Letter of Indemnity

Shipping requires dealing with some paperwork. If you use a Telex Release for your shipment, the cargo might not be released without a Letter of Indemnity. The LOI confirms that the carrier can release the goods to the consignee without the original Bill of Lading. Moreover, it protects the owner of the cargo from losses.

What is a Letter of Indemnity (LOI) in shipping?

A Letter of Indemnity (LOI) is a document that protects the cargo owner from losses due to theft, loss, destruction, or other harmful events that might impact the shipment. Moreover, it obligates the shipper to bear responsibility if any damage or loss results from a breach of contract.

There are three parties to an LOI:

  1. the carrier seeking the indemnity
  2. the person granting the indemnity (receiver of the goods)
  3. a third-party institution backing the person granting the indemnity.

Information included in a Letter of Indemnity:

  • the title “Letter of Indemnity”
  • names of both parties
  • addresses of both parties
  • name and affiliation of the third party
  • terms and obligations of the parties involved
  • the duration of indemnity
  • a detailed description of intentions 
  • a detailed description of the items 
  • date of execution of the contract
  • signatures of the parties.
Letter of Indemnity - sample
Sample Letter of Indemnity for shipping, cma-cgm.com

Who can issue LOI?

Letter of Indemnity is a contract between the parties in a business transaction that can be issued by:

  • insurers
  • shipping companies
  • banks
  • any organization or person that would be able to restitute losses.

If one party does not comply with its obligations stated in the letter of indemnity or changes the terms, the party writing the LOI will provide financial restitution to the aggrieved party. Therefore, LOI serves as a bond of indemnity or indemnity bond.

Reasons for using LOI 

The Letter of Indemnity can come in handy, especially in cases of:

  1. Cargo delivery to a port not stated in the Bill of Lading
  2. Split Bills of Lading
  3. Other personnel are on board
  4. Special types of equipment or cargo types
  5. Cargo release without Bill of Lading
  6. Cargo release for lost Bills of Lading

Why do you need LOI for shipments with a Telex Release?

Telex Release is an electronic Bill of Lading (BL). It is preferred since a physical BL can be easily lost. If Telex Release is used, a Letter of Indemnity from the shipper will ensure the carrier company will not suffer any damages or losses if they release cargo to a party not holding an original BL. If the lost Bill of Lading is found afterward and it turns out that the shipment differs from the description on BL, the carrier will be blameless.

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