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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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Tuesday, 17 November 15
FOB NEWCASTLE COAL SWAPS FALL: Q1'16 SLID 11.45% M-M
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2016 delivery slid $4.75 per ton (11.45%) month over month to US$ 36.75 per ton. The swap ...
Monday, 16 November 15
KOMIPO INVITES BIDS FOR 1.295 MILLION TONS OF BITUMINOUS COAL FOR Q1 - Q2'16
COALspot.com: South Korean state-owned utility Korea Midland Power (KOMIPO) issued an new tender for 1,295,000 Metric Tons (MT) of minimum 4,600 kc ...
Monday, 16 November 15
SOUTH CHINA COAL SWAPS DECLINE CONTINUES THIS PAST WEEK
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2016 delivery declined US$ 6.05 (12.59%) per ton month over month.
A commodity swa ...
Monday, 16 November 15
CLARKSEA INDEX COMPETITION: IS IT ALL IN THE TIMING? - CLARKSONS
Readers of the Shipping Intelligence Weekly are invited each year to predict the value of the ClarkSea Index one year ahead in the first week of No ...
Monday, 16 November 15
DRY BULK MARKET: Q1' 2016 SHAPING UP TO BE A ' DISASTROUS' ONE OF PROJECTED LOWER IRON ORE IMPORTS FROM CHINA
Over the course of the past year or so, it’s been the drop of coal imports from China, which has had a detrimental effect on the course of dr ...
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Showing 2711 to 2715 news of total 6871 |
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- Bhushan Steel Limited - India
- Electricity Generating Authority of Thailand
- Sarangani Energy Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Gujarat Sidhee Cement - India
- Iligan Light & Power Inc, Philippines
- Energy Link Ltd, New Zealand
- Port Waratah Coal Services - Australia
- Price Waterhouse Coopers - Russia
- TNB Fuel Sdn Bhd - Malaysia
- Coastal Gujarat Power Limited - India
- Orica Mining Services - Indonesia
- Indogreen Group - Indonesia
- Ambuja Cements Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- PNOC Exploration Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- CNBM International Corporation - China
- Vedanta Resources Plc - India
- Eastern Energy - Thailand
- Kumho Petrochemical, South Korea
- PTC India Limited - India
- Uttam Galva Steels Limited - India
- Leighton Contractors Pty Ltd - Australia
- Jaiprakash Power Ventures ltd
- Attock Cement Pakistan Limited
- GAC Shipping (India) Pvt Ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Videocon Industries ltd - India
- Malabar Cements Ltd - India
- Ministry of Transport, Egypt
- Borneo Indobara - Indonesia
- Sical Logistics Limited - India
- Kideco Jaya Agung - Indonesia
- Georgia Ports Authority, United States
- Coal and Oil Company - UAE
- Cement Manufacturers Association - India
- Kaltim Prima Coal - Indonesia
- Toyota Tsusho Corporation, Japan
- Global Business Power Corporation, Philippines
- Eastern Coal Council - USA
- Global Coal Blending Company Limited - Australia
- Wilmar Investment Holdings
- Ministry of Mines - Canada
- Trasteel International SA, Italy
- Vijayanagar Sugar Pvt Ltd - India
- Marubeni Corporation - India
- The State Trading Corporation of India Ltd
- Riau Bara Harum - Indonesia
- Grasim Industreis Ltd - India
- Deloitte Consulting - India
- Directorate Of Revenue Intelligence - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mercator Lines Limited - India
- Aditya Birla Group - India
- Asmin Koalindo Tuhup - Indonesia
- Star Paper Mills Limited - India
- Standard Chartered Bank - UAE
- Electricity Authority, New Zealand
- Xindia Steels Limited - India
- LBH Netherlands Bv - Netherlands
- GMR Energy Limited - India
- San Jose City I Power Corp, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Bharathi Cement Corporation - India
- Bukit Makmur.PT - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Central Electricity Authority - India
- Merrill Lynch Commodities Europe
- International Coal Ventures Pvt Ltd - India
- SMC Global Power, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Barasentosa Lestari - Indonesia
- White Energy Company Limited
- Cigading International Bulk Terminal - Indonesia
- Parliament of New Zealand
- PowerSource Philippines DevCo
- Aboitiz Power Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- VISA Power Limited - India
- Central Java Power - Indonesia
- Goldman Sachs - Singapore
- Global Green Power PLC Corporation, Philippines
- Rashtriya Ispat Nigam Limited - India
- Chettinad Cement Corporation Ltd - India
