Maritime Shipping

Maritime cash flow is a choreography of promises. A voyage can be profitable on paper yet burn cash in reality if documents lag cargo, if port fees land in the wrong currency at the wrong time, or if bunker surcharges swing with USD while revenue clears in local money. Treat letters of indemnity (LOIs), port-cost control, and bunker surcharge FX as a single operating system. When those pieces interlock, claims shrink, P&L volatility narrows, and treasury finally sees voyage forecasts match bank statements.

Where money and documents cross paths

Every ocean shipment sits on three control pillars: title documents, port services, and fuel economics. Title documents (bill of lading, delivery order) decide who can claim the cargo; port services decide when the ship can move; fuel economics decide whether the net freight survives the sail. Finance has to wire cash and risk policies directly into those pillars instead of treating them as “operations’ problem.”

A practical map for finance:

• Documents and delivery: cash risk concentrates when cargo must discharge before original B/Ls are available or when a consignee asks for a switch B/L.
• Ports and canals: 70–90 discrete tariff lines can hit a call—pilotage, towage, mooring gangs, berth dues, waste reception, canal tolls, light dues—mostly in local currency and often due before sailing.
• Fuel and surcharges: bunkers price in USD; liner BAF/CAF formulas and tramp voyage adjustments attempt to pass cost to shippers, but timing and currency rarely line up with receivables.

Letters of indemnity: using them without gambling the ship

LOIs exist because commercial schedules don’t wait for paperwork. Done well, they unblock cargo while keeping risk bounded; done badly, they turn into uninsured liabilities.

Typical triggers

• Delivery without presentation of original B/L (bank delay, courier loss).
• Switch B/L (change of consignee/port after sailing).
• Discharge at a port other than stated on the B/L.
• Short/over-delivery or misdescription corrections when documents cannot be reissued in time.

Who issues and who carries the risk

• Charterers commonly issue LOIs to owners; owners may demand a bank-backed LOI or a P&I–approved wording to keep cover intact.
• For delivery without B/L, many P&I policies require LOIs to last at least the cargo time bar (often 6–7 years) and to be back-to-back along the chain (receiver → charterer → owner).
• If an LOI deviates from recognized wordings or if it covers an illegal act (e.g., sanction circumvention), P&I cover can evaporate. That risk belongs in finance’s approval loop, not just legal’s inbox.

What good LOIs contain

• Clear identification of voyage, vessel, cargo, and parties; irrevocable undertaking to indemnify for all consequences (claims, losses, costs, interest).
• Duration tied to the longest applicable time bar; law and jurisdiction that are enforceable against the issuer; security ranking if multiple debts exist.
• Delivery triggers defined (e.g., named bank’s authentication, consignee’s letter), not vague “on instruction.”

Controls that keep LOI risk bounded

• Dual approval (legal + credit) and a register of live LOIs with expiry dates and counterparty ratings.
• Bank-backed LOIs for high-value cargoes or weaker counterparties; collateral or cash margins where banks are unavailable.
• Event discipline: no cargo release until the LOI is countersigned, stored, and visible to the master; no switch B/L without cancellation of the first set and a clean audit trail.

Port fees: turning the DA from a black box into a forecast

Port disbursements are deterministic if you force them to be. The building blocks:

From proforma to final DA

• Insist on proforma DA before arrival with named tariff items, currencies, and validity windows. Local agents should cite the port authority tariff schedule and service-company quotes, not just a round number.
• Reconcile final DA to proforma by variance class: tariff change, overtime, weather, idle time, or scope creep. Variance classes belong in the ledger, not in the email chain.

Currency and timing

• Many dues are pay-before-sail in local currency. Finance should pre-fund agent accounts or virtual IBANs in the right currency with a small buffer; paying from a USD base with same-day FX when a towage bill appears is how basis points leak.
• Build a port calendar: bank holidays, cut-offs for remittances, and typical processing lags for cash-to-master requests. Target a rule of “no on-the-day spot conversions” outside emergencies.

Scope control at the quay

• Pilotage/towage: confirm tug counts and bollard pulls against the berth plan; over-ordering is the common leak.
• Waste/oily water: pre-approve volumes; reception fees scale, and a casual “pump it all” becomes an invoice you cannot contest later.
• Fresh water and stores: use contracted prices; keep the master’s discretionary spend within daily limits unless charterers authorize.
• Canal transits (Suez/Panama and others): treat tolls and booking fees as separate cash events with their own currency handling and approvals.

