At 14.52 hours on 17 March 1943, U-338 fired torpedoes at convoy SC-122, observed one hit and heard three detonations which were probably depth charges.

The Granville (Master Friedrich Matzen) was struck by one torpedo on the port side at the #2 hatch, starting a fire in the hold. The engine room flooded as the watertight door between the coal bunkers and fireroom was open, because coal was being transferred from the bunkers to the fireroom. Ten crew members working in the engine room were killed. The vessel broke in two amidships and sank within 15 minutes, taking two armed guards with her. The surviving men of her complement of 35 crew members, eleven armed guards and one passenger (an US Army LtCol) abandoned ship in lifeboats and rafts. The survivors, including the master, were picked up about an hour later by HMS Lavender (K 60) (Lt L.G. Pilcher, RNR) and landed at Liverpool on 23 March. The second mate was rescued but died of wounds on the corvette and was buried at sea.