Delivery of cargo without presentation of an original bill of
lading, although non-recommended, is a reality of international trade, UK
P&I Club notes. Delays in the documentary chain, and onward sales of the
cargo while it is in transit, often means that original bills are not available
when the ship reaches the discharge port.
It is common in a lot of
trades, whether bulk or oil, to accept a Letter of Indemnity (LOI) for
non-production of bills of lading. Although it is commonly accepted in many
trades, the consequences of non-performance can be extremely serious. According
to the Club, there are four main risks associated with delivery of cargo
without presentation of original bills of lading:
·
Mis-delivery of cargo,
·
Insurance cover: liabilities arising as a consequence of
mis-delivery are not covered under all P&I Club rules unless the Directors
of the club in question otherwise agree,
·
It is not certain whether the LOI will in fact respond in the
event of a mis-delivery claim,
·
Concerns about the creditworthiness of the party providing
the LOI.
The Club notes the
following key issues:
1. P&I
cover is prejudiced if cargo is delivered against an LOI and claims arise where
the cargo is mis-delivered.
2. It
is absolutely essential that operators get the wording of the LOI right and
ensure that proper procedures are in place to demonstrate compliance with the
LOI
3. Operators
must also actively weigh up the counter party risk of accepting an LOI. An LOI
is only as secure as the party providing it.
As it is understood, it
is very important for owners to be very meticulous regarding their procedures
of delivering cargo. It is absolutely essential that Members get the
wording of the LOI right and ensure that proper procedures are in place to
demonstrate compliance with the LOI.
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