Mr Old Man Q&A Uncategorized WHERE ORIGINAL BILLS OF LADING ARE LOST IN TRANSIT By Mr Old Man Posted on July 8, 2015 7 min read 1 0 2,314 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr Ghé thăm dự án du lịch trên đỉnh Quế của Pơloong Miên WHERE ORIGINAL BILLS OF LADING ARE LOST IN TRANSIT QUESTION Dear Mr. Old Man! We need your advice regarding documents (including original bills of lading made out to the order of our bank) lost in transit. Our bank issued LC in favor of the beneficiary in Indonesia. As the goods arrived at the port of discharge before the documents, our bank issued at the applicant’s request a shipping guarantee in favor of the shipping company to enable the applicant to take delivery of the goods without presentation of original bills of lading. Later on the presenting bank sent our bank a message inquiring the status of the documents and we informed the presenting bank that we had not received the documents. There is news that the courier has lost the documents in transit. However, the presenting bank has not confirmed this fact or sent us a set of photocopied documents nor urged us to pay though the payment has been delayed for more than 30 days. Our question: If the presenting bank sends us a set of photocopied documents and we accept to pay by debiting the applicant’s pledged deposit account, how can we liquidate our obligations under the shipping guarantee which stipulates that our obligations under the guarantee shall automatically terminate upon receipt by the shipping company of the duly endorsed bill of lading? If requested, should we issue a letter of indemnity to compensate the shipping company the amount that the shipping company may become obliged to pay on account of the lost bill of lading? The case is very urgent. We appreciate your early opinion. Thank you! ————- ANSWER Hi, According to Article 35 UCP 600, if a nominated bank determines that a presentation is complying and forwards the documents to the issuing bank or confirming bank, whether or not the nominated bank has honoured or negotiated, an issuing bank or confirming bank must honour or negotiate, or reimburse that nominated bank, even when the documents have been lost in transit between the nominated bank and the issuing bank or confirming bank, or between the confirming bank and the issuing bank. It is practice that in order for the issuing bank to issue a shipping guarantee in favour of the shipping company to enable the applicant to take delivery of the goods, the applicant would undertake to accept to pay even when the documents contain discrepancies. Based on Article 35 and the applicant’s undertaking, your bank is obliged to honour. Your bank may request the presenting bank to furnish a set of photocopied documents, but there is no need for your bank to determine if they are complying. There is no need for your bank to issue a letter of indemnity because your bank issued a shipping guarantee in favour of the shipping company to enable the applicant to take delivery of the goods. Your bank’s liability toward the shipping company under the shipping guarantee is the same as that under the letter of indemnity. The lost bill of lading was issued to the order of your bank; hence, that someone acquiring the lost bill of lading presents it to the shipping company to request for delivery of the goods is impossible. Please note that only the bona fide holder of the bill of lading is entitled to the goods. If necessary, your bank/applicant may apply to the court for nullification of the lost bill of lading and inform the shipping company of the same. Last but not least, I wonder why the presenting bank keeps silent as to your bank’s advice of non-receipt of the documents and the payment has been delayed for more than 30 days. Is the LC available with your bank by payment? Article 35 is not applicable to the case where the presenting bank is not the nominated bank under the LC. Kind regards, Mr. Old Man