The cargo that arrived twice
A West Africa crude cargo was sold onward three times in a week. Two buyers presented bills of lading at the same terminal, both original, both genuine.
What happened
A 950,000 barrel cargo loaded at Bonny in March. The original seller sold to a trading house, which sold to a refiner, which resold a part cargo to a fourth party after its own run plan changed. Each sale used a different set of documents, and the chain of endorsements on the bill of lading was never reconciled.
When the vessel arrived, two parties presented what each believed to be the controlling document. One held an endorsed original. The other held a letter of indemnity issued because the originals had not arrived in time, which is entirely normal and happens on most cargoes.
Why it was not caught earlier
Nobody in the chain was doing anything unusual. Letters of indemnity exist precisely because paper moves slower than ships. The failure was that no single party held a view of the whole chain, and each one reasonably assumed the party before it had checked.
What it cost
The terminal discharged against the letter of indemnity, which is the standard commercial answer. The dispute then ran for fourteen months. Legal costs alone exceeded the margin on the original trade by a factor of four, and that is before the working capital tied up in the meantime.
What to take from it
- A letter of indemnity is a promise to indemnify, not a substitute for title. The exposure sits with whoever issued it.
- The party with the thinnest margin in a chain is usually the one least able to fund a fourteen month dispute.
- Reconciling endorsements is nobody’s job by default, which is why it does not happen.