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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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Friday, 27 November 15
INDONESIA COAL SWAPS: WEEK ENDING 20 NOVEMBER CLOSED HIGHER COMPARED TO THE PREVIOUS WEEK
COALspot.com: Indonesian coal swaps for delivery Q1 2016 declined month on month and up on week over week. Coal prices seen slight improvements thi ...
Friday, 27 November 15
FOB RICHARDS BAY COAL SWAPS UP FROM LAST WEEK
COALspot.com: API4 FOB Richards Bay Coal swap for delivery Q1’ 2016 up week over week and month over month.
The Q1’ 2016 swa ...
Thursday, 26 November 15
ITALY'S STEAM COAL IMPORTS EXPECTED TO REACH 16 MILLION TONS AND COKING COAL IMPORTS TO AMOUNT TO 4 MILLION TONS - ASSOCARBONI
ASSOCARBONI LOOKS AT COAL FROM A DIFFERENT ANGLE
- “Coal has made huge steps towards environmental sustainability, making itself t ...
Thursday, 26 November 15
DRY BULK MARKET WILL REBOUND EVENTUALLY, BUT THINGS WILL BECOME EVEN WORSE BEFORE THEY IMPROVE SAYS SHIPBROKER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
As the dry bulk market’s benchmark, the Baltic Dry Index (BDI) reached an all-time late last week and has failed to rebound significantly eve ...
Thursday, 26 November 15
Q3'16 FOB NEWCASTLE COAL SWAP FALLS 27.5% SINCE 20 FEB 2015
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery slid $5 per ton (12.05%) month over month to US$ 36.50 per ton. The s ...
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- Antam Resourcindo - Indonesia
- Economic Council, Georgia
- Aditya Birla Group - India
- European Bulk Services B.V. - Netherlands
- Gujarat Electricity Regulatory Commission - India
- South Luzon Thermal Energy Corporation
- Standard Chartered Bank - UAE
- Sindya Power Generating Company Private Ltd
- PNOC Exploration Corporation - Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Carbofer General Trading SA - India
- Iligan Light & Power Inc, Philippines
- IEA Clean Coal Centre - UK
- Independent Power Producers Association of India
- Kartika Selabumi Mining - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Semirara Mining Corp, Philippines
- Georgia Ports Authority, United States
- India Bulls Power Limited - India
- Sree Jayajothi Cements Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Cigading International Bulk Terminal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Sidhee Cement - India
- Bharathi Cement Corporation - India
- Binh Thuan Hamico - Vietnam
- San Jose City I Power Corp, Philippines
- Kobexindo Tractors - Indoneisa
- Timah Investasi Mineral - Indoneisa
- Bhushan Steel Limited - India
- Borneo Indobara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Edison Trading Spa - Italy
- The University of Queensland
- Rio Tinto Coal - Australia
- Mintek Dendrill Indonesia
- Agrawal Coal Company - India
- Chettinad Cement Corporation Ltd - India
- Bhatia International Limited - India
- Miang Besar Coal Terminal - Indonesia
- Indian Oil Corporation Limited
- GAC Shipping (India) Pvt Ltd
- Sojitz Corporation - Japan
- Planning Commission, India
- Therma Luzon, Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Samtan Co., Ltd - South Korea
- Rashtriya Ispat Nigam Limited - India
- Merrill Lynch Commodities Europe
- Central Java Power - Indonesia
- Energy Development Corp, Philippines
- Interocean Group of Companies - India
- Siam City Cement PLC, Thailand
- Lanco Infratech Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Ministry of Finance - Indonesia
- Sarangani Energy Corporation, Philippines
- Orica Australia Pty. Ltd.
