How long is a bank guarantee issued in lieu of a lost original bill of lading valid..??

I previously wrote about What to do when an Original Bill of lading is lost.. One of the questions that came up after that was, if a shipper is submitting a bank guarantee, how long is the guarantee valid because he cant afford to keep money held up for this.. bg - How long is a bank guarantee issued in lieu of a lost original bill of lading valid..??

Generally all that the bank needs to know before they cancel the guarantee, is that the cargo is being released to the rightful owner/consignee of the cargo.. The general process to be followed by the shipper (or the entity that put up the bank guarantee) is :

  1. Get confirmation from the consignee of the bill of lading in writing on their letter head that
    • That they have received the cargo covered under the bill of lading in full
    • That they have paid the shipper of the cargo all their monies
    • They are relinquishing any further claim on the cargo in full or part
  2. Upon receipt of this confirmation, the bank that issued this guarantee will have to
    • Verify that the letter is indeed authentic and has been issued by the actual consignee/receiver of the cargo
    • The bank will have to verify this properly as different types of bills of lading will have different consignees (Direct, To Order (of Shipper), To Order of Bank etc)..
    • Where the bill of lading is consigned To Order (of Shipper) or To order of Bank, the actual receiver/buyer of the cargo will have to be verified basis the contract or purchase order exchanged between the Seller and Buyer..

Needless to say, each bank will have their own working policies, but this would be the general route to follow..

In essence, once both buyer and seller have confirmed that the deal has been concluded and they have received the cargo and money respectively, the bank guarantee can be cancelled by the bank..

useful

What did you think of the above article..?? Comment below..

8 comments on “How long is a bank guarantee issued in lieu of a lost original bill of lading valid..??

  1. Htet Ko Zin says:

    Thank you, sir!

  2. And, sorry, but what does Alexander Robertson’s comment “Besides the comments above, as a carrier I will want to ensure that any claim which any party may have against the carrier is well and truly time barred.” have to do with whether or not a bank guarantee has a due date of cancellation because of a lost bill of lading? And if the carrier lost the original bill of lading, is it not the carrier who is responsible? And what does ” . . . well and truly time barred.” Mean. What is “time barred”? Is Alexander talking about a statute of limitations of actions under the laws of a particular jurisdiction?

    I’m even more confused than ever on this.

  3. One more thing . . . we would need to know the terms of the “bank guarantee” . . . does the bank guarantee have an end date? If is, the buyer is not really protected. Would not the bank guarantee need to be good through the delivery of the goods to the buyer? If the bill of lading is lost, it would seem natural that the bank guarantee would be good until such time as the necessary documents are produced to conclude the sale and to see that the seller gets paid.

    What am I missing here? I really don’t understand what is a “bank guarantee” and why a Letter of Credit was not used. And what is the big deal about a lost bill of lading? Why should a guarantee of payment be cancelled because of a paperwork snafu?

    I’m afraid I don’t understand any of this. Thanks for clarifying.

  4. You say “bank guarantee” . . . . are you talking about a Letter of Credit? If not, please more fully describe what is a bank guarantee? I am confused

  5. conrado says:

    Becarefull with the banking legislation in each
    country abt guarantees. So that it could be possible that in spite of the agreement between shipper and receiver on the cargo involved,it could happens that to realise the guarantee to take more time and expenses not foreseen.

  6. Alexander Robertson says:

    Besides the comments above, as a carrier I will want to ensure that any claim which any party may have against the carrier is well and truly time barred.

(Estimated reading time: 2 minutes)
You may also like :