Usually, a shipper needs a new bill of lading when the goods loaded onto the cargo vessel do not match those stated on the original bill of lading.
Here the shipper agrees to protect the shipping company against any possible consequences that may arise from issuing a clean bill of lading. In such circumstances, the carrier can request a letter of indemnity from the shipper or recipient.
When cargo is delivered to a port that’s different to the one named on the original bill of lading.Īcts of God, political unrest, or human error can cause goods to be delivered to a port that isn’t the one stated on the bill of lading. While the availability and use of electronic Bills of Lading is certainly helping to overcome these problems, they still exist, as digital documentation has yet to be adopted in all areas of shipping. Without a letter of indemnity, the carrier could be held liable for lack of documentary evidence of the transactions, including who is the owner of the cargo when it reaches the port of discharge. This often leads to complicated situations in which an LOI issued by the shipper is assumed to cover all parties involved in the chain of selling until the goods are released at the port of discharge. When cargo is sold during transit as part of a high sea sale.Ĭargo can be traded while in transit, sometimes several times. The LOI will absolve the carrier of any blame or financial penalty if the shipment is later found to be substantially different to that recorded on the original bill of lading. In such cases, or when the original bill of lading has been lost, the consignee will offer the carrier a letter of indemnity in exchange for delivery of the freight without the bill of lading. The speed of shipping has increased to such an extent that cargo vessels often arrive at their port of discharge before the paperwork has arrived by courier. When the cargo’s consignee requests the carrier to release the goods without producing the original bill of lading. Here are some more of the most common scenarios in which such letters provide indemnity in shipping: That helps the shipping process, as the carrier gets to offload the cargo without having to wait for the bill of lading, which could delay their operations. The terms of the LOI can offer the customer assurances that they won’t suffer a loss if they accept the cargo without its bill of lading, but later find the shipment was delivered incomplete. For example, a carrier can offer an LOI to a customer who has reservations about accepting a shipment that arrived in port without its bill of lading. There are several shipping scenarios in which a letter of indemnity (LOI) is of value. The Benefits of an Indemnification Letter in International Shipping The backer – typically, this is a bank or other financial institution that is backing the person or business granting the indemnity. 
The granter of the indemnity, usually the person or business receiving the goods.The party that is seeking or offered the indemnity.Usually, three parties are involved in the agreement laid out in a letter of indemnity: Who Is Affected By A Letter of Indemnity? Changes the terms of a contract or agreement.The concept of indemnity is based on helping one party in a contract avoid losses if the other party: It can be defined as: Protection or security against legal liability for the consequences of one’s actions. ‘Indemnity’ isn’t the sort of word most people use or encounter much in everyday life.
A letter of indemnity is used in shipping to reassure one party that they will not suffer financial loss if the other party cannot fulfil an agreement, or if the nature of that agreement changes.
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