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Letter Of IndemnityLetter Of IndemnityCharterers, Owners and InsuranceCharterers, Owners and Insurance

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OWNERS: Standard London, Status and Rules, clause 20.21.4(v.e):

There is no recovery arising out of a bill of lading, waybill or other document containing or evidencing the contract of carriage issued with the knowledge of the Member or his Master with an incorrect description of the cargo or its quantity or its condition

CHARTERERS: LSW 1122 03/03, clause 3B4:

This Policy excludes any claim In connection with the issue of a bill of lading or similar document of title which the Assured or his agent knew did not correctly state the quantity and/or condition of the cargo at the time of shipment

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L/C – What is it and why this is good for the seller?L/C – What is it and why this is good for the seller? Documents required by bankers under L/C Documents required by bankers under L/C

Why do they ask for clean bill of lading?Why do they ask for clean bill of lading?

IncotermsIncoterms

Risk transfer and duty to insureRisk transfer and duty to insure

Role and nature of bill of ladingRole and nature of bill of lading What is LOI in the end?What is LOI in the end?

CASE STUDYCASE STUDY

Origins of LOIOrigins of LOI

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be allowed by it for the purchase of the goods from an identified seller

He will get paid irrespective on whatever happens

What is L/C?What is L/C?

Why L/C is good for a seller?Why L/C is good for a seller?

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The seller must provide the documents stipulated by the buyer, which normally include:

-A commercial invoices

-A certificate of origin

-Insurance policy or certificate covering marine and war risks (in CIF contract)

-Full set of cleanclean marine bills of lading, marked “freight paid”

Disperances in documents may cause delays in obtaining payment or prevent making payment to the seller

Which documents are requested in L/C?Which documents are requested in L/C?

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SELLER: Charters a ship and pays freight

RISK TRANFER: When goods are crossing ship’s rail in the port of loadingin the port of loading

INSURANCE: Seller insures goods for his account in favour of the buyerin favour of the buyer

CIF (Cost, Insurance and Freight)CIF (Cost, Insurance and Freight)

CFR (Cost and Freight)CFR (Cost and Freight)SELLER: Charters a ship and pays freight

RISK TRANFER: When goods are crossing ship’s rail in the port of loadingin the port of loading

INSURANCE: Buyer insures goods for his own account and in his own favourin his own favour

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HAGUE VISBY RULES Article 4:

Bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described

Bill of LadingBill of Lading

What is LOI (Letter of Indemnity)?What is LOI (Letter of Indemnity)?

FRAUDFRAUDPromise to release shipowner from any liability regarding to cargo carried?

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Buyer:Buyer: ООО ООО ““СбытстройтехмехСбытстройтехмех””

Cargo insurer:Cargo insurer: САО САО ““Честь и СовестьЧесть и Совесть””

Seller (Trader):Seller (Trader): ОООООО ““Рога и КопытаРога и Копыта””

Shipowner:Shipowner: ОАООАО ““Эх, ПрокачуЭх, Прокачу””

P&I club:P&I club: Клуб Веселых и НаходчивыхКлуб Веселых и Находчивых

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BUYER: Launches cargo insurance claim

Marks bill of lading accordingly

Holds shipowner liable for loss and damage

When goods arive to the place of When goods arive to the place of discharge...discharge...

TRADER/SELLER: Has been cashed in for sold goods under L/C

SHIPOWNER: Calls trader and rests assured that cargo is insured and he is protected under LOI

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BUYER: Gets his claim paid by cargo insurance underwriters

Stays happy and relaxed

What’s next...What’s next...

SHIPOWNER: Founds his vessel arrested for cargo claim placed by recovery agency

Calls P&I Club for help

CARGO INSURERS: Pay cargo claim and appoint recovery agency under subrogation form signed by the buyer

P&I CLUB: Shows up and interviews crew

Finds out LOI was issued and feels sorry for the shipowner

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Not to accept LOI and make remarks in bills of ladingNot to accept LOI and make remarks in bills of lading Think twice Think twice

To understand risks he is taking by accepting LOITo understand risks he is taking by accepting LOI To be sure who is chartering their ship and provides LOITo be sure who is chartering their ship and provides LOI

To demand using P&I Clubs suggested forms onlyTo demand using P&I Clubs suggested forms only To demand signature of the bank under LOITo demand signature of the bank under LOI

In all circumstances ask for advice from their P&I Club or Charterers’ Liability In all circumstances ask for advice from their P&I Club or Charterers’ Liability insurerinsurer

What should shipowner / charterer to What should shipowner / charterer to considerconsider

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Thank youThank you