What is a Letter of Indemnity: Guarantee for B/L Corrections, Clean B/Ls, and Delivery Without Original B/L Presentation
Interlink編集部What Is a Letter of Indemnity?
A Letter of Indemnity (LOI) is a written assurance by the requester to compensate for any damages, claims, or costs that may arise later. It is commonly used in situations such as correcting a Bill of Lading (B/L), cargo delivery outside normal documentation procedures, or requesting the issuance of a Clean B/L for cargo with remarks.
An LOI is not merely an instruction letter. It serves as a document through which the requester accepts indemnity responsibility in exchange for shipping lines, NVOCCs, freight forwarders, or other parties undertaking actions that deviate from standard procedures.
However, submitting an LOI does not guarantee that the other party will comply. Depending on the request, additional confirmations or requirements may include bank guarantees, bank counter signatures, internal approvals, or confirmation by P&I Clubs, shipping lines, NVOCCs, or freight forwarders. An LOI is not a document that eliminates risk; rather, it is used as the basis to claim compensation from the requester if damages or claims occur subsequently.
Scope Covered in This Article
| Item | Content Covered in This Article | Content Covered in Other Articles |
|---|---|---|
| LOI Basics | Meaning of Letter of Indemnity, its role as a letter of compensation, concept of risk transfer | General contracts, guarantee agreements, governing law, jurisdiction are covered in legal-related articles |
| B/L Corrections and LOI | Situations where LOI is required for post-issuance corrections to B/L content and its limitations | B/L correction, consignee changes, notify party changes, B/L backdating are covered in their respective articles |
| Requests for Clean B/L Issuance | Precautions when Clean B/L is requested for cargo with exterior abnormalities or remarks | Clean B/L, Claused B/L, cargo incidents, survey reports are covered in their respective articles |
| Delivery without Presentation of Original B/L | Risks of misdelivery when cargo delivery is requested without presenting Original B/L | Original B/L loss, D/O exchange, cargo delivery, Bank L/G are covered in their respective articles |
| Delivery at Different Ports or Locations | LOI for delivery of cargo at a location or port different from that stated on the B/L | Change of destination, deviation, D/O, change of import location are covered in related transportation practice articles |
| Bank Guarantees and Countersigning | Situations requiring LOI backed by bank guarantee or LOI with bank countersignature | Letter of Guarantee, Bank L/G, letters of credit, bank guarantees are covered in their respective articles |
| Relationship with P&I Club | P&I Club standard forms, impact on P&I cover, point that LOI does not substitute insurance | P&I Club, shipowner liability insurance, carrier liability, general average are covered in their respective articles |
| Freight Forwarder Practice | Checkpoints for parties receiving or providing an LOI, internal approvals, response in case of incidents | Freight forwarder liability, NVOCC liability, cargo insurance, subrogation practices are covered in their respective articles |
Basic Concept of LOI
The fundamental idea of a Letter of Indemnity (LOI) is that, in exchange for requesting actions that the counterparty would normally be reluctant to undertake, the requester agrees to indemnify against any resulting damages, claims, or costs. For example, when delivering cargo without the Original B/L, there is an inherent risk of wrongful delivery to the rightful holder of the original B/L.
By providing an LOI, the requester promises to compensate the shipping line or other party accepting the LOI if damages or claims arise from that action. However, an LOI is not a document that eliminates risk. It serves as a document to claim indemnification from the requester if damages occur later.
Therefore, the party accepting the LOI needs to verify the requester’s creditworthiness, indemnity capability, signing authority, the necessity of a bank guarantee, coverage by the P&I Club, and internal approval status.
