Letter of Authorization and Authority – What is it and How is it Used in Shipping?

What is a Letter of Authority? 

A Letter of Authorization is a document issued by one party, typically the shipper or consignee, granting authority to another party to act on their behalf for specific tasks related to the shipping process. It basically is a legal declaration that someone else, like a freight forwarder, agent, or third-party representative, has the right to perform certain actions. For example, these actions can be: arranging the shipment, receiving cargo, or signing necessary documents. 

The LoA is used to delegate responsibilities, especially in scenarios where the original shipper or consignee may not be present at the port of loading or discharge. It ensures that the process can continue without delays caused by missing authorizations or approvals. It can be issued to a person or a company. This can differ per LoA. For most import Letters of Authority the consignee issues the letter to the carrier. 

When is a Letter of Authority needed in container shipping? 

A Letter of Authorization is often required in several key scenarios within the shipping process. Some of them are listed below: 

1. Cargo pickup or delivery

At the port of discharge (PoD), the consignee may authorize a third party, such as a trucking company or freight forwarder, to take delivery of the cargo. The LoA allows the third party to act on the consignee’s behalf, ensuring that the cargo is collected and transported without delay, should the consignee not be able to take the cargo himself. 

2. Arranging Shipments 

Similarly, a LoA can also be issued for the cargo in the port of loading (PoL). If the shipper is not present at the port of loading or if they are working through an intermediary, a freight forwarder or other agent can be authorized to arrange the shipment, negotiate rates with carriers, or provide shipping instructions. 

3. Change of cargo ownership or consignee 

A Letter of Authorization can also be used in cases where the ownership of the cargo changes mid-shipment or the consignee needs to be altered.  In these cases, the LoA is used to authorize the necessary changes in the Bill of Lading and other relevant documents, if applicable. 

4. Customs Clearance 

When it comes to customs handling, the shipper or consignee may not have the time or expertise to cover the process themselves. By issuing a LoA to a customs broker or freight forwarder, they can delegate the submission of documentation, paying duties, and ensuring compliance with customs regulations. 

This can also be done online in our Online Business Suite via the Customs Clearance tool.

How to issue a Letter of Authorization? 

As mentioned above, a Letter of Authorization is generally required in situations where a third party needs to represent the shipper or consignee. Here’s a breakdown of the issuing process with the parties mentioned. 

1. Issuance by the authorizing party: The shipper or consignee writes and signs a formal LoA, specifying the name of the person or company they are authorizing, the scope of responsibilities being transferred, and the validity of the authorization. 
2. Submission to relevant parties: The LoA is submitted to relevant stakeholders in the shipping process, such as carriers (for import LoAs), customs officials, port authorities, or freight forwarders. These parties will double-check the LoA to confirm that the authorized person or company actually has permission to act on behalf of the original shipper or consignee. 
3. Execution of responsibilities: Once the LoA is in place, the authorized party can carry out the defined tasks - for example handling customs clearance, submitting shipping instructions, or taking delivery of cargo at the destination. 

The scope and validity duration of the LoA can vary based on the needs of the shipper or consignee. It can be issued for a one-time shipment or for multiple shipments over a specified period. 

Key elements of a Letter of Authorization 

To make sure the Letter of Authorization can be used without any disruptions or issues, some key components should be included. 

• Details of the authorizing party: Meaning the full legal name, address, and contact information of the shipper or consignee issuing the LoA. 
• Details of the authorized party: Full legal name and address of the person or company receiving the authorization, along with their contact information. 
• Scope of authorization: A clear outline of the tasks or responsibilities being delegated (for example: customs clearance, cargo pickup, or documentation handling). 
• Duration of authorization: The time in which the LoA is valid, whether it’s for a single shipment or for multiple shipments over a defined time. 
• Signature and date: The signature of the authorizing party and the date the LoA was issued, as well as any additional required notarization or witness signatures, depending on local regulations. 

Conclusion 

A Letter of Authorization is an important document in container shipping, enabling shippers and consignees to give responsibilities to third parties with a full legal backing.  

The LoA helps to prevent delays, ensures regulatory compliance, and can improve communication between all stakeholders in the supply chain. For businesses that frequently move goods internationally, having a clear and effective LoA process can streamline operations and reduce disruptions during the process.