Steps when charterer requests issuing clean B/L against defected goods:

One of the commonly tested item is what to do when charterer request to issue a clean B/L despite cargo having deficiency. Points to include in the answer are as follows:

1. First of all, one of the functions of B/L is  a receipt containing accurate quantity and quality of the consignment based on which the consignee will take decision on their part.
2. SEcondly, the responsibility of issuing true B/L lies with the carrier, hence any false representation will be treated as fraud for which the receiver will be entitled for redress.
3. Thirdly, as it is an act of fraud any Letter Of Indemnity (LOI) received from charterer will not be legally enforceable.
4. Fourthly, issuing clean B/L against LOI, these are not covered by the insurer so if anything arises owner has to bear on his own.
5. So,  clean B/L cannot be issued when cargo have defects , otherwise the receiver might claim the damage from owner and high chance owner have to bear it.

Why charterer makes such a request:

In practice this can happen, specially because most of the global trade is conducted in Letter of Credit (L/C) which calls for a clean B/L as per UCC rules. So that’s why it is not totally unrealistic. It might be the case that charterer informs the receiver about such defects and still want a clean B/L for the sake of release of L/C payment.

When to issue clean B/L against LOI and Steps to take for that:

Issuing clean against LOI Occassionally happens,  specially charterer is a reputed one with long relationship. But in that case there are some steps to be taken

1. Consignee needs to be informed about the defects of the cargo
2. Charterer needs to issue an LOI acknowledging full responsibilities.
3. LOI needs to be as per owner’s P&I wording, although such cases are not covered by the insurance.
4. The receiver cannot resale the cargo to a third party before receiving the cargo.