Yutaka Tsurusaki
Attorney-at-law, Tsurusaki & Kobayashi (T&K Partners)

1. Significance of Bill of Lading—Those who laugh at one B/L cry at B/L

Nowadays going paperless, the significant meaning of Bill of Lading (B/L) is often forgotten in practice, and it is necessary to re-realise it in each company. The B/L to be issued upon the Cargo being shipped on the Vessel or being transported to the Container Yard is a very significant document, and if the Owners/Carrier do not deal with it without carefulness, there will arise very big problems.

The B/L has the following main functions;

1. The function related to the contractual terms of the contract of carriage of the Cargo,
2. The function related to the quantities, conditions and others of the received Cargo, and
3. The function related to the title to the Cargo

This time the important function of the above (3) is briefly addressed for.

2. Is LOI a Mere "a Piece of Paper"?—Danger of Delivery of Cargo Without Production of B/L and Letter of Indemnity (LOI)

The B/L has a big function that the Carrier may deliver the Cargo to the proper holder of the original B/L with production of the B/L. On the contrary the Carrier owes the obligation to deliver the Cargo to the proper holder of the original B/L with production of the B/L and if the Carrier delivers the Cargo to the person/entity who is not the B/L holder and where the B/L holder appears (for example the bank in case of the Letter of Credit (L/C)), the Carrier cannot deny the claim and can owe the liability for the damages.

However, nowadays for the reason of the speed-up the vessels and other reasons, there frequently occur situations that the original B/L does not arrive at the discharge port/place by the time of the Vessel's arrival thereat and the delivery of the Cargo cannot be done with production of the B/L. As a result in practice, there occur irregular situation that the Carrier delivers the Cargo without production of the B/L but by obtaining the Letter of Indemnity (LOI) from the Charterers and the Cargo Interests, however, since there are dangers hereunder mentioned, if adopts it, large cares are required. Some LOIs have bank guarantees but they issued many LOIs without bank guarantees (Single LOI).

Even where the issuer of the LOI is a big corporation having creditability, they spent large labours and time by the Carrier to receive the indemnity for the damages if the B/L holder appears and where the issuer is a corporation having no or little creditability, there is a possibility that the LOI becomes a mere "a piece of paper", and therefore, it is needed to be careful. In any case it is needed to be very careful about the wordings of the LOU in question.

Therefore, the Owners/Carrier should in principle refuse the request for the delivery of the Cargo without production of the B/L.

3. Important Points of Letter of Indemnity Clause (LOI Clause) Under Charter Party

Although the Owners/Carrier is entitled to refuse the delivery of the Cargo by LOI and to request for the delivery with production of B/L, nowadays many Charter Parties stipulate as the LOI Clause that the Owners must deliver the Cargo without production of the original B/L but with production of the LOI of the Charterers, and if the Owners/Carriers agree on such a Clause, it is needed to be very careful about the creditability of the Charterers, the provision of the Clause and the wordings of the LOI.

4. Conclusion

As above the B/L is a very significant document to the Owners/Carrier and the damages related to the cargo delivery without production of the B/L and the LOI may break the "Keel" of the company and are not covered by P&I Insurance, and therefore, it is necessary to fully instruct and educate the staff members of each company for very careful and prudent dealing with the B/L.