Mis-Delivery Claims In Relation To Cargo Discharged Against LOIs

This year, many of our clients have faced claims arising out of the delivery of cargo without production of the original bills of lading and against letters of indemnity ("LOIs").

This scenario has become 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. In many cases, the original bills of lading have not passed through the banking chain to the ultimate receivers and cargo is discharged against an LOI and released to a party who has not paid for the goods. This results in a claim against the carrier by the bank for mis-delivery and, ultimately, a claim under the LOI by the carrier.