Common Situations Where LOI Is Used
| Situation | Request Details | Main Risks | Practical Considerations |
|---|---|---|---|
| B/L Correction | Correction of shipper, consignee, Notify Party, cargo details, freight terms, etc. | Infringement of third-party rights, document discrepancies, claims due to errors | Confirm whether the correction matches the facts and has approval from relevant parties |
| Request for Clean B/L Issuance | Request to issue a Clean B/L for cargo with visible damage or remarks | Misrepresentation, bank settlement issues, disputes with buyer | Check that cargo condition and document details do not conflict |
| Delivery Without Presentation of Original B/L | Delivering cargo without the original B/L | Misdelivery, claims from rightful holder, P&I coverage issues | Bank-guaranteed LOI or P&I Club prescribed forms are often required |
| Delivery at Location Different from B/L Named Port | Delivering cargo at a place other than the B/L’s discharge or delivery port | Contract breach, carrier liability, additional costs, insurance issues | Confirm with the shipping line, P&I Club, and bank guarantee as needed |
| Emergency Handling When Documents Are Not Arrived | Request processing with substitute documents due to delay of bank documents or courier | Insufficient confirmation of rights holder, misdelivery, future claims | Verify differences between Sea Waybill and Surrendered B/L |
| Unusual Release Request | Request handling different from normal D/O exchange or local agent procedures | Misunderstanding of cargo release authority, local charges, third-party claims | Confirm approval from local agent, shipping line, and NVOCC |
What a Letter of Indemnity (LOI) Can and Cannot Do
| Item | Expected Effect of LOI | What LOI Cannot Resolve | Practical Judgment |
|---|---|---|---|
| Clarifying Indemnity Responsibility | Clearly expresses the requester’s intention to indemnify damages, claims, and costs | Cannot legally or justifiably change the content of the request itself | Confirm that the request does not contradict facts, laws, or contracts |
| Delivery Without Original B/L | Creates an indemnity party to claim compensation if misdelivery occurs | Cannot eliminate risks to the rightful holder of the B/L | Check bank guarantees, P&I Club forms, and shipping line approvals |
| B/L Correction | Shifts responsibility for subsequent claims and costs arising from corrections back to the requester | Cannot justify corrections that misrepresent facts | Verify actual cargo, sales contracts, customs documents, and involved party approvals |
| Request for Clean B/L Issuance | The requester commits to indemnify against future disputes | Cannot negate visible external damage or abnormalities | Review photos, inspection records, remarks, and L/C conditions |
| P&I Coverage | Use of P&I Club specified forms may be required | LOI does not replace P&I insurance coverage | Confirm the impact on P&I coverage beforehand |
| Credit Supplement | Strengthens requester’s creditworthiness through bank guarantees or countersigning | Cannot automatically recover all damages beyond the guarantee scope | Verify guarantee amount, duration, governing law, and signing authority |
LOI for B/L Corrections
After the issuance of the B/L, corrections may be required for the shipper's name, consignee's name, Notify Party, cargo details, marks, quantity, freight terms, and similar items. In such cases, the shipping line, NVOCC, or freight forwarder will verify that the corrections reflect the facts, have approval from the relevant parties, and do not cause disadvantage to third parties.
Depending on the nature of the corrections, the party requesting the amendment may be asked to provide a Letter of Indemnity (LOI). This is to clearly specify that the requester will compensate for any claims or costs arising in the future due to the corrections made.
However, corrections that are factually incorrect or that affect rights and interests may not be accepted even if an LOI is provided. An LOI is not a document to justify inaccurate B/L entries.
| Correction Item | Ease of Handling with LOI | Party to Confirm With | Points of Caution |
|---|---|---|---|
| Correction to Notify Party description | Relatively easy to handle | Shipper, local agent, importer | Consent and confirmation of description from related parties are necessary |
| Minor corrections to address/contact details | May be easy to handle | Shipper, Consignee, Notify Party | Verify that it does not affect cargo identity |
| Consignee change | Requires careful confirmation | Shipper, bank, buyer, NVOCC, shipping line | Confirm rights relationships, Original B/L whereabouts, and bank involvement |
| Correction of cargo quantity or description | Requires careful confirmation | Shipper, customs broker, warehouse, shipping line | Check consistency with actual cargo, customs documents, invoice, packing list |
| Change to inaccurate or false information | Generally should not be handled | Shipper, legal department, management | An LOI does not eliminate issues related to false statements |
Request for Clean B/L Issuance and LOI
When there are visible anomalies in the cargo or its packaging, remarks may originally be noted on the B/L. For example, if carton crushing, water damage, packaging damage, quantity shortage, or seal abnormalities are detected, the B/L issuer may issue a Claused B/L or a B/L with remarks.
In such cases, the shipper or exporter may request the issuance of a Clean B/L and provide a Letter of Indemnity (LOI). However, issuing a Clean B/L despite visible anomalies can cause significant issues with bank settlements, explanations to buyers, carrier liability, and insurance coverage.
This is especially critical in documentary credit transactions, where Clean B/Ls are often required. Using an LOI to remove remarks should be handled with extreme caution. Preparing documents that do not match the actual condition of the cargo may be considered a dispute or inaccurate document issuance.
