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Tuesday, 03 November 15
THE DISCHARGE OF CARGO IN THE PRC WITHOUT ORIGINAL BILLS OF LADING - CLYDE&CO
 KNOWLEDGE TO ELEVATE
On occasions, a vessel may arrive at a port and be ready to discharge but the original bills of lading in respect of the cargo have not passed through the banking chain to the ultimate receivers, cargo is then discharged against a letter of indemnity (“LOI”) and released to a party who has not paid for the goods, resulting in a claim against the carrier for mis-delivery and, ultimately, a call under the LOI. This scenario is becoming increasingly common in the PRC, particularly in the iron ore trade where banks are looking to enforce their rights in view of the deteriorating financial health of local steel mills and traders. This article highlights the key risks and considers ways in which a party can minimise their potential exposure.
Carriers often come under pressure to deliver cargo without production of the original bills. In light of the potential liabilities, no prudent carrier would agree to delivering cargo without the original bills until they had received an LOI from a party who is financially reliable. Often the carrier will not accept an LOI from the end receiver, who they have had no previous dealings with, and will demand one from its direct contractual counterparty, the charterer. The charterer will in turn want an LOI from the sub-charterer, if there is a charter chain, who may look to its buyer under the cargo sale contract and so on down the chain to the ultimate receiver.
Often the charterer, as shipper the goods, has received payment and, in order to facilitate the discharge of cargo without delay and to avoid a demurrage claim, may issue an LOI without a full appreciation of the risks involved.
There is always a risk of the LOI being called upon. This can happen in circumstances where the bills of lading do not make their way through the chain to the receiver to whom delivery of the cargo has been facilitated by the LOI. The bank, which has paid the seller under the letter of credit, may not have received payment from its customer and therefore retains the bills of lading. The bank then demands delivery of the cargo which has already been delivered (to the party named in the LOI, often the bank’s customer). The bank may have a claim against its customer, but the easier target is a claim against the carrier for mis-delivery. The carrier then inevitably makes a call under the LOI.
Clearly the safest option is for a party to refuse to issue an LOI. However, it not be commercially viable to suggest that LOIs should be avoided at all costs.
If a party is considering providing an LOI, careful scrutiny of the security for payment under the sale contract and of the risk of the bills of lading being stuck in the chain should be conducted first. If practicable, the internal authority for the issuance of LOIs should be reserved to senior staff in the credit or finance functions of the business as the provision of an LOI re-opens the counterparty risk.
The vast majority of LOIs are issued on the International Group of P&I Clubs standard wording and there is often very little, if any, scope for seeking to negotiate this wording. However, if possible, a party should try to limit its liability under the LOI to be issued with regard to amount and duration.
If a party issues an LOI then it should always obtain an LOI from its charterer/buyer down the chain. The indemnity should be on materially identical terms to the LOI provided (subject to any limits included). Parties should always remember that security is only as sound as the solvency of the party providing it and so the indemnity should be backed by a guarantee from a first class international bank or, at the very least, a parent company of substance.
It is important to consider the enforceability of the indemnity and the appropriate law and jurisdiction clause and whether the LOI would need to be registered.
At ports in the PRC, cargoes are often discharged from vessels to customs controlled warehouses or holding areas pending collection by the cargo owner. Effective control over the cargo is often difficult to monitor following discharge. Bills of lading are often exchanged for delivery orders issued by the carrier's agent which can be used to collect the cargo. If the bills have not arrived, the delivery order is often given to the receiver named in the LOI without due consideration as to whether they are entitled to the delivery order and the cargo released against presentation of it.
In the PRC, it is this lack of physical control of the cargo that is leading to the exposures/losses. Parties should try to insert provisions into its contracts which ensure that delivery orders are only exchanged in return for original bills of lading and find ways of asserting greater control over local agents. Charterers should also instruct the vessel to retain the delivery order until the original bills of lading are presented and insist that the carrier's and receiver's agents are different entities.
Another option which should be explored is increasing the usage of independently owned or leased warehouses or bonded warehouses into which cargo can be discharged. Whether this is viable would largely depend on the facilities at the relevant port and the point at which import duty will become payable.
Written by Gerald Yee, Leon Alexander and Kate Docton | Clyde&Co
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Sunday, 25 October 15
ANOTHER DISAPPOINTING WEEK FOR PANAMAX; INDEX FELL 5.4 PERCENT W-W
COALspot.com: The BDI was slightly up by 2.65 pct closing at 774 points mainly because of Cape index which was up by 10.85 pct closing at 1461 poin ...
