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Lighthouse - March, 2019.

Release of The Cargo without The Presentation of Original Bill of Lading

Risk Factors Involved in Non-Presentation of OBL
It is quite evident by now that there is risk associated with delivery of cargo with the Letter of Indemnity and not the original Bill of Lading. The below listed are some of the basic risks that are involved in the same:

1. Mis-delivery of Cargo:
It is well understood a bill of lading, amongst other functions, acts as a “key” to the warehouse which, when available at the discharge port, is presented to the Master in order to release the cargo to the “bearer” of the bill of lading. Where such a “key” is not available at the discharge port, it must be remembered that an LOI will not absolve the carrier from liability if the cargo is delivered to the wrong party.

2. Insurance Cover:
It is well understood that 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. The LOI is designed to try to alleviate such risk, so far as it can, but it must be understood that an LOI effectively substitutes an Owner’s P&I cover for mis-delivery claims and there are certain insurance policies that do not cover the claims arising out of non- presentation on BL.

3. Creditworthiness of the Party:
This is one of the most important factors while delivering cargo with letter of indemnity. In some cases, the party that presents the letter of indemnity may not be related or connected to the cargo or the shipment in actual. In other cases, the parties may represent themselves as the agent of the cargo interest, but they could be deceitful and later the carrier may be held liable by the actual cargo interest. In some cases, the consignee may have failed to pay the shipper the value for the cargo which could also lead to non- receipt of the Bill of lading. So, the carrier/ shipping line must always ensure to check the creditworthiness of the party claiming the cargo with the letter of indemnity.

Reasons for non-presentation of BL:

  • Consignee has not received the Bills of Lading from the shipper in spite of cargo on board.
  • Consignee has only received an electronic copy or the telex message.
  • Consignee has not paid the buyer yet for the cargo bought and has existing dues.
  • Consignee or agents have misplaced the documents or the Bill of Lading.
  • The party representing the consignee or the cargo interest may be fraudulent and not acting in good faith.

The practice of delivery of cargo without presentation of original bills of lading is very familiar, and is here to stay as long as shipping exists. Delivery of cargo without presentation of an original bill of lading, although not recommended, is a reality of international trade and if the parties act cautiously then no one would suffer a loss in the business. It is therefore important to remember the risks involved in such operations and to act cautiously in order to minimise risks to shipowning interests.

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