Cargo Delivery Without Presentation of Original B/L and Letter of Indemnity (LOI)
In transactions using an Original B/L, the original Bill of Lading is generally required to be presented for cargo delivery. However, when the cargo has arrived at the discharge port but the Original B/L is still in transit via bank or courier and has not yet arrived, the consignee may provide an LOI to request cargo delivery.
This practice involves the risk of misdelivery. If the legitimate holder of the Original B/L appears afterward, the party releasing the cargo could face significant liability. Even if the releasing party accepts an LOI and delivers the cargo without the presentation of the Original B/L, the risk does not fully disappear.
For this reason, shipping lines and P&I Clubs may require the use of a bank-guaranteed LOI or a prescribed LOI format when delivering cargo without the Original B/L.
Delivery of Cargo at Ports Different from Those Stated on the B/L and Letter of Indemnity
There are cases where delivery of cargo is requested at a port, location, or terminal different from the named discharge port or delivery place stated on the B/L. In such cases, the delivery place under the transport contract differs from the actual delivery place, which could affect carrier liability, additional costs, customs procedures, insurance, and P&I coverage.
Especially when delivery is requested at a location different from the B/L-stated port and at the same time without presentation of the original B/L, the risk increases significantly. In such situations, instead of a simple company-signed LOI, a bank-counter-signed LOI or formats recommended by international P&I groups may be required.
The contracting party should verify the scope of indemnity including additional freight, port charges, storage fees, demurrage, customs formalities, third-party claims, and carrier liability.
Main Contents Included in an LOI
| Item | Details | Parties to Confirm With | Points to Check |
|---|---|---|---|
| Recipient | Shipping line, NVOCC, freight forwarder, or other party accepting the LOI | Requester, receiving party, local agent | Clarify to whom the letter of indemnity is addressed |
| Requester Name | Shipper, Consignee, Charterer, cargo owner, etc. | Requester, bank, cargo owner | Confirm the party assuming indemnity liability |
| Vessel and Voyage | Vessel name, Voyage No. | Shipping line, NVOCC, freight forwarder | Identify the specific transport covered |
| B/L Number | The relevant B/L number | Shipping line, NVOCC, cargo owner | Prevent confusion with other B/Ls |
| Cargo Details | Description of goods, quantity, container numbers, seal numbers, etc. | Cargo owner, warehouse, customs broker | Clearly specify the cargo involved |
| Request Details | B/L correction, issuance of Clean B/L, release without original B/L, etc. | Requester, receiving party, legal department | Specify details outside of normal procedures |
| Scope of Indemnity | Damages, claims, costs, liabilities, attorney fees, etc. | Requester, legal department, insurer | Confirm the extent of coverage |
| Handling Third-Party Claims | Defense and indemnity provisions against third-party claims | Requester, bank, legal department | Anticipate claims from bona fide B/L holders, buyers, banks, insurers |
| Bank Guarantee / Countersignature | Whether the bank provides guarantee or co-signs jointly | Bank, requester, receiving party | Confirm if requester’s sole credit is sufficient |
| Signing Authority | Signer’s name, title, company representation authority | Requester, legal department, bank | Verify that signer is authorized to issue the indemnity |
Cases Where Bank Guarantee or Countersignature Is Required
If the content or risks involved in the LOI are significant, the shipping line or other party accepting the LOI may require an LOI accompanied by a bank guarantee or a bank countersignature rather than just a company signature on the LOI.
| Scenario | Reason Why Bank Guarantee Is Often Required | Points to Confirm | Practical Considerations |
|---|---|---|---|
| When releasing cargo without the Original B/L | High risk of a wrongful delivery claim from the rightful B/L holder | Cargo value, location of original B/L, bank involvement | Check shipping line’s prescribed format or P&I Club form |
| When delivery occurs at a location different from the port stated on the B/L | Affects the carriage contract, additional costs, insurance, and P&I coverage | Delivery location, additional charges, customs procedures | Signature by the requester alone may be insufficient |
| When releasing without Original B/L and delivering at a different location | Multiple high-risk factors coincide | Bank guarantee, internal approvals, P&I Club confirmation | Do not process based solely on onsite judgment |
| When cargo value is high | Compensation capacity of the requester alone may be inadequate | Guarantee amount, guarantee period, bank's creditworthiness | Confirm that guarantee limit is not lower than potential damages |
| When the requester’s creditworthiness is uncertain | Indemnity claims may be unrecoverable later | Requester’s credit, parent company guarantee, bank guarantee | Exercise particular caution with overseas companies and new clients |
Relationship Between P&I Club and LOI
LOIs are also important in relation to the P&I Club. When a shipping line releases cargo without the Original B/L or delivers cargo at a location different from the port stated on the B/L, issues may arise with P&I insurance coverage.
