BILLS OF LADING AND

LETTERS OF INDEMNITY
Marcus Bradley
CEVA Legal Department

21 November 2019

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 CEVA Legal Department
Kenneth Burch
CLO

SVP Chief
Commercial
SVP Corporate
Legal
VP Compliance Cluster
Officer Legal Teams
Legal +1 FTE Litigation +8 FTEs

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 Agenda
1. Role of the Bill of Lading

2. Fact Pattern

3. Letter of Indemnity

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 Abundant names of shipping documents

· Bills of lading (b/l)

· Master b/l
· House b/l
· Ocean freight b/l
· FIATA b/l (FBL)
· CT-document
· Multimodal b/l
· Straight b/l –
· Express release b/l

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 Role of the Bill of Lading

The Bill of Lading generally has three

key functions:

Receipt

Evidence of the contract of carriage

Document of title

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 Bill of Lading as Document of Title

Document of Title:

 Negotiable instrument:
A Pyramid Lines bill of lading is a fully negotiable document (“to order”).
Ownership in the goods represented by the bill of lading is transferable from
one party to another by proper endorsement of the bill of lading.

 Entitled to Possession:
A Pyramid Lines bill of lading ensures that no party other than those authorized
under the contract of carriage will be able to obtain possession of the cargo.

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 Switch Bills of Lading

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 Switch Bills of Lading

A seller of goods may find after bills of lading have been issued and released by a vessel
that the bills do not meet the requirements of the contract of sale of the cargo for various
reasons. For example:

· The contract of sale or the letter of credit may call for a different form of bill of lading;
· The contract of sale or the letter of credit may call for a different port of discharge;
· The trader may wish to conceal the name of the party from whom he has bought the
goods and may therefore, wish to conceal the name of the shipper on the bill of lading;
· The trader may wish to conceal where the cargo was loaded or the date of shipment;

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 Switch Bills of Lading

It is possible to issue this “Second set” of Bill of Lading BUT from Pyramid Lines Carrier’s
instructions (page 9-10) and a legal perspective the following conditions MUST be
fulfilled:

1. Possession of a full set of Original B/L’s which are fully endorsed.

2. All duties such as charges and freight should be paid before switching the B/L
information. This has to be verified by the Agent changing the B/L
3. The only required changes should be related to Consignee, Shipper, and Notify Party
and not the description of the cargo etc.
4. There should be written instruction from the trader with the new details to switch the
B/L which concerns Shipper/ Consignee and Notify.
And of course: the second set of bills of lading should not contain misrepresentations,
(the condition of the cargo, or the date of loading) and no changes to the true port of
loading.

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 Switch Bills of Lading
Risks involved in Switch Bills of Lading:

· Misrepresentations about the subject cargo’s origin, date of loading, description etc.
 Misrepresentations about the origin could also lead to breaking sanctions, or
shipping counterfeit or illegal goods.
· Any situation in which more than one set of bills is in circulation creates the danger of
multiple sales of the cargo either by accident or fraud.
 If not all the originals are surrendered there is a risk of a misdelivery claim by the
holder of the original bill leading to a claims.
· Mis-description of the goods.
 The misrepresentation can occur because the seller/shipper s attempting to
comply with the terms and conditions of a contract of sale, or because he is
attempting to evade restrictions imposed by Customs and/or other national
authorities. The most common “mistake” is declaring the cargo ‘clean on board

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 Agenda
1. Role of the Bill of Lading

2. Fact Pattern

3. Letter of Indemnity

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 A simple example of a common occurrence…

Lost Original Bill of Lading:

• Pyramid Lines bill of lading issued (either “to

order” or to a named consignee)

• Original bill of lading never arrives at

destination

• Consignee requests Pyramid Lines to release

cargo to consignee

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 There are risks to Pyramid Lines…

Risk of Misdelivery
• Holder of “to order” bill of lading is the owner and entitled to possession

• Straight bill of lading issued to named consignee

• Presentation of the original bill of lading proves that the consignee has
paid the shipper

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 The risk outweighs the possible benefit…
• Knowingly releasing cargo without presentation of the original bill of lading is
fraud.

• Pyramid Lines is potentially liable for:

• Freight and related charges,

• Value of the cargo, and
• Other damages, including consequential damages

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 Agenda
1. Role of the Bill of Lading

2. Fact Pattern

3. Letter of Indemnity

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 How does Pyramid Lines protect itself against
risk…

· Letter of Indemnity

 Consignee agrees to be fully responsible for any damages that may arise out of
releasing cargo to consignee

 Shifts the risk of misdelivery from Pyramid Lines to the consignee

· Bank Guaranty
 Letter of indemnity is only as secure as the party making it.

 Bank guarantees collection by Pyramid Lines upon LOI

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 QUESTIONS…

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