Allied Chemical International Corp (Allied), a shipper of chemical products, sold caprolactam to Banylsa Tecelagem do Brasil SA (Banylsa) in two lots of 6,000 bags each, on terms of sight drafts against documents at USD 266,756.92 per lot C&F Salvador, Brazil. Allied delivered the cargo to Companhia de Navegacao Lloyd Brasileiro (Lloyd), an ocean carrier, at the Port of Norfolk, Virginia. Lloyd loaded the cargo onto the Itapura and issued clean order bills of lading consigned to the order of Banylsa. Allied forwarded the shipping documents, including the original bills of lading and sight drafts, to Banco Bamerindus do Brasil SA, with instructions to release the documents only against payment.

On arrival at the Port of Salvador, Lloyd discharged the cargo to a warehouse controlled by the Administration of the Port of Salvador in accordance with local customs. Banylsa paid only one of the two sight drafts and received only one bill of lading. In respect of the second lot, Banylsa's agent requested Lloyd's agent to issue a carta declaratoria, a letter declaring that freight had been paid, on the basis that the original bill of lading had not yet been received. Lloyd issued the carta declaratoria, enabling Banylsa to obtain release of the cargo without presenting the original bill of lading and without having paid the corresponding sight draft. Banylsa subsequently filed for voluntary receivership. Allied recovered less than USD 40,000 from the receivership proceedings due to currency exchange losses, and brought suit against Lloyd for breach of contract of carriage and conversion.

Lloyd argued that cls 1 and 12 of the bill of lading absolved it of post-discharge liability, and alternatively that its liability was limited to USD 500 per pallet under the COGSA package limitation incorporated into the bill of lading. The Harter Act, 46 USC § 190, and COGSA, 46 USC § 1300, were central to the Court's analysis.

Held: Appeal dismissed.

Lloyd was liable for the full value of the misdelivered cargo, less the amount already recovered by Allied from Banylsa in the receivership proceedings. Clauses 1 and 12 of the bill of lading were null and void under the Harter Act, which governs after discharge until proper delivery is made. Upon discharge, Lloyd assumed the status of a bailee and remained responsible for proper delivery; transfer to the port authority did not alter this. Lloyd's issuance of the carta declaratoria without demanding production of the bill of lading constituted unjustified delivery under the Pomerene Bills of Lading Act, 49 USC § 89, and Lloyd could not establish under COGSA s 4(2)(q) that its fault did not contribute to Allied's loss. The COGSA package limitation under s 4(5) did not apply, as the freight rate was calculated by reference to the declared value of the goods, indicating the parties did not intend the pallets to constitute packages for limitation purposes.