Sunday, 25 October 15
DRY BULK SHIP OWNERS ARE LOOKING TO CHINA'S POLICIES FOR CUES ON FUTURE MARKET DEMAND - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
China’s hard or softer landing is a thing which has troubled dry bulk shipping for a couple of years now, as owners have been hit by the coun ...
Friday, 23 October 15
WILL INDIAN DOMESTIC COAL PRICES BE ABLE TO COMPETE IMPORTED COAL PRICES IF THE CURRENT TREND CONTINUES?
COALspot.com: The Most of the Indian end-users are waiting for last minute purchase to enjoy every drop in price. Coal procurement managers are als ...
Friday, 23 October 15
COAL PRODUCTION IN THE U.S. FOR THE WEEK ENDING OCTOBER 17 DECLINED FOR THE SECOND STRAIGHT WEEK
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 16.6 million shor ...
Wednesday, 21 October 15
RUSSIA'S CARBO ONE COAL SALES TO HIT 50 MLN T/YR - JACQUELINE HOLMES
COALspot.com: Russia's Carbo One has become one of the world's leading physical coal traders with an annual volume approaching 50 million t ...
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Showing 2751 to 2755 news of total 6871 |
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- McConnell Dowell - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Central Java Power - Indonesia
- Bhushan Steel Limited - India
- Malabar Cements Ltd - India
- Indian Energy Exchange, India
- Makarim & Taira - Indonesia
- Petron Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Mercuria Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Billiton Holdings Pty Ltd - Australia
- Medco Energi Mining Internasional
- Savvy Resources Ltd - HongKong
- Coal and Oil Company - UAE
- Vizag Seaport Private Limited - India
- Australian Coal Association
- Barasentosa Lestari - Indonesia
- Essar Steel Hazira Ltd - India
- Indogreen Group - Indonesia
- Ministry of Mines - Canada
- Marubeni Corporation - India
- Price Waterhouse Coopers - Russia
- Deloitte Consulting - India
- Goldman Sachs - Singapore
- Asmin Koalindo Tuhup - Indonesia
- Thai Mozambique Logistica
- Therma Luzon, Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Bukit Baiduri Energy - Indonesia
- Manunggal Multi Energi - Indonesia
- Sree Jayajothi Cements Limited - India
- South Luzon Thermal Energy Corporation
- Meenaskhi Energy Private Limited - India
- Indian Oil Corporation Limited
- ASAPP Information Group - India
- Cigading International Bulk Terminal - Indonesia
- Sical Logistics Limited - India
- Grasim Industreis Ltd - India
- Sojitz Corporation - Japan
- White Energy Company Limited
- Kalimantan Lumbung Energi - Indonesia
- Ambuja Cements Ltd - India
- Star Paper Mills Limited - India
- Wood Mackenzie - Singapore
- CIMB Investment Bank - Malaysia
- Gujarat Sidhee Cement - India
- Neyveli Lignite Corporation Ltd, - India
- Chettinad Cement Corporation Ltd - India
- Madhucon Powers Ltd - India
- OPG Power Generation Pvt Ltd - India
- Eastern Coal Council - USA
- PetroVietnam Power Coal Import and Supply Company
- Coalindo Energy - Indonesia
- Carbofer General Trading SA - India
- Anglo American - United Kingdom
- Toyota Tsusho Corporation, Japan
- Alfred C Toepfer International GmbH - Germany
- Miang Besar Coal Terminal - Indonesia
- Planning Commission, India
- Videocon Industries ltd - India
- Indika Energy - Indonesia
- Interocean Group of Companies - India
- Dalmia Cement Bharat India
- Bahari Cakrawala Sebuku - Indonesia
- Sindya Power Generating Company Private Ltd
- IHS Mccloskey Coal Group - USA
- Chamber of Mines of South Africa
- SN Aboitiz Power Inc, Philippines
- Ministry of Transport, Egypt
- Bukit Asam (Persero) Tbk - Indonesia
- Independent Power Producers Association of India
- Leighton Contractors Pty Ltd - Australia
- Parliament of New Zealand
- Baramulti Group, Indonesia
- Eastern Energy - Thailand
- Globalindo Alam Lestari - Indonesia
- European Bulk Services B.V. - Netherlands
- LBH Netherlands Bv - Netherlands
- Commonwealth Bank - Australia
- Intertek Mineral Services - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Attock Cement Pakistan Limited
- Trasteel International SA, Italy
- PTC India Limited - India
- Karaikal Port Pvt Ltd - India
- Electricity Authority, New Zealand
- The State Trading Corporation of India Ltd
- Aditya Birla Group - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bayan Resources Tbk. - Indonesia
- Global Coal Blending Company Limited - Australia
