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February 13, 1991


The opinion of the court was delivered by: Tenney, District Judge.


Plaintiff, Leather's Best International, Inc. ("LBI"), brings this action against defendant, Companhia de Navegacao Lloyd Brasileiro ("Lloyd"), for the loss of five pallets of leather which were shipped on board defendant's vessel, M.V. LLOYD SERGIPE ("LLOYD SERGIPE"). LBI alleges that the leather was stolen as a result of Lloyd's negligence and unreasonable deviations from the terms of the contract of carriage. Lloyd, as third-party plaintiff, has impleaded the shipper-consignor of the leather, Leather's Best Brasil, Comercio E Representacoes Ltda. ("LBB"), alleging that the loss was caused not by its own negligence, but rather by the acts of LBB and its agents. For the reasons set forth below, the court finds that Lloyd is liable to LBI for the full value of the missing cargo. The following, including those additional facts referred to in the Discussion, constitutes the court's findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52(a).


1.   The shipment in question consisted of 106,270.50 square
feet of crust leather having a gross weight of 8,413 kilograms
and a net weight of 8,233 kilograms.*fn1 Tr. 28, 126, 230;
Exh. 27.*fn2
2.   The leather was acquired by LBB in Brazil and was later
sold to LBI pursuant to an invoice, No. 017/88, dated February
29, 1988.*fn3 Tr. 28-29, 219, 230-31, 242-44; Exhs. 27, 34.
LBI purchased the leather according to "cost and freight"
invoice terms, meaning that LBB paid for all the transport and
freight charges before the cargo was loaded on the ship.
See Tr. 28-29, 230-31.
3.   Prior to loading, LBB weighed the shipment in Novo
Hamburgo, Brazil, using a scale which had been checked by
Imerto, the official organization for controlling the accuracy
of commercial scales in Brazil. Tr. 235-39, 420-22, 429-31,
442-43; Exh. 28, 29.
4.   LBB then palletized the leather,*fn4 loaded it onto ten
wooden pallets, and placed the pallets on a truck at LBB's
warehouse in Novo Hamburgo. Tr. 422-26, 434-37.
5.   The ten pallets of leather were driven by truck from
LBB's warehouse to the Customs' bonded warehouse of Expresso
Rio Grande Sao Paulo ("Expresso") located in the Port of Rio
Grande. Tr. 511-12.
6.   LBB hired a freight forwarder named Transcontinental
Servicos e Representacoes, Ltda. ("Transcontinental") to
oversee the movement of the cargo while it remained in Brazil.
See Tr. 270. Transcontinental then hired Commissaria de
Despachos Ltda. ("CODEL") to manage the shipment while it was
at the Expresso warehouse. Tr. 270.
7.   On March 5, while the goods were in the Expresso
warehouse, Lloyd delivered an empty container (CTIU 323389-7)
to CODEL. Tr. 446-48.
8.   Before putting the leather into the container, a
Brazilian Treasury official counted the number of pallets and
issued a document called a "Papeleta," attesting to the type
and quantity of goods loaded into the container. Tr. 447-48,
9.   The container was then closed with Brazilian Treasury
seal # 852146, and the Papeleta was affixed on the outside its
doors. Tr. 447-54, 516-17. The Brazilian Treasury seals that
were used at the time were thin chrome-colored strips on which
was written "Brazil" and "FRS" (Federal Revenue Service). Tr.
10.  The loaded and sealed container was kept in a yard
toward the rear of the Expresso warehouse and remained there
from March 5 to March 7. Tr. 520. The yard was controlled by
the Brazilian Federal Revenue Service. Tr. 454-55.
11.  On March 7, the container — with seal and Papeleta
intact — was delivered to the terminal in Rio Grande operated
by Consorcio de Terminals de Container do Rio Grande
("CONTECON"). Tr. 455-57.*fn6
12.  CONTECON issued a receipt for the container, dated March
7, indicating that the container had a gross weight of 10,885
kilograms and that it was sealed with the Brazilian Treasury
seal # 852146. Tr. 455-59; Exh. 46. At the time, there were two
weight scales located at the CONTECON terminal. Tr. 458-59,
13.  Transcontinental selected Lloyd as the carrier for this
shipment. See Tr. 522. Lloyd then chose its ship, the LLOYD
SERGIPE, to transport the cargo from Brazil to the United
States. Exhs. 16, 17, 18. The LLOYD SERGIPE is a general cargo
ship. Tr. 110.
14.  The LLOYD SERGIPE was scheduled to arrive in Rio Grande
between March 5 and 7, but because of mechanical difficulties
in the Port of Santos, Brazil, the ship did not arrive until
March 21. Tr. 316-18, 75, 378-82.
15.  The container remained at the CONTECON terminal from
March 7 until March 23, when it was loaded onto the LLOYD
SERGIPE. See Tr. 455-59, 83, 199; Exhs. 52, 57, 63.
16.  The container was stowed on the ship's weather deck. Tr.
249-50, 565; Exhs. 16, 17, 18, 56. Lloyd never authorized, and
none of the bills of lading contained a stamp or clause for,
on-deck stowage. Id.*fn7
17.  In early 1988, there had been many reported thefts from
Treasury-sealed containers located at the CONTECON terminal.
Tr. 468-70, 495-99; see Exhs. 47, 48.
18.  During the period of the ship's delay — March 7 to
March 22 — LBB repeatedly asked Transcontinental to have the
cargo loaded into another company's container and shipped on a
different vessel. Tr. 316-20. However, each request was met
with Transcontinental's response that the LLOYD SERGIPE would
be arriving in Rio Grande the next day, and thus, it would not
be worthwhile to unload and reload the cargo into another
container. Tr. 316-20, 381-84, 400-01. Transcontinental's
representations were based on the information provided by Lloyd
and its agents in Rio Grande. See Tr. 316-20, 380.
19.  The LLOYD SERGIPE arrived in the port of Rio Grande on
or about March 21. See Tr. 300-01. On March 23, the container
was loaded aboard the ship, and Lloyd issued a document called
a "Controle

