Q.When the master can accept LOI. and what are its types ?

Answer 2 Answers

Let us be frank here. We seafarers (including Masters) do not understand how the shipping business works.

I’m not trying to be rude––heck, I tell this to myself every day! I’m trying to make a point.

The things that may look logical to us can land us in trouble if we allow these to happen. We just need to be careful while dealing with these things. 

Letter of Indemnity is one of such things.

The most common LOI that a master encounter is the LOI for the discharge of cargo without receiving the original bill of lading at the discharge port.

Let us understand LOI with this example.

The receiver of the cargo (or consignee) needs to provide the original bill of lading to the master for discharging the cargo to them. But sometimes the bill of lading may not reach to the receiver before the ship's arrival at discharge port.

In this case, the receiver will provide the LOI, indemnifying the owners, charterers, and master of any consequences of discharging the cargo without production of the original bill of lading.

Should the master accept this LOI and discharge the cargo? Well, the master needs to receive specific instructions from the shipowner that the LOI has been received by them and they have checked it for wording and it is OK to discharge the cargo without the original bill of lading.

Master must not just get the LOI and discharge the cargo without the owner's approval and instructions.

Same goes for other types of LOI's such as LOI for change in cargo destination other than that mentioned in the bill of lading.

Even though the risks imposed by the use of LOI are not covered by the P&I clubs, use of LOI is something that becomes unavoidable for the shipowners.

But there are certain LOIs that a master must not accept irrespective of if the shipowners have accepted these LOI or not.

These are the LOIs that misrepresent the facts. The most common example of such LOI is the one that may be offered by the shipper for a clean bill of lading even when a damaged cargo is loaded on the ship.

The shipper may offer to issue an LOI which will indemnify the shipowners and master for the issue of a clean bill of lading. But this LOI will have no legal value.

Here is another example where master must not accept the LOI. Let us say a chemical tanker is loading a polymerizing cargo. These are the cargoes that tend to polymerize in normal conditions.

To stop these cargoes to polymerize, a certain amount of inhibitor is added to the cargo by the shipper. The shipper is supposed to provide "Inhibitor certificate" to the master. Now if the shipper does not provide this inhibitor certificate and ask the master to accept the LOI that would state that shipper will bear the responsibility if cargo starts to polymerize.

If master accepts this LOI and sails the ship without inhibitor certificate, it would be considered that master risked the ship and its crew. Master cannot accept LOI that may pose a threat to the ship.  

So to answer your question directly. That is when the master can accept the LOI? The master can accept the LOI when

  • It has been instructed by the shipowner that the said LOI can be accepted 
  • The LOI does misrepresent the facts or there is no false information in the LOI
  • The LOI is not issued to hide some fact
  • Actions requested with the issue of LOI does not pose any safety threat to the vessel, crew or the environment.  
Thiruvali Shrinivaasan

Thiruvali Shrinivaasan

Dec 11, 2017

Implications of LOI is well written. As a responsible Master, better pass on to Owners for their view and upon receipt of their answer, act accordingly. Prof. Tetley - famous Maritime Lawyer is of the opinion that issue of LOI has been adjudged in many courts as illegal.

If oB/L will not presented at discharging port due to lack of time or whatsoever reason this statement should be written in the Charter Party.

According to charther party, company should give a LOI wording to the charterer (This LOI wording could asked from P&I club), and charterer fill the LOI accordingly and sent to the  Captain via company to discharge cargo without oB/L and only with presented LOI by charterer.