How Is Package Limitation Calculated When Inner Packages Are Not on the Bill of Lading in South Korea?
Contents
- 1. What Is Per-Package Limitation of Liability in South Korea?
- 2. How Is the Package Limitation Unit Determined in South Korea?
- 3. When Both Outer and Inner Packages Are Listed, Which One Governs?
- 4. What Happens When Inner Packages Appear Only on the Packing List?
- 5. What Are the Key Practical Takeaways?
- 6. FAQ
Hypothetical scenario: A shipment of 2,496 computers was loaded into four containers. The bill of lading listed 104 pallets in the “Number of Packages” column, while the carton count of 2,496 appeared elsewhere in the document. When one container flooded, the carrier sought to cap liability at 26 pallets. The cargo insurer argued for 624 cartons. Which position prevails under South Korean law?
The Decisive Factor: Every Column of the Bill of Lading Must Be Read
※ The hypothetical above is reconstructed from the facts of a published Supreme Court decision (Case 2002Da44267) for explanatory purposes only.
The Supreme Court of Korea held that the parties’ intention as expressed in the bill of lading is the primary criterion for identifying the package limitation unit. Critically, a figure in the “Number of Packages” column is not automatically conclusive unless the parties expressly agreed that it would be. In the case above, the seal number column contained the notation “C/NO. 1–2,496,” where “C” denoted carton. The court found that this reference, read together with other entries, identified the carton as the minimum package unit. The practical implication is clear: a single overlooked notation in any column of the bill of lading can dramatically alter the carrier’s liability exposure.
1. What Is Per-Package Limitation of Liability in South Korea?
Under South Korean maritime law, a carrier’s liability for loss or damage to cargo is not unlimited. Article 797 of the Korean Commercial Act caps that liability at a statutory ceiling calculated on a per-package or per-shipping-unit basis.
The Statutory Cap
Article 797(1) of the Korean Commercial Act limits the carrier’s liability to the higher of the following two amounts:
- 666.67 SDR per package or shipping unit
- 2 SDR per kilogram of the goods lost or damaged
The “unit of account” (계산단위) refers to the Special Drawing Right (SDR) as defined by the International Monetary Fund (Article 797(1) of the Korean Commercial Act).
The Container Carve-Out
A separate rule applies when a container or similar transport unit is used. Article 797(2)(i) of the Korean Commercial Act provides that where the number of packages or shipping units contained in a transport unit is stated in the bill of lading or other document evidencing the contract of carriage, each such package or unit is counted individually. Where no such statement is made, the entire contents of the transport unit are treated as a single package or shipping unit (Article 797(2)(i) of the Korean Commercial Act).
The practical significance is straightforward: the more precisely inner package units are described in the bill of lading, the higher the ceiling on the carrier’s liability. Cargo interests should verify that the bill of lading accurately reflects the smallest package unit before accepting it.
2. How Is the Package Limitation Unit Determined in South Korea?
The primary criterion is the intention of the parties as expressed in the bill of lading. The Supreme Court of Korea has consistently applied this standard (Supreme Court of Korea, Case 2002Da44267, 22 July 2004).
The Meaning of “Package”
The Supreme Court defined “package” as anything designed to protect cargo or facilitate its handling, and held that it need not completely enclose the goods. What constitutes a package in any given case is assessed against industry custom and general commercial understanding (Supreme Court of Korea, Case 2002Da44267, 22 July 2004).
Bill of Lading Entries and the Limitation Unit: A Summary
| Bill of Lading Entry | Package Limitation Unit | Authority |
|---|---|---|
| Both outer and inner packages listed | Inner package (smallest unit) | Supreme Court, Case 2002Da44267 |
| Outer package only; inner package not listed | Outer package (default) | Article 797(2)(i), Korean Commercial Act |
| Inner package on packing list / invoice only | Inner package unlikely to be recognised | Article 797(2)(i); academic opinion |
| No package description at all | Entire container contents as one unit | Article 797(2)(i), Korean Commercial Act |
3. When Both Outer and Inner Packages Are Listed, Which One Governs?
Where both an outer and an inner package are referenced anywhere in the bill of lading, the Supreme Court of Korea held that, absent special circumstances, the smallest package unit is the package limitation unit (Supreme Court of Korea, Case 2002Da44267, 22 July 2004).
Is the “Number of Packages” Column Conclusive?
A recurring dispute in South Korean practice is whether the figure in the “Number of Containers or Packages” column is automatically determinative. The Supreme Court answered as follows:
Even if the smallest package unit does not appear in the “Number of Packages” column, all other columns of the bill of lading must be examined. The figure in that column will be treated as conclusive only if there is an express statement to that effect. Otherwise, the smallest unit found anywhere in the document is the agreed limitation unit (Supreme Court of Korea, Case 2002Da44267, 22 July 2004).