Therefore, while the P&I Club may recommend accepting an LOI in certain situations, it is important to note that receiving an LOI does not automatically guarantee continued P&I coverage. An LOI is not a substitute document for P&I insurance.
| Items to Confirm | Practical Implications | Parties to Confirm With | Notes |
|---|---|---|---|
| Is there a prescribed P&I Club format? | The shipping line may not accept formats other than the specified one | Shipping line, P&I Club | Using only your own format may not be sufficient |
| Is bank counter-signature required? | Issues may arise when cargo value or misdelivery risk is significant | Shipping line, bank, P&I Club | Bank’s review, fees, and credit limits may be necessary |
| Is there a risk of exclusion from P&I coverage? | Even with an LOI, coverage may not be provided by insurance | P&I Club, shipping line, legal department | LOI is not a replacement for P&I insurance |
| How to handle claims from misdelivery? | Claims for indemnity against the party requesting delivery may occur based on the LOI | Shipping line, shipper, bank, lawyer | Confirm scope of indemnity and recoverability |
| Is approval from the shipping line or P&I Club required? | Do not deliver cargo based solely on on-site judgment | Shipping line, P&I Club, local agents | Keep records of approvals |
Common Misunderstandings
| Common Misunderstanding | Actual Perspective | Practical Notes |
|---|---|---|
| Submitting an LOI always guarantees the other party will comply | The other party may require internal approval, bank guarantees, or P&I Club confirmation even after receiving the LOI | Confirm acceptance conditions before submitting the LOI |
| An LOI eliminates all risks | An LOI is not a document that eliminates risk; it is a document for making indemnity claims later | Verify the client's creditworthiness and indemnity capability |
| An LOI allows correction of B/L details that differ from the facts | Corrections that do not reflect the facts may not be accepted even if an LOI is issued | Confirm consistency with the actual cargo, customs documents, and sales contract |
| Clean B/L issuance requests can be handled solely with an LOI | Issuing a Clean B/L for cargo with visible defects can cause problems in bank settlements and insurance | Check photos, inspection records, and whether a remark is needed |
| Delivery can be safely made without the Original B/L if an LOI is provided | The risk of wrongful delivery to a legitimate B/L holder remains | Confirm if the LOI includes a bank guarantee, P&I Club format, and shipping line approval |
| An LOI signed only by the person in charge is valid as the company's LOI | The signatory must have authority to represent the company and assume indemnity responsibility | Verify position, representative authority, internal approval, and bank countersignature |
| An LOI can replace P&I insurance | An LOI is not a substitute for P&I insurance, but may be required where P&I cover is problematic | Check policies of the P&I Club and shipping line |
| Using a template LOI is sufficient | The contents of the request, scope of indemnity, subject cargo, guarantee period, and signing authority must be confirmed case by case | For important cases, consult legal, banking, P&I Club, and lawyers |
Common Problematic Cases in Practice
| Case | Issues | Causes | Practical Measures |
|---|---|---|---|
| Requested B/L correction by LOI but contents differed from the facts | False statements, infringement of third-party rights, bank settlement disputes arise | Requester demanded correction only for document convenience | Verify Invoice, Packing List, Booking, Original B/L, and relevant party approvals |
| Requested Clean B/L despite cargo having external abnormalities | Mismatch between cargo condition and document contents leads to later disputes | Prioritized L/C settlement or buyer’s explanations to avoid remarks | Check photos, inspection records, survey reports, and necessity of remarks |
| Requested delivery without Original B/L arrival | Risk of misdelivery to a party not holding legitimate B/L | Documents via bank or courier do not arrive in time for cargo arrival | Confirm bank-guaranteed LOI, P&I Club format, and shipping line approval |
| Requested delivery at a port different from the B/L port of discharge | Affects carriage contract, additional costs, customs procedures, and P&I coverage | Change in trade flow, resale, delivery location change, emergency response | Obtain approval for delivery at a different location, confirm additional cost responsibility, and bank countersignature |
| LOI signer lacked authority | Company may dispute signature authority even if indemnity claim is later made | Only the person in charge signed without confirming company approval | Confirm signer's title, representative authority, internal approval, and bank guarantee |
| Requester lacked indemnity capacity | Unable to recover costs or third-party claims even if they occur | Insufficient credit check on requester | Confirm bank guarantee, parent company guarantee, limit of guarantee, and guarantee period |
