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HomeBill of LadingStory of a CIF contract and a Letter of Indemnity

Story of a CIF contract and a Letter of Indemnity

Story of a CIF contract and a Letter of Indemnity

Question from a reader Bob..


Seller is delivering CIF to Chinese port. The contract has an LOI provision if the original bill of lading should be lost.

The buyer’s bank refuses to make payment without original BOL and will not accept LOI. 

How long does it take to get second set of original bills of lading so that the buyer’s bank will make payment?

I find it a strange coincidence that the contract has a provision for an LOI (Letter of Indemnity) in case the OBL should be lost and the OBL actually is lost..

Anyway, before I get to the answers to your questions, take a look at the process of What to do when the original bill of lading is lost..??..

If and when an original bill of lading is lost, one of two things can be done to obtain

  • a duplicate set of bill of lading or
  • secure cargo release without an original bill of lading

in this case the former will apply as the bank needs it to release payment..

1) The shipper must notify the police at the city/country where the loss occurred.. Depending on the shipping line, the shipper may also be required to submit a proper indemnity letter (as per the line’s format) countersigned by a first class bank, insurance company or mutual association covering adequate value (general rule for adequate value is not less than 200% of the CIF value of the goods)..

Image credit :
Image credit :

This indemnity must also cover all costs, claims relating to the issuance of a second set of  bills of lading..

A normal LOI without an endorsement/guarantee by a bank is not worth the paper its printed on..

2) Pursuant to the notification to the police, a court order can also be secured and this court order advises the carrier (shipping line) to deliver the goods to the actual and final receiver of the cargo, if the entity claiming the goods gives a surety bond, for an amount approved by the court..

The court also may order payment of reasonable costs and attorney’s fees to the carrier..

This process however, might take a long time because you have to prove entitlement to the court and the checks are rigorous..

To discuss your statement, “The buyer’s bank refuses to make payment without original BOL and will not accept LOI” – an original bill of lading being lost or delayed happens quite regularly in trade and no issuing bank (buyers bank) should reject an LOI especially if it is guaranteed by another first class bank as mentioned in Point 1 above, unless it has other compelling reasons to or if it is explicitly specified in the LC..

If they do still reject, then you must approach the nominated bank (sellers bank) to discuss same with the issuing bank..


To answer your second questionHow long does it take to get second set of original bills of lading so that the buyer’s bank will make payment?” – once the LOI as per Point 1 above is submitted to the shipping line, they will take some time to verify the authenticity of the LOI and any other extenuating circumstances surrounding the case..

They might also consult with their P&I club or TT Club for advise before they release the second set.. How long it actually takes them will depend on the shipping line.. In general, it shouldn’t take them long to issue this..

Also read my article How long is a bank guarantee issued in lieu of a lost original bill of lading valid..?? regarding the validity of a bank guarantee which is also a very important point when dealing with LOIs..

I have one question though for the International Trade experts – does an LOI (whether mentioned in the commercial contract or not) have any bearing on the Incoterms®..??


  1. Hi!

    Normally the seller (shipper) gets 3/3 set of Bill of Lading and forwards the three negotiable originals to his bank (Remitting Bank) for collection of payment. The remitting bank sends by separate couriers all the three original bills of lading to the collecting bank in the destination country.

    This practice is precisely adopted to avoid such a tangle as described in the question arising out of loss of original documents.

    However, many times cost cutting measures either at the banks or couriers result into such misfortunes befalling on the exporter without his negligence.

    At my organization, as soon as the bank forwards documents for collection, we ask the bank to give us the courier docket numbers for the three separate dispatches without fail to ensure that the bank does follow our instructions.

    With regards,


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