- Salva Resources Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Singapore Mercantile Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kapuas Tunggal Persada - Indonesia
- Intertek Mineral Services - Indonesia
- Cement Manufacturers Association - India
- Orica Mining Services - Indonesia
- IHS Mccloskey Coal Group - USA
- Sakthi Sugars Limited - India
- Star Paper Mills Limited - India
- Directorate Of Revenue Intelligence - India
- GMR Energy Limited - India
- Tata Chemicals Ltd - India
- SN Aboitiz Power Inc, Philippines
- Parry Sugars Refinery, India
- Meralco Power Generation, Philippines
- The Treasury - Australian Government
- Medco Energi Mining Internasional
- Romanian Commodities Exchange
- Pendopo Energi Batubara - Indonesia
- Mercuria Energy - Indonesia
- ASAPP Information Group - India
- Wilmar Investment Holdings
- Karbindo Abesyapradhi - Indoneisa
- Price Waterhouse Coopers - Russia
- Central Electricity Authority - India
- Savvy Resources Ltd - HongKong
- Vizag Seaport Private Limited - India
- SMG Consultants - Indonesia
- LBH Netherlands Bv - Netherlands
- PowerSource Philippines DevCo
- Indonesian Coal Mining Association
- Indika Energy - Indonesia
- Power Finance Corporation Ltd., India
- Ministry of Mines - Canada
- Australian Commodity Traders Exchange
- Latin American Coal - Colombia
- Uttam Galva Steels Limited - India
- The State Trading Corporation of India Ltd
- Kepco SPC Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- Indian Energy Exchange, India
- Formosa Plastics Group - Taiwan
- AsiaOL BioFuels Corp., Philippines
- Sical Logistics Limited - India
- Bukit Baiduri Energy - Indonesia
- Siam City Cement - Thailand
- Port Waratah Coal Services - Australia
- Sinarmas Energy and Mining - Indonesia
- Tamil Nadu electricity Board
- Chamber of Mines of South Africa
- Kohat Cement Company Ltd. - Pakistan
- Dalmia Cement Bharat India
- Jaiprakash Power Ventures ltd
- Neyveli Lignite Corporation Ltd, - India
- Baramulti Group, Indonesia
- Meenaskhi Energy Private Limited - India
- Global Business Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Madhucon Powers Ltd - India
- Malabar Cements Ltd - India
- Goldman Sachs - Singapore
- PTC India Limited - India
- Electricity Generating Authority of Thailand
- Leighton Contractors Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- Riau Bara Harum - Indonesia
- OPG Power Generation Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Vedanta Resources Plc - India
- SMC Global Power, Philippines
- GVK Power & Infra Limited - India
- Global Green Power PLC Corporation, Philippines
- Indogreen Group - Indonesia
- Kumho Petrochemical, South Korea
- Kalimantan Lumbung Energi - Indonesia
- Kaltim Prima Coal - Indonesia
- New Zealand Coal & Carbon
- Straits Asia Resources Limited - Singapore
- Coastal Gujarat Power Limited - India
- Karaikal Port Pvt Ltd - India
- Coalindo Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Petron Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Coal and Oil Company - UAE
- Ceylon Electricity Board - Sri Lanka
- Essar Steel Hazira Ltd - India
- London Commodity Brokers - England
- Eastern Energy - Thailand
- Manunggal Multi Energi - Indonesia
- Barasentosa Lestari - Indonesia
- White Energy Company Limited
- Videocon Industries ltd - India
- Bangladesh Power Developement Board
- Jorong Barutama Greston.PT - Indonesia
- Grasim Industreis Ltd - India
- Bhoruka Overseas - Indonesia
- Marubeni Corporation - India
- McConnell Dowell - Australia
- CNBM International Corporation - China
- Kideco Jaya Agung - Indonesia
- Wood Mackenzie - Singapore
- Trasteel International SA, Italy
- Bahari Cakrawala Sebuku - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Eastern Coal Council - USA
- Energy Link Ltd, New Zealand
- Commonwealth Bank - Australia
- Makarim & Taira - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Ind-Barath Power Infra Limited - India
- Indo Tambangraya Megah - Indonesia
- Attock Cement Pakistan Limited
- ICICI Bank Limited - India
- Australian Coal Association
- Toyota Tsusho Corporation, Japan
- Maheswari Brothers Coal Limited - India
- Africa Commodities Group - South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Heidelberg Cement - Germany
- Bukit Asam (Persero) Tbk - Indonesia
- Posco Energy - South Korea
- Jindal Steel & Power Ltd - India
- Larsen & Toubro Limited - India
- Bayan Resources Tbk. - Indonesia
- Xindia Steels Limited - India
- MS Steel International - UAE
- CIMB Investment Bank - Malaysia
- Ministry of Transport, Egypt
- Altura Mining Limited, Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bulk Trading Sa - Switzerland
- International Coal Ventures Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Thiess Contractors Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Mercator Lines Limited - India
- Minerals Council of Australia
- Mjunction Services Limited - India
- Deloitte Consulting - India
- Parliament of New Zealand
- Anglo American - United Kingdom
- Oldendorff Carriers - Singapore
- Pipit Mutiara Jaya. PT, Indonesia
- VISA Power Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Renaissance Capital - South Africa
- Holcim Trading Pte Ltd - Singapore
- Metalloyd Limited - United Kingdom
- Simpson Spence & Young - Indonesia
- Electricity Authority, New Zealand
- Thai Mozambique Logistica
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