The Seal Number Column as Evidence
In Case 2002Da44267, the seal number (Seal No.) column adjacent to the “Number of Packages” column contained the notation “P/NO. 1–104, C/NO. 1–2,496,” where “P” stood for pallet and “C” for carton. The court treated this as sufficient to identify 2,496 cartons as the minimum package unit and therefore the package limitation unit. Any notation in any column that identifies the inner package count may be decisive.
Effect of “Said to Be” Qualifications
A “Said to Contain” or “Said to Be” qualification on a bill of lading has no effect on the identification of the package limitation unit (Supreme Court of Korea, Case 2002Da44267, 22 July 2004). Such qualifications indicate that the carrier did not verify the contents of the container; they are irrelevant to how the limitation unit is determined.
4. What Happens When Inner Packages Appear Only on the Packing List?
This is the most difficult scenario in practice. The ratio of Case 2002Da44267 presupposes that inner packages are referenced somewhere in the bill of lading. Where they appear only in a packing list or invoice and not at all in the bill of lading, the precedent cannot be applied directly.
The Statutory Language of Article 797(2)(i)
Article 797(2)(i) of the Korean Commercial Act requires the package count to be stated in “the bill of lading or other document evidencing the contract of carriage.” Whether a packing list or commercial invoice qualifies as a “document evidencing the contract of carriage” is a contested question.
Legal Character of the Packing List and Invoice
A packing list or commercial invoice is generally treated as a document ancillary to the contract of sale rather than a document evidencing the contract of carriage. The prevailing academic view in South Korea is that such documents do not satisfy the requirement of Article 797(2)(i), and that inner packages described only in a packing list or invoice cannot be recognised as the package limitation unit (Chong-Hyun Choe, Haesamgbeop Sangnon [Maritime Law: A Detailed Commentary], 2nd ed., Parkyoungsa, 2014, pp. 312–313).
That said, the outcome in any particular case may depend on whether the packing list or invoice can be shown to form part of the contract of carriage in the specific circumstances. A careful review of the full transactional record is therefore essential.
Conclusion Where Inner Packages Are Absent from the Bill of Lading
No Supreme Court decision in South Korea has recognised inner packages as the limitation unit where they appear only on a packing list or invoice and not in the bill of lading. In such cases, the outer package stated in the bill of lading will in all likelihood govern.
5. What Are the Key Practical Takeaways?
In package limitation disputes under South Korean maritime law, the outcome turns on the precise content of every column in the bill of lading. All parties — shippers, cargo insurers, and carriers — should attend to the bill of lading at the drafting stage, because that document will be the primary battleground if a dispute arises.
For Shippers and Cargo Insurers
- Confirm that the smallest package unit (e.g., individual cartons) is recorded somewhere in the bill of lading — not only in the “Number of Packages” column, but in any column, including the seal number column or the cargo description field.
- Even if the “Number of Packages” column shows only pallets, a carton count in another column may still be recognised as the limitation unit under Case 2002Da44267.
- Do not rely on the packing list or invoice alone to establish the inner package count for limitation purposes. Request that the bill of lading reflect the inner package unit.
- Verify that the insured value and the package unit used in the marine cargo policy are consistent with the bill of lading entries.
For Carriers
- Recording only the outer package (pallets, skids) in the “Number of Packages” column will not prevent the inner package from being used as the limitation unit if the inner package count appears anywhere else in the bill of lading.
- To make the “Number of Packages” column figure conclusive, an express statement to that effect must appear in the bill of lading.
- A Shipper Load Stowage and Count condition does not affect the determination of the package limitation unit.
Analytical Sequence When a Dispute Arises
- Examine every column of the bill of lading to determine whether inner package numbers appear anywhere in the document.
- Assess whether there is an express statement making the “Number of Packages” column figure conclusive.
- If inner packages are absent from the bill of lading, consider whether the packing list or invoice can be characterised as a document evidencing the contract of carriage in the particular circumstances.
- Confirm whether the governing statute is the current Article 797 of the Korean Commercial Act or a predecessor provision, depending on when the contract of carriage was concluded.
Maritime cargo disputes frequently involve parallel questions of governing law, jurisdiction, and limitation periods. Experience in handling such multi-layered disputes is essential to developing an effective strategy from the outset.
6. FAQ
Package limitation disputes in South Korean maritime law require detailed analysis of bill of lading entries, applicable statutes, and Supreme Court precedent. Having handled complex cargo and commercial disputes, the team at Atlas Legal is well-placed to advise shippers, insurers, and carriers on liability exposure and litigation strategy under South Korean law.
※ The information in this article is provided for general informational purposes only and does not constitute legal advice. The applicable legal analysis may differ depending on the specific facts of each case. Please consult a qualified attorney regarding any specific legal matter.