- Metalloyd Limited - United Kingdom
- Kepco SPC Power Corporation, Philippines
- Mjunction Services Limited - India
- IEA Clean Coal Centre - UK
- Simpson Spence & Young - Indonesia
- Coastal Gujarat Power Limited - India
- Larsen & Toubro Limited - India
- PowerSource Philippines DevCo
- Siam City Cement - Thailand
- Mercator Lines Limited - India
- Semirara Mining Corp, Philippines
- Kaltim Prima Coal - Indonesia
- Jindal Steel & Power Ltd - India
- Siam City Cement PLC, Thailand
- Australian Commodity Traders Exchange
- Ind-Barath Power Infra Limited - India
- Uttam Galva Steels Limited - India
- Salva Resources Pvt Ltd - India
- Bangladesh Power Developement Board
- India Bulls Power Limited - India
- San Jose City I Power Corp, Philippines
- Ministry of Finance - Indonesia
- The Treasury - Australian Government
- Economic Council, Georgia
- Altura Mining Limited, Indonesia
- Romanian Commodities Exchange
- Iligan Light & Power Inc, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- London Commodity Brokers - England
- Vedanta Resources Plc - India
- Gujarat Mineral Development Corp Ltd - India
- Meralco Power Generation, Philippines
- Latin American Coal - Colombia
- Georgia Ports Authority, United States
- Power Finance Corporation Ltd., India
- Holcim Trading Pte Ltd - Singapore
- VISA Power Limited - India
- Orica Australia Pty. Ltd.
- TNB Fuel Sdn Bhd - Malaysia
- Tamil Nadu electricity Board
- Electricity Generating Authority of Thailand
- Xindia Steels Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Samtan Co., Ltd - South Korea
- Rio Tinto Coal - Australia
- GN Power Mariveles Coal Plant, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Lanco Infratech Ltd - India
- AsiaOL BioFuels Corp., Philippines
- International Coal Ventures Pvt Ltd - India
- Parry Sugars Refinery, India
- New Zealand Coal & Carbon
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Bharathi Cement Corporation - India
- Sinarmas Energy and Mining - Indonesia
- Straits Asia Resources Limited - Singapore
- Renaissance Capital - South Africa
- GMR Energy Limited - India
- CNBM International Corporation - China
- The University of Queensland
- Sakthi Sugars Limited - India
- Heidelberg Cement - Germany
- Port Waratah Coal Services - Australia
- GAC Shipping (India) Pvt Ltd
- SMG Consultants - Indonesia
- Sarangani Energy Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Timah Investasi Mineral - Indoneisa
- Bulk Trading Sa - Switzerland
- Energy Link Ltd, New Zealand
- Minerals Council of Australia
- Riau Bara Harum - Indonesia
- Standard Chartered Bank - UAE
- Energy Development Corp, Philippines
- Central Electricity Authority - India
- Ceylon Electricity Board - Sri Lanka
- Kapuas Tunggal Persada - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Tata Chemicals Ltd - India
- Bhoruka Overseas - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Kideco Jaya Agung - Indonesia
- SMC Global Power, Philippines
- Singapore Mercantile Exchange
- Posco Energy - South Korea
- Oldendorff Carriers - Singapore
- Binh Thuan Hamico - Vietnam
- Antam Resourcindo - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Gujarat Electricity Regulatory Commission - India
- Global Business Power Corporation, Philippines
- Agrawal Coal Company - India
- Directorate General of MIneral and Coal - Indonesia
- ICICI Bank Limited - India
- Directorate Of Revenue Intelligence - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Merrill Lynch Commodities Europe
- Pendopo Energi Batubara - Indonesia
- GVK Power & Infra Limited - India
- Jaiprakash Power Ventures ltd
- Maharashtra Electricity Regulatory Commission - India
- Wilmar Investment Holdings
- Kartika Selabumi Mining - Indonesia
- Indo Tambangraya Megah - Indonesia
- Mintek Dendrill Indonesia
- Kumho Petrochemical, South Korea
- Bhatia International Limited - India
- Thiess Contractors Indonesia
- Cement Manufacturers Association - India
- Borneo Indobara - Indonesia
- MS Steel International - UAE
- Banpu Public Company Limited - Thailand
- Formosa Plastics Group - Taiwan
- Rashtriya Ispat Nigam Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Orica Mining Services - Indonesia
- Edison Trading Spa - Italy
- Aboitiz Power Corporation - Philippines
- Africa Commodities Group - South Africa
- Indonesian Coal Mining Association
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