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November 12, 1985


The opinion of the court was delivered by: CARTER

CARTER, District Judge

This case involves litigation for the payment of surcharges totalling $94,800 for detention and diversion of some trucks carrying containers with defendant's cargo to various delivery points in Iraq, other than Baghdad or Mosul, the contracted points of delivery. Plaintiff seeks to assess some $42,600 in diversion charges and $52,200 in detention charges. Both sides move for summary judgment. Although there is some disagreement by each party as to the other's 3(g) statement, the basic facts are not essential to a determination of the summary judgment motions. Accordingly, we proceed to their disposition.

Defendant, McGraw-Edison Company ("McGraw"), sold a quantity of air coolers and parts to the Iraq Trading Company during the latter part of 1981 and the early part of 1982. The contract called for sale f.o.b., Phoenix, Arizona, where defendant's manufacturing plant was located, and delivery to Baghdad and Mosul by way of a Turkish port. The transaction involved a total of 596 containers of air coolers and 8 containers of parts--510 containers were to be delivered to Baghdad and 94 containers were to be delivered to Mosul.

 Two letters of credit were issued by the Iraq Trading Company in defendant's favor with the Rafidian Bank in Baghdad and Chase Manhattan Bank in New York as the advising bank. One letter of credit covered the shipments going to Mosul and the other covered the cargo scheduled for deliver to Baghdad. At the time of each of the listed shipments, bills of lading from Costa Line Cargo Services, Inc. ("Costa Line") covering the cargo and relating to the particular ocean vessel and voyage and the applicable invoice, legalized by the Embassy of Iraq in the United States, were presented to the Chase Manhattan Bank and draw downs against the letters of credit were effected in favor of the defendant in the amounts of the applicable invoice.

 Plaintiff, Costa Line, and defendant entered into a contract of carriage of the cargo by sea to Iskenderun, Turkey, and then overland to Baghdad and Mosul. Costa Line in turn entered into agreement with Makzume Shipping Agency for the overland transportation of the cargo from Iskenderun to the two designated delivery destinations in Iraq. The cargo was shipped in plaintiff's container vessels to the Turkish ports and overland by truck by Iraq at a cost of $6,700 per container.

 The cost of the inland shipment charged by plaintiff was $2.305.40 per 40 foot container. Costa Line's normal charges for such inland shipment (Iskenderun to Baghdad) was $2,240 per 40 foot container of up to 35,200 lbs, as evidenced by its tariff on file with the Federal Maritime Commission. The surcharge for this inland shipment was $65.40 per container for a total surcharge of shipment was $65.40 per container for a total surcharge of $39,501.60. (Defendant's Opposition and Reply Affidavit at 5-6).

 The cargo arrived at Iskenderun on plaintiff's vessels, was discharged and loaded onto trucks for transportation to Iraq. Inland way bills were issued listing defendant as shipper and the Iraq Trading Company as receiver. The inland route to Baghdad involved crossing the Turkey/Iraq border and proceeding approximately 600 kilometers to Iraq Customs Authority in Baghdad, where the diversions and detention charges, which plaintiff seeks to recover from defendant, were incurred.

 The cargo arrived at Iskenderun on 5 shipments: on March 5, 1982, Spetses Island arrived carrying 129 containers--53 were diverted; on May 6, 1982, the Costa Mediterranea (Voyage 1) arrived carrying 108 containers--none was diverted; on June 5, 1982, the Costa Atlantica (Voyage 2) arrived carrying 126 containers--none was diverted; on July 8, 1982, the Costa Mediterranea (Voyage 2) arrived carrying 122 containers--40 were diverted; and on August 6, 1982, the Costa Atlantica (Voyage 3 arrived carrying 119 containers--53 were diverted.

 On arrival at Iskenderun, the containers were off loaded from plaintiff's vessels onto trucks for inland transportation to Baghdad and Mosul. When the trucks arrived at Iraq Customs Authority in Baghdad, some 600 kilomsters from the Turkish/Iraq border, a representative of the Iraq Trading Company was present, and this representative would direct the truckers from time-to-time to divert part of the shipment scheduled for delivery to Baghdad to other locations in Iraq.

 These directives, plaintiff argues, had the weight of the Iraq Customs Authority which had to approve delivery to any place other than that listed on the way bill which was Baghdad. Moreover, plaintiff contends, it could not have delivered the cargo to Baghdad contrary to the directive to deliver the cargo to another destination because the cargo would have been subject to damage or theft if discharged in Baghdad and not accepted by the Iraq Trading Company. The truckers had to remain with the cargo until advised by the Iraq Trading Company that space was available for unloading either in Baghdad or at the diverted destination. Two days' free time was allowed for delivery. Thereafter, for each day of waiting, a demurrage charge of $100 per day, per truck was incurred. Because a state of war existed in Iraq, telephone communications from Iraq to the outside world were virtually non-existent, rendering it impossible for plaintiff to contact defendant for permission to incur these costs before abiding by the instructions of the Iraq officials. (Aff. of Ronald Makzume).

 Defendant contends that at the time the diversion and detention took place, it was no longer the owner of the cargo. Plaintiff counters that while ownership had technically passed from defendant, it maintained a proprietary interest in the containers since prior to shipment defendant had executed a performance bond in the form of a standing letter of credit in the amount of $1 million or roughly 10% of the purchase price of the goods. The bond was to be discharged only on confirmation from the Iraq Trading Company to the issuing bank of the arrival and inspection of the last shipment.


 Since the contract was f.o.b. Phoenix, Arizona, ownership of the containers had already passed to the Iraq Trading Company when the various shipments arrived at the Turkish port and were subsequently diverted or detained during the inland journey. Phillips Puerto Rico Core, Inc. v. Tradax Petroleum, Ltd., 782 F.2d 314, slip op. at 6139-40 (decided Sept. 16, 1985) (2d Cir. 1980); Madeirense do Brasil S/A v. Stulman-Emrick Lumber Co., 147 F.2d 399, 402 (2d Cir. 1945)("under a c.&f. contract the seller fulfills his duty on shipment of the goods, and that the risk thereafter is on the buyer unless other terms of the contract indicate a contrary intention"), cert. denied, 325 U.S. 861, 89 L. Ed. 1982, 65 S. Ct. 1201 (1945).

 The existence of the performance bond does not change that. The cases cited by plaintiff, C.H. Leavell & Co. v. Hellenic Lines, Ltd. 1969 AMC 2177, and International Packers Ltd. v. Federal Maritime Commission, 123 U.S. App. D.C. 55, 356 F.2d 808 (D.C. Cir. 1966), do not appear to be on point. In one, the surcharge resulted from an unexpected occurrence during the voyage and in International, the shippers, aware that a strike had closed United States east coast ports, requested the carrier not to unload the cargo at available alternate ports, thus authorizing it to kept he cargo, which was perishable, under refrigeration on the carrier's vessel until an east coast port became available. Inferentially, at least, the shippers had in fact agreed to the surcharge. There are no such facts on this record to ...

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