3(8) or a permissible clarification of competing package candidates. The Second Circuit treats such clauses as lawful where the pallet is a bona fide COGSA package and the cargo was palletized for the merchant's convenience. The Ninth Circuit remains more skeptical of carrier-drafted aggregation when COGSA applies by force of statute, but later district court cases confirm that this skepticism is not categorical because a larger shipper-prepared unit may qualify as the COGSA package when the bill of lading clearly identifies it and the unit itself qualifies as a package.

The key drafting and litigation questions are:

• Face-of-Bill Package Count. What unit appears on the bill, and does an incorporated terms-and-conditions clause contradict or displace it?
• Incorporation of Terms and Conditions. Are the carrier's terms clearly, conspicuously and specifically incorporated?
• Fair Opportunity and Declared Value. Did the carrier give notice of the $500 limitation and a genuine opportunity to declare excess value?
• Cargo Preparation. Who palletized or unitized the cargo and why? Disputed evidence on this point can defeat a summary ruling before trial.
• Statutory versus Contractual COGSA. Does COGSA apply by force of law or by incorporation?
• Forum Selection. Do forum-selection clauses materially affect the economics of the package-limitation dispute?

Holland & Knight's Maritime Team is well suited to consider these legal and business implications. Until the U.S. Supreme Court hears cases where COGSA has been incorporated solely by contract and the terms and conditions contain a potentially liability limiting definition of package (such as pallet), package-limitation disputes will turn on drafting, incorporation, declared-value procedures, forum and the evidentiary record surrounding cargo preparation. Careful attention should be given to the forum chosen for suits as a result of recent rulings, being mindful of other business considerations for the company.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.