Meaning and Usages of LOI

[jabra]

dear sir,

could you please tell me the meaning and usages of LOI

[iLC]

LOI could mean many things. please be specific. giving us the context would be helpful

[jabra]

dear sir,

i have heard using this term when getting into contract; even before making an profoma invoice

[picant]

Hi Pals,

I think that the meaning is Letter of intent, when a buyer has the intention to check the possibility to buy goods from a seller, then when all details are checked and approved a contract will be signed. It is possible that a LOI is necessary in certain Countries with foreign currencies limit, to start a process of getting authorization to import and to obtain foreign currency to pay the supply.
Other unknown- further comments appreciated
Ciao

[iLC]

i also think that its letter of intent. it is a document outlining an agreement between the buyer and seller before the agreement is finalized. you can compare it with an informal offer. in business world many offer comes to a company most of which never see the light. LOI is some kind of document which allow the company to analyze the potentiality before the actual agreement is made. of course it happens before the profoma invoice. the process start with a LOI, then Porforma invoice, the LC, then shipment and at last payment.

[cristiand969]

Dear all,
Well, I have to dissapoint you.... LOI is actualy short name of Letter of Indemnity.
Letters of Indemnity (LOIs)
Is a type of indemnity which, although in essence not dissimilar to other indemnities, is seen in commodity trades such as oil where the cargo is sold during an ocean voyage.
Background and Transaction
a) There is a consignment of oil and it is often sold many times over during a
single sea voyage. More than 25 sales of a single consignment have been
seen.
b) The value of the oil is often quite large, and it is not unusual to see individual
transactions in the region of USD 15/20 million.
c) Buyers and sellers are often brokers who have no interest in the oil as end
users but who simply make a profit on each sale. A particular seller in the
chain may well be a subsequent buyer of the same oil.
d) Original bills of lading have been issued upon the shipment, but the problem
is that prior intervening parties take time to release the bills of lading and
therefore subsequent Beneficiaries and Applicants have to resort to the use
of letters of indemnity.
Although specifically used for OIL cargoes, LOI is widely used other goods in commodity trade by sea.
Whilst some shipping organizations are seeking to provide a standard model wording
for the indemnity forms, they generally remain different from carrier to carrier and
often from country to country. They do, however, have the following common features:
i. The form is preprinted with the heading of the shipping company/carrier or
bank and indicates that it is an indemnity and undertaking in connection with
‘delivery without production of a bill of lading’.
ii. The Applicant and Issuing Bank, both of which may sign the indemnity (or in
the case of an indemnity issued directly by the bank, contain only the banks’s
signature), would undertake:
- To indemnify the shipping company/carriers and hold them harmless in
respect of any liability, loss or damage of whatsoever nature sustained by
delivering goods as requested.
- To provide funds to defend any action brought against the shipping
company/carrier.
- To pay on demand any freight and/or General Average and/or charges
due on goods. In some cases the bank may insist that the goods be released
only after payment of freight or other charges.
- To surrender an original bill of lading as soon as it is received and
acknowledge that the liability of each and every person is joint and several
and shall not be conditional upon proceeding first against any person.
The indemnity form may show that indemnities limiting liability, incorporating any
expiry date or bearing any qualifying remarks may not be acceptable.
The following particulars are typically shown:
◆ consignee
◆ vessel and voyage number
◆ bill of lading number
◆ quantity and description of goods/containers
◆ amount.
The Issuing Bank will normally require the Applicant to sign its own indemnity in
favour of the bank. This indemnity will usually seek to protect the bank as fully as
possible and include the Applicant’s undertaking to accept documents irrespective of
discrepancies, and contain an irrevocable authority to debit the Applicant’s account.
The Risks
The risks to the bank in addition to those detailed above are that:
◆ There may be no date limitation of the bank’s liability
◆ The bank’s liability may be unlimited in amount.
Accordingly banks may insist upon cash deposits to cover the invoice value, and often
record the amount of liability against the customer’s Credit facility. Local bank regulation
may dictate the specific procedure for establishing the bank’s liability, limitation on its
duration and specific accounting for the liability.

[iLC]

dear Cristian,

you are correct. LOI may also mean letter of indemnity and in most cases thats so. but here case is bit different. here LOI is something that is coming before the profoma invoice or and agreement. so...