| Misunderstood that P&I coverage would be maintained | P&I insurance may not cover risks even if LOI is provided | Confused LOI with insurance coverage | Consult in advance with P&I Club, shipping line, and legal department |
| LOI indemnity scope was too narrow | Unable to recover storage fees, demurrage, legal fees, and third-party claims | Insufficient description of applicable damages and cost items | Ensure inclusion of damages, claims, liabilities, costs, legal fees, and third-party claims |
Comparison Table of Freight Forwarder Involvement Scope
| Category | What Can Be Supported | What Should Not Be Concluded | Practical Response |
|---|---|---|---|
| Organizing LOI Usage Scenarios | Clarify whether it involves B/L correction, Clean B/L issuance, or delivery without B/L | Explaining that having an LOI always enables processing | Check the request details, differences from usual procedures, and necessary approvals |
| B/L Correction Handling | Confirm correction details, stakeholder approvals, and document consistency | Judging that LOI can justify corrections that differ from actual facts | Verify the actual cargo, invoice, packing list, and location of original B/L |
| Clean B/L Request Handling | Organize photos, packaging condition, remarks, and L/C conditions | Definitively stating Clean B/L can be issued despite visible external abnormalities | Prioritize survey, remarks, and confirmation with the shipping line |
| Delivery Without Original B/L | Organize original document whereabouts, bank handling status, and consignee confirmation | Explaining delivery can be safely made by LOI alone | Check bank guarantees, P&I Club forms, and shipping line approvals |
| Bank Guarantee Confirmation | Confirm bank counter-signatures, guarantee amounts, and guarantee periods | Explaining that all damages can be fully recovered just because the bank signature exists | Verify guarantee scope, governing law, and signature authority |
| P&I Club Confirmation | Confirm shipping line specified forms, P&I Club policies, and approval requirements | Explaining that an LOI replaces P&I insurance | Confirm any impact on P&I cover |
| Incident and Claim Handling | Organize LOI, B/L, D/O, Arrival Notice, cost documents, and invoice | Making immediate conclusions on liability or insurance payment eligibility | Early consultation with legal counsel, insurance company, shipping line, and P&I Club |
Decision Checklist
| Situation for Confirmation | Party to Confirm With | Items to Confirm | Actions if Issues Are Found |
|---|---|---|---|
| When receiving an LOI request | Requester, Sales Representative, Operations Staff | What part of the usual procedure they want to bypass | Identify the request details and avoid making immediate decisions on feasibility |
| In case of B/L correction | Shipper, shipping line, NVOCC, bank | Whether the correction content matches the facts and has approvals from all parties | Refuse or hold correction if there is suspicion of false information |
| When requesting a Clean B/L | Shipper, warehouse, shipping line, surveyor | Appearance abnormalities, photos, inspection records, need for remarks | Avoid issuing a Clean B/L that contradicts the actual cargo condition |
| When delivering without presenting the Original B/L | Consignee, bank, shipping line, P&I Club | Location of the original B/L, legitimate holder, bank guarantee, specified forms | Verify LOI with bank guarantee or P&I Club form |
| In the case of different port or location delivery | Shipping line, local agent, customs, P&I Club | Delivery location, additional fees, contract changes, customs procedures | Confirm shipping line approval, responsibility for additional fees, bank countersignature |
| When confirming LOI signatures | Requester, bank, legal department | Signatory’s title, authority, internal approvals | If authority is unclear, request re-signature or bank guarantee |
| For high-value cargo | Requester, bank, insurance company, management | Cargo value, compensation capacity, guarantee amount, guarantee period | Consider bank guarantee, parent company guarantee, internal approval |
| When accidents or third-party claims arise | Shipping line, P&I Club, insurance company, lawyer | LOI compensation scope, claim details, costs, supporting evidence | Make compensation claims to requester, notify relevant parties, and preserve evidence |
Concept of Indemnity Liability and Recourse
The indemnity liability under an LOI has similarities to the "With Recourse" concept in trade settlement. Under With Recourse, even if the bank initially monetizes the funds, the risk may revert to the exporter if the importer fails to pay.
Similarly, with an LOI, when the shipping line or other party accepting the LOI takes action outside the standard procedure at the request of the applicant, and third-party claims or costs arise, that party seeks indemnification from the applicant. In other words, an LOI is not a document to eliminate risk; rather, it is a document used to recover any damages incurred back from the applicant after the requested action has been taken.
Therefore, the applicant’s creditworthiness, bank guarantees, signature authority, and scope of indemnity are important.