- Essar Steel Hazira Ltd - India
- Parry Sugars Refinery, India
- ASAPP Information Group - India
- Indo Tambangraya Megah - Indonesia
- Siam City Cement - Thailand
- Larsen & Toubro Limited - India
- Pendopo Energi Batubara - Indonesia
- Siam City Cement PLC, Thailand
- India Bulls Power Limited - India
- Kapuas Tunggal Persada - Indonesia
- IEA Clean Coal Centre - UK
- Timah Investasi Mineral - Indoneisa
- South Luzon Thermal Energy Corporation
- Petron Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Interocean Group of Companies - India
- Binh Thuan Hamico - Vietnam
- Kohat Cement Company Ltd. - Pakistan
- Bangladesh Power Developement Board
- The University of Queensland
- Independent Power Producers Association of India
- Simpson Spence & Young - Indonesia
- European Bulk Services B.V. - Netherlands
- Savvy Resources Ltd - HongKong
- IHS Mccloskey Coal Group - USA
- Semirara Mining and Power Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Indian Oil Corporation Limited
- Globalindo Alam Lestari - Indonesia
- New Zealand Coal & Carbon
- Thai Mozambique Logistica
- Ceylon Electricity Board - Sri Lanka
- Agrawal Coal Company - India
- Semirara Mining Corp, Philippines
- CIMB Investment Bank - Malaysia
- Jindal Steel & Power Ltd - India
- Banpu Public Company Limited - Thailand
- Antam Resourcindo - Indonesia
- Posco Energy - South Korea
- Baramulti Group, Indonesia
- Bhatia International Limited - India
- Ind-Barath Power Infra Limited - India
- Makarim & Taira - Indonesia
- Tamil Nadu electricity Board
- Power Finance Corporation Ltd., India
- The Treasury - Australian Government
- Karaikal Port Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Mercuria Energy - Indonesia
- Formosa Plastics Group - Taiwan
- Samtan Co., Ltd - South Korea
- Sakthi Sugars Limited - India
- Therma Luzon, Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Kartika Selabumi Mining - Indonesia
- Minerals Council of Australia
- Orica Australia Pty. Ltd.
- Indian Energy Exchange, India
- Meenaskhi Energy Private Limited - India
- Oldendorff Carriers - Singapore
- London Commodity Brokers - England
- Coalindo Energy - Indonesia
- Madhucon Powers Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Karbindo Abesyapradhi - Indoneisa
- Sree Jayajothi Cements Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mjunction Services Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Directorate General of MIneral and Coal - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Mintek Dendrill Indonesia
- OPG Power Generation Pvt Ltd - India
- Australian Coal Association
- Neyveli Lignite Corporation Ltd, - India
- Chamber of Mines of South Africa
- McConnell Dowell - Australia
- Metalloyd Limited - United Kingdom
- Miang Besar Coal Terminal - Indonesia
- Latin American Coal - Colombia
- Krishnapatnam Port Company Ltd. - India
- Singapore Mercantile Exchange
- GVK Power & Infra Limited - India
- Bulk Trading Sa - Switzerland
- Kalimantan Lumbung Energi - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Salva Resources Pvt Ltd - India
- Romanian Commodities Exchange
- Tata Chemicals Ltd - India
- Indonesian Coal Mining Association
- ICICI Bank Limited - India
- Medco Energi Mining Internasional
- Bahari Cakrawala Sebuku - Indonesia
- Australian Commodity Traders Exchange
- Africa Commodities Group - South Africa
- Intertek Mineral Services - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- SMG Consultants - Indonesia
- Wood Mackenzie - Singapore
- SN Aboitiz Power Inc, Philippines
- Meralco Power Generation, Philippines
- Energy Development Corp, Philippines
- Lanco Infratech Ltd - India
- Maheswari Brothers Coal Limited - India
- MS Steel International - UAE
- Bayan Resources Tbk. - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Commonwealth Bank - Australia
- Altura Mining Limited, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Dalmia Cement Bharat India
- Edison Trading Spa - Italy
- Rio Tinto Coal - Australia
- Bhoruka Overseas - Indonesia
- Alfred C Toepfer International GmbH - Germany
- TeaM Sual Corporation - Philippines
- Economic Council, Georgia
- Sojitz Corporation - Japan
- Indika Energy - Indonesia
- Heidelberg Cement - Germany
- Renaissance Capital - South Africa
- Thiess Contractors Indonesia
- Sindya Power Generating Company Private Ltd
- Planning Commission, India
- Manunggal Multi Energi - Indonesia
- Ministry of Finance - Indonesia
- Anglo American - United Kingdom
- Carbofer General Trading SA - India
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