P & I Clubs regard them as
fraudulent documents
I REFER to Wharf Rat's column regarding Letters of Indemnity (FTW November 12, 1999).
Thank you for the humorous and sometimes interesting comments which you make in your column.
I would like to clarify one issue regarding LOIs.
You may check this information with any P&I Club of your choice and I think you will find a fairly consistent reply. LOIs are illegal and regarded as fraudulent documents.
However a shipping line usually issues them under commercial pressure from the various shippers, under threat of you will never see a kilo of my cargo again or their salesmen have accepted a clean on board clause in their L/C (Letter of Credit).
Yes, we have bad experiences with customers not honouring LOIs.
However this is not necessarily your biggest problem. Let's say you have a reasonably insignificant remark on a Mates Receipt (M/R) for which the line issues an LOI. Let's then assume that during the voyage the cargo is then damaged over and above what has been noted on the LOI.
Now the receiver claims, correctly, against the line. The P&I Club calls for the M/R and loading documentation in order to deal with the claim and notes that the M/R was claused but the bills have been issued clean on board. Liability is then rejected by the P&I and the owner is exposed, which then leaves the shipper also exposed if the claim is of a serious magnitude.
Certainly problems are inherent with certain commodities and are usually known and accepted by that industry. You will then have the shark trader who wants to make a few extra bucks on his deal by claiming for damages. He is fully in his right because of the clean bill.
Maybe the seller should agree on acceptable conditions at the time of sale as these become acceptable endorsements on the bills of lading, in order to stop unnecessary aggravation.
Alas I fear this is but a pipe dream but please think about it my dear shipper.
William Hall, MACS Shipping, Johannesburg.
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