What is a letter of authorisation in shipping?

 

 

Letters of Authorisation play a crucial role in the shipping and logistics industry. This guide provides a comprehensive explanation of what Letters of Authorisation (LoAs) are and their significance in maritime operations.

The guide clearly defines LoAs in shipping terms and then explores the specific circumstances in which they are required in container shipping, including how Letters of Authorisation facilitate cargo delivery, shipment arrangements, customs clearance processes, and transfers of cargo ownership. It also aims to explain this important documentation by laying out when and how to use LoAs effectively during shipping operations.

Note: The terms Letter of Authorisation and Letter of Authority can be used interchangeably. Similarly, the abbreviation LoA can be used for both terms. In this article, the terms Letter of Authorisation, Letter of Authority and LoA will all be used to refer to the same concept.

 

What is an LoA?

 

Documentation is an essential component of shipping, playing a key role in ensuring the smooth movement of goods across international borders. One such important type of shipping documentation is the Letter of Authority – but what exactly is an LoA?

An LoA is used to assign responsibility for specific task(s) in the shipping process to a third party. Letters of Authority are widely used across the shipping industry to delegate responsibility and authorise a third party (e.g. a freight broker, port agent, or other intermediary), to act on the shipper’s behalf when carrying out tasks like negotiating freight rates or receiving cargo. In particular, an LoA is used in scenarios where the original shipper or consignee isn’t physically present at the port of loading or the port of discharge.

Typically, there are three parties involved in an LoA – the shipper, the carrier, and the logistics provider. As a formal legal document, an LoA sets out the roles and responsibilities of each party and ensures everyone involved is aware of (and agrees to) the terms that have been negotiated.

Issuing a Letter of Authority helps the shipper to:

• Ensure compliance with relevant regulations
• Prevent delays caused by missing authorisations or approvals
• Improve stakeholder communication across the supply chain
• Clearly define and assign responsibility for specific tasks in the shipping process

 

When is a Letter of Authority needed in container shipping?

 

For those working in the container shipping sector, Letters of Authority are a familiar piece of documentation. There are several common scenarios in which a Letter of Authority is required in container shipping. Let’s look at each of these in turn.

 

Cargo delivery

 

If a consignee wants to authorise a freight forwarder (or other third party) to pick up or take delivery of their cargo, then an LoA is needed. This usually happens when the consignee is not able to take delivery of the cargo themselves. In this scenario, the LoA is issued in order to give the third party the right to act on behalf of the consignee and take delivery of their cargo at the port of discharge and then arrange for its collection and transportation. 

 

Arranging shipments

 

It is also common to see a Letter of Authorisation used in the Port of Loading (PoL). If the person/business shipping the cargo is not present in the PoL, they might use an LoA to give authority to a freight forwarding company or other third-party agent that they have appointed to take care of certain tasks on their behalf (e.g. arranging the shipment, negotiating freight rates, and giving shipping instructions). 

 

Customs clearance

 

Another common scenario where we see a Letter of Authorisation used in container shipping is for handling customs clearance. The shipper or consignee might choose to use a customs broker or freight forwarder to take care of customs handling on their behalf if they don’t have the time or in-house experience to navigate the process themselves. In this instance, they would need to issue an LoA to the agent they appoint, granting the agent authority to submit customs documentation, pay any duties or charges, and ensure compliance with all applicable customs regulations.

 

Change of cargo ownership

 

If a cargo’s ownership changes mid-way through the shipment, an LoA will be needed to authorise a third party to make any necessary changes to relevant shipping documentation, such as the Contract of Affreightment (COA) or the Bill of Lading (BoL).