012005 012008 012005 Letter Of Indemnity Charterers Owners

01/2005 01/2008

01/2005 Letter Of Indemnity Charterers, Owners and Insurance 01/2008

01/2005 CHARTERERS: LSW 1122 03/03, clause 3 B 4: 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 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 01/2008

01/2005 Origins of LOI L/C – What is it and why this is good for the seller? Documents required by bankers under L/C Why do they ask for clean bill of lading? Incoterms Risk transfer and duty to insure Role and nature of bill of lading What is LOI in the end? CASE STUDY 01/2008

01/2005 What is L/C? It is simply a letter/confirmation by a bank acting on behalf of the buyer that credit will be allowed by it for the purchase of the goods from an identified seller Why L/C is good for a seller? He will get paid irrespective on whatever happens 01/2008

Which documents are requested in L/C? The seller must provide the documents stipulated by the buyer, which normally include: 01/2005 -A commercial invoices -A certificate of origin -Insurance policy or certificate covering marine and war risks (in CIF contract) -Full set of clean marine bills of lading, marked “freight paid” Disperances in documents may cause delays in obtaining payment or prevent making payment to the seller 01/2008

CIF (Cost, Insurance and Freight) Charters a ship and pays freight RISK TRANFER: When goods are crossing ship’s rail in the port of loading INSURANCE: Seller insures goods for his account in favour of the buyer 01/2005 SELLER: CFR (Cost and Freight) SELLER: Charters a ship and pays freight RISK TRANFER: When goods are crossing ship’s rail in the port of loading INSURANCE: Buyer insures goods for his own account and in his own favour 01/2008

Bill of Lading 01/2005 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 What is LOI (Letter of Indemnity)? Promise to release shipowner from any liability regarding to cargo carried? FRAUD 01/2008

When goods arive to the place of discharge. . . 01/2005 TRADER/SELLER: BUYER: Has been cashed in for sold goods under L/C Launches cargo insurance claim Marks bill of lading accordingly Holds shipowner liable for loss and damage SHIPOWNER: Calls trader and rests assured that cargo is insured and he is protected under LOI 01/2008

What’s next. . . 01/2005 BUYER: Gets his claim paid by cargo insurance underwriters Stays happy and relaxed CARGO INSURERS: SHIPOWNER: Pay cargo claim and appoint recovery agency under subrogation form signed by the buyer Founds his vessel arrested for cargo claim placed by recovery agency Calls P&I Club for help P&I CLUB: Shows up and interviews crew Finds out LOI was issued and feels sorry for the shipowner 01/2008

01/2005 What should shipowner / charterer to consider Not to accept LOI and make remarks in bills of lading Think twice To understand risks he is taking by accepting LOI To be sure who is chartering their ship and provides LOI To demand using P&I Clubs suggested forms only To demand signature of the bank under LOI In all circumstances ask for advice from their P&I Club or Charterers’ Liability insurer 01/2008

01/2005 Thank you 01/2008