This web alert serves as a reminder of the dangers of releasing cargo against an LOI. The club would emphasise that members should have a full appreciation of the risks in order for these to be minimised.
The bill of lading is considered to be the ‘key to the warehouse’ and the carrier’s obligation, under a negotiable bill, is to give delivery to the holder of the bill of lading and not to any other party. If the carrier were to deliver the goods to a party not included on the bill of lading, and therefore not entitled to the goods, the carrier would be liable for the consequences. Often the original bill of lading has not arrived at the port of discharge and the charterer asks the owner to deliver the cargo without production of the original bill against a LOI. The club would advise members to proceed with real caution when accepting an LOI as a reliable form of security, as an LOI is not enforceable as of right according to English law. The best form of security would be to request a bank guarantee or cash deposit to provide the member with a full-proof form of security. Read full story ›
Source: Hellenic Shipping News