What is a letter of indemnity and why is it used in place of an original bill of lading?

What is a letter of indemnity and why is it used in place of an original bill of lading?

• A. A letter of indemnity compensates the party releasing goods without the original bill of lading, shifting risk to the issuer to cover potential loss or fraud.
• B. A letter of indemnity is a deposit paid to secure goods.
• C. A letter of indemnity ensures delivery of goods without a bill of lading but transfers all risk to the buyer.
• D. A letter of indemnity verifies ownership of goods.

Answer: (A)

A letter of indemnity is a contractual guarantee that allows a party to release goods without presenting the original bill of lading, by shifting the risk of loss or fraud to the issuer of the indemnity. When the original document isn’t available, carriers need protection against claims that the release was improper or that a true owner might later complain. The LOI covers those potential losses, so the releasing party isn’t left exposed if a claim arises. It’s not a deposit securing goods, it doesn’t transfer all risk to the buyer, and it doesn’t verify ownership of the goods.

A letter of indemnity is a contractual guarantee that allows a party to release goods without presenting the original bill of lading, by shifting the risk of loss or fraud to the issuer of the indemnity. When the original document isn’t available, carriers need protection against claims that the release was improper or that a true owner might later complain. The LOI covers those potential losses, so the releasing party isn’t left exposed if a claim arises. It’s not a deposit securing goods, it doesn’t transfer all risk to the buyer, and it doesn’t verify ownership of the goods.