Scenario 1: When a B/L Correction Requested by LOI Differs from the Facts
This case occurs when the cargo owner submits an LOI requesting corrections to the B/L cargo details or consignee name, but the requested changes do not match the actual cargo or sales contract. In such cases, even if there is an LOI, B/L corrections that are inconsistent with the facts should not be made.
The shipping line, NVOCC, and freight forwarder should verify the Invoice, Packing List, Booking, Shipping Instructions, location of the Original B/L, and approval from involved parties. If the correction affects rights, banking settlements, customs clearance, or cargo delivery, internal approval and legal review may be required.
Scenario 2: When a Clean B/L Is Requested for Cargo with External Damage
This situation occurs when the exporter submits an LOI and requests the issuance of a Clean B/L for cargo with crushed cartons, water stains, packaging damage, or similar issues. In such cases, there may be a desire to remove remarks due to reasons such as L/C settlement or explaining the condition to the buyer.
However, issuing a Clean B/L that contradicts the actual cargo condition could lead to serious disputes later involving the bank, buyer, insurance company, and B/L issuer. When external damage is present, it is necessary to verify photos, inspection records, surveys, and whether remarks are required, avoiding merely adjusting documentation to superficially improve the condition.
Scenario 3: When the Consignee Requests Cargo Release Due to Non-arrival of the Original B/L
In this case, even though the cargo has arrived at the discharge port, the consignee requests cargo release using a Letter of Indemnity (LOI) because the Original B/L has not yet arrived, being in transit via the bank or courier. In such situations, the risk of wrongful delivery is extremely critical.
If the rightful holder of the Original B/L appears later, the party releasing the cargo may be subject to liability claims. A bank-guaranteed LOI, P&I Club form, shipping line approval, and confirmations from the shipper, bank, and consignee may be required.
Scenario 4: When Delivery Is Requested at a Port Different from the One Stated on the B/L
This situation occurs when the B/L states discharge at Port A, but the shipper requests cargo delivery at Port B. In such cases, the carriage contract, additional charges, customs procedures, P&I coverage, and the shipping line’s operational decisions are all involved.
If delivery without presentation of the original B/L is also requested, a bank-counter-signed LOI may be required. For delivery at a different port or location, it is necessary to confirm whether the scope of indemnity covers the delivery place, additional freight, port charges, storage fees, demurrage, customs procedures, and potential third-party claims.
Scenario 5: When the Signatory of the LOI Lacks Authority
There are cases where the LOI includes the company name and the signature of a representative, but the signatory does not have the authority to assume indemnity liability on behalf of the company. In such instances, if an indemnity claim is made later, the company may dispute by stating that the signatory lacked signing authority.
In an LOI, it is important to verify the signatory’s title, corporate representative authority, internal approval, and whether a bank counter-signature is present. For high-value cargo, foreign companies, new business partners, delivery without Original B/L, or delivery at alternate ports, processing based solely on the representative’s signature should be avoided, and bank guarantees or legal confirmation should be considered.
Scenario 6: Misunderstanding That LOI Automatically Provides Coverage under P&I Insurance
This scenario involves the mistaken belief that obtaining an LOI for delivery of cargo without the Original B/L automatically ensures coverage under P&I insurance. An LOI is not a substitute for P&I insurance.
In fact, deviating from standard procedures may create issues with P&I coverage, so it is essential to check the policies of the P&I Club and the shipping line in advance. Holding an LOI and being covered by insurance should be treated as separate matters.
Summary
A Letter of Indemnity (LOI) is a letter of guarantee used in situations such as B/L corrections, requests for Clean B/L issuance, or cargo release without presentation of the Original B/L. The LOI is not merely a request document; it is a written promise by the requester to indemnify against any losses, claims, or costs that may arise later.
In actual practice, it is important to understand that submitting an LOI does not eliminate the associated risks. The LOI is a document intended to seek indemnification from the requester in case damages or claims occur after non-standard procedures have been carried out. Therefore, it is essential to confirm details such as the scope of the request, facts, indemnity coverage, signing authority, the requester’s creditworthiness, and whether a bank guarantee is necessary.
For cargo release without the Original B/L, delivery at a location different from the port stated on the B/L, or requests for Clean B/L issuance against cargo with visible discrepancies, consultations with the P&I Club, shipping line, bank, lawyer, or insurance company may be required. When using an LOI, the focus should be not on merely filling out the form but on clearly defining which risks are borne by whom and to what extent indemnification can be provided subsequently.
