Bills of Lading and Associated LOI’s


A Bill of Lading (BOL or B/L) is a document issued by the shipper and usually delivered to the ship's master acknowledging that specified goods have been received on board for conveyance to a named place. When cargo arrives at the discharge port, the absence of an original BOL can cause problems. Therefore, a “Letter of Indemnity” (LOI) is used to allow for delivery of cargo without the original bill of lading or the delivery of that cargo at a port other than that stated in the bill of lading, or a combination of both. Your Soundtanker broker can best explain how, when and why the LOI might be necessary for your cargo and/or charter party agreement.

Legal Issues with LOI’s: Why it Matters to You
Shippers, receivers and shipowners all face legal challenges when considering whether to issue, receive or otherwise rely on an LOI. Ultimately, the broad guarantees provided by LOI’s may not survive the test of arbitration or the courts. There are several variables to consider. The financial stakes involved with a high-value cargo are so massive that a prudent shipowner might assume that the guarantor who signed an LOI will not honor his obligations promptly – if at all. An LOI issued at the tail end of a chain of sales – where the cargo has been sold more than once in transit – creates additional issues. There is no guarantee that a middle party in the middle of the chain will make proper payment for the goods. Even the banks that finance commodity purchases could be at risk when LOI’s are used. For these and a myriad of other reasons, some courts have found such LOI’s as unlawful. Sorting out the intricacies of these documents is best done before the charter party is finalized.

Soundtanker Provides Guidance: LOI’s and the Charter Party Agreement
Shipowners are often requested by charterers to agree to clauses which provide for delivery of cargo without production of bills of lading and/or at ports other than those stated in the bills of lading against letters of indemnity. Some shipowners are reluctant to do so. But, it is critical that the LOI question is settled well before the discharge of the vessel. A charter party which does not address these questions risks serious discharge port delays – or worse. Your Soundtanker broker can evaluate your particular situtation and recommend an appropriate plan.