INTRODUCTION TO LETTERS OF INDEMNITY
The maritime letter of indemnity is a very common tool. It is used by shipowners, sellers, buyers and their bankers to smooth their contractual obligations. The type of maritime letter of indemnity most frequently encountered in practice is that used to collect cargo without the production of a bill of lading. This practice is a violation of the presentation rule (which requires a shipowner to deliver only against an original bill of lading where one is issued) but enables buyers to collect goods at the port of destination without incurring demurrage and other costs at that port. Other typical situations in which letters of indemnity are commonly used include where a letter of indemnity is offered to the carrier in exchange for a clean bill of lading, and where a letter of indemnity is offered to the carrier in order for the carrier to change the destination of the goods carried by sea after a bill of lading has been issued.
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