KPI discipline

• DA variance as % of proforma by port and agent.
• Avg. local-currency pre-fund days vs. cash tied up; minimize but never to zero.
• % of calls with on-the-day FX; drive to <5%.
• Auto-match rate between agent statements and bank statements; aim >98% by count with virtual accounts and ISO 20022 remittance data.

Bunker surcharges: pass-through is not a hedge

Bunkers are largely USD-priced; freight and surcharges may not be. Linehaul BAF/CAF and tramp bunker adjustment clauses reduce price risk but leave currency and timing risk.

Where the exposure hides

• Currency mismatch: charge BAF in EUR/GBP/JPY to shippers while paying fuel in USD; BAF formula may lag market indices by weeks.
• Timing mismatch: BAF is billed with freight (often pre-carriage), while bunkers are paid on delivery; in volatile USD cycles, the spread can eat margin.

FX policy that actually stabilizes margins

• Natural hedge first: wherever revenue is in USD or a USD-linked clause, keep it in USD to fund bunkers; only convert the excess for local opex.
• Short-dated forwards on net bunker-related exposure over the voyage portfolio (1–3 months). Ladder coverage so you never roll 100% on a bad day.
• Options for lanes with known upside risk (e.g., high-frequency trades with thin contribution margins); collars cap pain without locking all upside.
• Indexation hygiene: align BAF review cadence to the index you cite (weekly/monthly), freeze a rate window (e.g., prior week average), and store the window and source on the invoice. You cannot defend BAF math if your system cannot show the index snapshot used.

Data model must carry the proof

• Every surcharge line stores: currency, rate source, timestamp, index window, and hedge tag (covered/uncovered).
• FX cost reported as basis points of voyage revenue and of bunker spend; split into translation (book) vs. transaction (cash).
• A per-lane waterfall explaining variance: price index delta, volume, currency effect, timing effect.

Putting it together on a voyage P&L

A voyage ledger that finance can trust records money as integer minor units plus ISO currency and stamps every monetary event with exchange rate, source, and timestamp, plus idempotency keys on external calls. It links:

• Documents: B/L data, LOI register records, switch events.
• Port events: Statement of Facts, agent proforma/final DA, service orders.
• Fuel: bunker delivery notes, index snapshots, surcharge formulas, hedge IDs.
• Cash: bank statements (ISO 20022), virtual accounts per voyage/charterer, and reconciliation states.

If the master changes tug orders, if a consignee requests delivery without B/L, or if BAF moves mid-voyage, those events should cascade to P&L and cash forecasts automatically rather than relying on manual adjustments.

Risk, sanctions, and resilience (operational, not moralizing)

• Sanctions: screen counterparties, cargoes, and vessels at fixture and before release against current lists; keep routing logic that blocks sanctioned ports and flags higher-risk trades for LOI escalation.
• Operational resilience: dual banks per core currency; pre-agree emergency funding lines for canal tolls and port dues; failover for payment files; tested refund/playback for duplicate payments.
• Authority on board: captains need a clear spend mandate; anything beyond it requires shore approval logged against the DA.

A pragmatic 90-day plan

• Days 1–30: standardize LOI wordings and approvals; launch an LOI register with expiries and counterparty grading; mandate proforma DAs with tariff references; assign virtual IBANs per voyage/charterer.
• Days 31–60: wire ISO 20022 statements and auto-match into the ledger; set local-currency pre-fund buffers for top 20 ports; roll a forward-hedge ladder on net bunker USD exposure; embed BAF index windows and sources on invoices.
• Days 61–90: pilot bank-backed LOIs for high-value cargoes; publish a DA variance dashboard; add option collars on lanes with thin margins; run a tabletop exercise for delivery-without-B/L including evidence packs and P&I notification.

When a payment intermediary helps

If you need multi-currency accounts for port pre-funding and canal tolls, virtual IBANs to tag voyage remittances, and predictable cross-border payouts to agents and suppliers—without assembling a dozen bilateral bank setups—bring in a specialist. A provider like Collect&Pay can stand up local rails, virtual accounts, and line-level reconciliation that matches voyage logic. Weight corridor breadth, uptime, payout failure handling, and fee/FX transparency more heavily than headline processing rates; opaque reporting will cost more than it saves.