do Operacio," indicating that Lloyd's seal (# 75501) was
affixed to the container and that the container was in good
condition. Exh. 52; see Tr. 83-84, 199.
20.  Lloyd's sole agent at the Port of Rio Grande was
Brascon, S.A. ("Brascon"). Tr. 56-57, 82-83, 459, 490-91. As
such, Brascon was the only entity authorized by Lloyd to place
its "onboard" stamps on bills of lading issued at the Port of
Rio Grande.*fn8 Tr. 56-57, 66, 81-82.
21.  Brascon issued bills of lading for the entire shipment
on forms provided by Lloyd. Exhs. 16, 17, 18; Tr. 533-43,
543-44, 546. Each bill of lading specified the weight of the
cargo, and each was stamped "clean on board."*fn9 Exhs. 16,
17, 18; Tr. 63-65, 540.
22.  These bills of lading, however, possessed different
"onboard" dates, ranging from March 10 to March 22. Exhs. 16,
17, 20. Twenty-nine of the thirty-one bills of lading bound for
New York were stamped "clean on board" on dates prior to the
arrival of the ship.*fn10 Exh. 20; Tr. 75-80.
23.  The LLOYD SERGIPE set sail from Rio Grande on March 23.
Tr. 708-09. On the way to the United States, the ship stopped
at the ports of San Francisco do Sul, Vitoria, and Fortaleza.
Tr. 206.
24.  On April 12, the LLOYD SERGIPE arrived in Port
Elizabeth, New Jersey, where the container was discharged at
the Maher Terminals. See Tr. 612-15, 646-47. Upon discharge,
the container was not weighed and the seals were not
checked.*fn11 Tr. 650, 651-60.
25.  In order to obtain delivery of the shipment from Maher
Terminals, LBI presented an endorsed original bill of lading
stamped "clean on board March 10" to Lloyd's New York agent,
Norton Lilly International, Inc. ("Norton Lilly"). Tr. 33, 42.
The only bills of lading LBI received were those sent by ...

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