1. 01/2008 01/2005

2. 01/2008 Letter Of Indemnity Charterers, Owners and Insurance

3. 01/2008 01/2005 OWNERS: Standard London, Status and Rules, clause 20.21.4(v.e): There is no recovery arising out of a bill of lading, waybill or other document containing or evidencing the contract of carriage issued with the knowledge of the Member or his Master with an incorrect description of the cargo or its quantity or its condition CHARTERERS: LSW 1122 03/03, clause 3B4: This Policy excludes any claim In connection with the issue of a bill of lading or similar document of title which the Assured or his agent knew did not correctly state the quantity and/or condition of the cargo at the time of shipment

4. 01/2008 01/2005 L/C – What is it and why this is good for the seller? Documents required by bankers under L/C Why do they ask for clean bill of lading? Incoterms Risk transfer and duty to insure Role and nature of bill of lading What is LOI in the end? CASE STUDY Origins of LOI

5. 01/2008 01/2005 It is simply a letter/confirmation by a bank acting on behalf of the buyer that credit will be allowed by it for the purchase of the goods from an identified seller He will get paid irrespective on whatever happens What is L/C? Why L/C is good for a seller?

6. 01/2008 01/2005 The seller must provide the documents stipulated by the buyer, which normally include: - A commercial invoices - A certificate of origin - Insurance policy or certificate covering marine and war risks (in CIF contract) clean - Full set of clean marine bills of lading, marked “freight paid” Disperances in documents may cause delays in obtaining payment or prevent making payment to the seller Which documents are requested in L/C?

7. 01/2008 01/2005 SELLER: Charters a ship and pays freight in the port of loading RISK TRANFER:When goods are crossing ship’s rail in the port of loading in favour of the buyer INSURANCE:Seller insures goods for his account in favour of the buyer CIF (Cost, Insurance and Freight) CFR (Cost and Freight) SELLER: Charters a ship and pays freight in the port of loading RISK TRANFER:When goods are crossing ship’s rail in the port of loading in his own favour INSURANCE:Buyerinsures goods for his own account and in his own favour

8. 01/2008 01/2005 HAGUE VISBY RULES Article 4: Bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described Bill of Lading What is LOI (Letter of Indemnity)? FRAUD Promise to release shipowner from any liability regarding to cargo carried?

9. 01/2008 01/2005 Buyer:ООО “ Сбытстройтехмех ” Cargo insurer:САО “Честь и Совесть” Seller (Trader):ООО “Рога и Копыта” Shipowner:ОАО “Эх, Прокачу” P&I club:Клуб Веселых и Находчивых

10. 01/2008 01/2005 BUYER:Launches cargo insurance claim Marks bill of lading accordingly Holds shipowner liable for loss and damage When goods arive to the place of discharge... TRADER/SELLER: Has been cashed in for sold goods under L/C SHIPOWNER:Calls trader and rests assured that cargo is insured and he is protected under LOI

11. 01/2008 01/2005 BUYER:Gets his claim paid by cargo insurance underwriters Stays happy and relaxed What’s next... SHIPOWNER:Founds his vessel arrested for cargo claim placed by recovery agency Calls P&I Club for help CARGO INSURERS:Pay cargo claim and appoint recovery agency under subrogation form signed by the buyer P&I CLUB:Shows up and interviews crew Finds out LOI was issued and feels sorry for the shipowner

12. 01/2008 01/2005 Not to accept LOI and make remarks in bills of lading Think twice To understand risks he is taking by accepting LOI To be sure who is chartering their ship and provides LOI To demand using P&I Clubs suggested forms only To demand signature of the bank under LOI In all circumstances ask for advice from their P&I Club or Charterers’ Liability insurer What should shipowner / charterer to consider

13. 01/2008 01/2005 Thank you