Petroluum L/C's

RolandLeupi · Post by **RolandLeupi** » Fri Nov 18, 2005 12:00 am

to busy today
will be back next week

AbdulkaderBazara · Post by **AbdulkaderBazara** » Sun Nov 20, 2005 12:00 am

Below address will take you to an article on Oil LC’s written by a non-banker. Thought it might be of interest to you.

http://www.barrettwells.co.uk/oillcs.html

JudithAutié · Post by **JudithAutié** » Sun Nov 20, 2005 12:00 am

The article mentionned above does give a fairly accurate summary of an oil transaction, but I would point out that the LOI which is given as an exemple is the one that is required to obtain payment under a documentary credit and not the one issued in favour of the carrier for delivery of the goods without presentation of the original B/L.

There is usually a second LOI which is also out there somewhere, whereby the shipping company is released from all liability due to delivery of the oil without presentation of at lease one original B/L. Very often, it is the original seller of the goods who has chartered the vessel, and who issues the LOI in favour of the shipping company, and not, as would seem more logical, the receiver (final buyer). This is because very often the original seller of the goods does not know the final buyer, and the vessle has arrived at the disport. If the oil is not discharged, the ship goes on demurrage -- which is extremely expensive for the big tankers, so the charterer of the vessel (the original seller) issues the LOI to the shipowners.

So you see the complications which can arise out of a seemingly straight forward oil transaction.

Regards
Judith

NigelHolt · Post by **NigelHolt** » Mon Nov 21, 2005 12:00 am

Kim,

It is with respect to ‘missing bill of lading indemnities’ in favour of carriers that the British Bankers’ Association has agreed a wording limited as to time and to amount. See my DCI article on the subject of a few years back.

Jeremy

RolandLeupi · Post by **RolandLeupi** » Mon Nov 21, 2005 12:00 am

Jeremy,
An LOI may be regarded as valueless to the issuing bank. Bank's however acting in this field of activities will structure a credit facilitation that will put them on a safe side taking into consideration what may happen in such cases. Separate agreements between applicant and their bankers may also ovveride this problem (a special kind of assignement for ex.). In addition to that the bank issuing the L/C requests that the B/L are issued or endorsed to their order giving them the right of possession of the goods.

RolandLeupi · Post by **RolandLeupi** » Mon Nov 21, 2005 12:00 am

Judith,
We do not consider the fact that with the payment of an L/C against the presentation of an invoice and LOI only is to be considered as the "termination" of the L/C. The L/C requires specific documents which have to be presented. In case of unavailability to do so the posssibility to cash with an invoice and an LOI only is given. We do however consider that L/C terms and conditions will be fulfilled only against surrender of the original shipping documents
Roland

JudithAutié · Post by **JudithAutié** » Mon Nov 21, 2005 12:00 am

Perhaps your credits have a special term or condition, but the opinion that Leo so nicely quoted does say that if the credit is payable against an LOI in the absence of the other documents, the credit has been executed. Any documents presented subsequently would be in release of the LOI, and not a presentation under the credit.
Regards
Judith

RolandLeupi · Post by **RolandLeupi** » Mon Nov 21, 2005 12:00 am

Judith,
Yes, you're right. We put in our text that the LOI shall expire upon the tendering to us of the full set original bills of lading and all other shipping documents in strict conformity with the terms and conditions of L/C No.............of.........
Interesting exchange of view anyhow

With thanks
Roland