MR. OLD MAN

For those who eat, sleep and breathe Letters of Credit & Cycling

WHETHER AN EXPIRED LC CAN BE AMENDED TO EXTEND THE EXPIRY DATE

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QUESTION

Dear Mr. Old Man,

Can an expired LC be amended to extend the expiry date?

Is there any provision that prevents the expired letter of credit from being amended to extend the expiry date?

Thank you

PMB

——–

 

ANSWER

Hi,

My answer is No and Yes. It depends.

According to UCP 600 sub-article 10 (a), except as otherwise provided by article 38, an LC can neither be amended nor cancelled without the agreement of the issuing bank, the confirming bank (if any) and the beneficiary.

Where the LC expires without any complying presentation being made, the issuing bank’s obligation under the LC will expire accordingly. Therefore, the issuing bank would not agree to amend the expired LC unless:

(i) its internal regulations allow such amendment;

(ii) the applicant requests such amendment;

(iii) such amendment does not affect the applicant’s capacity to reimburse the issuing bank; and/or

(iv) it has reasons to believe that the advising bank will agree to advise the amendment and that the beneficiary will accept the amendment.

…

Kind regards,

Mr. Old Man

mroldman

17 responses to “WHETHER AN EXPIRED LC CAN BE AMENDED TO EXTEND THE EXPIRY DATE”

  1. Ganiu Avatar
    Ganiu

    Hi,
    Can an LC that expired 10 months ago without any communication from the applicant or issuing bank be amended with another expiry date?

    Does the confirming bank charge their fee to cover the whole life of the first and amended expiry date?

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    Reply
    1. mroldman Avatar
      mroldman

      No. It depends on banks. It is normal that the issuing bank would close file with regard to the LC when it has been fully utilized or expired within 30 days

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      Reply
  2. Isi Avatar
    Isi

    Hi Mr Oldman,

    1- Should an unconfirmed LC always be available with the issuing bank, specially when the issuing bank has no RMA with beneficiary (advising bank)?

    2- In case an unconfirmed LC was presented to the beneficiary bank( not a mominated bank) before expiry , and the beneficiary bank sent docs to issuing bank before expiry, but they reached issuing bank after expiry.

    Is issuing bank still obliged to honour?
    Is that presentation considered to be complying ?

    Thanks,
    Isi

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    Reply
    1. mroldman Avatar
      mroldman

      1/ It depends. It may be available with the issuing bank or with a nominated bank.
      2/ Documents must be presented to the issuing bank or the nominated bank on or before the last day for presentation. If LC is available with the issuing bank, the date and place of expiry would be at the issuing bank’s counter, so the focuments must be presented to the issuing bank within the period for presentation and LC validity.

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  3. Kumar Avatar
    Kumar

    Hi Mr. Old Man,

    Post by Mr. Rashed dt. October 2, 2016 at 10:32 pm,
    Cumulative LC was for 9 months, Why did you calculate it for 6 months (USD 15,000 x 6months = USD 90000)? Is it USD 15,000 x 9months ?
    Kindly explain

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  4. manish Avatar
    manish

    Dear Old Man

    is it possible to amend the expiry date of the LC, after the LC has expired. the bank has has remitted funds to the beneficiary of the amount of LC too.

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    1. mroldman Avatar
      mroldman

      Theorectically, no. But in reality, it is acceptable if involved parties agree.

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  5. Rashed Avatar
    Rashed

    Hey Mr. Old Man,

    Could you please help me in clarifying the answer of the following question:

    A credit is issued for the amount of USD15,000 and is stated to revolve monthly on an automatic and cumulative basis. The credit has a 9 months validity period. The following drawings are made in the first 5 months:
    January – USD12,500
    February – USD16,000
    March – USD10,750
    April – USD13,800
    May – USD15,000
    How much is available to be drawn in June?

    Expecting your prompt response as always.

    Regards,

    Rashed

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    1. mroldman Avatar
      mroldman

      Hi Rashed,

      It is understood that the unutilized sums in a cumulative revolving L/C can be added to the upcoming drawings until the LC expires.

      As the L/C revolves monthly for a validity period of 9 months, the maximum amount available to be drawn in June is USD21,950

      Note:
      Maximum amount that can be drawn for six months is USD90,000 (= USD15,000 x 6).
      However, the total amount drawn for the last 5 months was USD68,050 (= 12,500 + 16,000 + 10,750 + 13,800 + 15,000).
      So, the maximum amount available to be drawn in June is USD21,950 (= USD90,000 – USD68,050).

      I am not good at calculation. Please check again!

      Kind regards,
      Mr. Old Man

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      1. Rashed Avatar
        Rashed

        Thanks a lot, Sir! The answer and the calculation are absolutely perfect.

        Like

  6. Tan Avatar
    Tan

    Dear Mr old man

    We already advise the instruction to the beneficiary, however, they are slient and do not give any instruction. In this case, at now we act just only on the role of presenting bank. What should we do now? Pls advise

    Regards

    Tan

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    1. mroldman Avatar
      mroldman

      What instruction are you talking about?

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      1. Tan Avatar
        Tan

        Hi Mr Old Man

        Something such as beneficiary’s consent about the action of issuing bank: dispatch the docs to applicant upon applicant’s acceptance or etc…

        Thanks and best regards

        Tan

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  7. Tan Avatar
    Tan

    Hi Mr old man

    We have the following case relating to expired lc. We sent export docs under lc to issuing bank. LC expired, therefore, issuing bank inform they do not handle the docs outside this lc and treat it as collection. Then after two weeks, the issuing bank sent message to inform that the applicant accept the docs, will pay at maturity date and they sent the docs to applicant

    Whether the issuing is correct when sending the docs to applicant upon the applicant’s acceptance without seeking our consent

    Thanks and best regards

    Tan

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    1. mroldman Avatar
      mroldman

      Hi,

      Where the L/C expired, the issuing bank’s payment obligation under the L/C ceases. If this is the case, the issuing bank may not handle the presented documents in accordance with sub-article 16 (c) UCP 600. It may just send the presenter an MT799 saying that the L/C expired and that it is returning the documents to the presenter or holding the documents at the presenter’s disposal.

      The issuing bank in your case was not right to treat the documents as a collection and release the documents to the applicant against the applicant’s acceptance without the presenter’s prior consent.

      Kind regards,
      Mr. Old Man

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      1. Ravi Avatar
        Ravi

        Mr Old Man,

        If documents are presented after L/C expired….the shipment has to be terminated to the origin country???

        Deal canceled?
        Payment Refused?

        is applicant has right to cancel the L/C and deny the payment in above case?

        Ravi

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      2. mroldman Avatar
        mroldman

        Hi,
        a) Draft at sight under D/P is no longer needed if the drawee pays at sight upon receipt of the documents. As the draft drawn on the drawee who has paid, it should be released to the drawee for his filing.
        b) Draft at sight under D/P is not needed if the collecting bank release the documents against sight payment and the drawee pays at sight upon receipt of the documents. According to international practice if the amount relating drafts is expressed differently in figures and in words, the amount in words will hold. In case of the amount expressed several times in words or several times in figures, it is the amount that is the lowest one that holds and in no caae the amoiunts may be added up.
        You should check data in other documents, e.g, in the covering letter and the remitting bank’s payment instructions and if needed contact the remitting bank to clarify or request correct drafts.
        c) Actually, under D/P transactions, drafts at sight plays no important role. However, they exist for either of the followign reasons:
        1/ Practice; or
        2) Law.
        Under the Stamp Acts, the Government can levy stamp duty on some instruments like bills of exhange, promissory notes…
        Kind regatrds,
        Mr. Old Man

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