what should be the expiry

[jim]

dear sir,

under a mixed payment letter of credit, 20% of the LC value is to be paid on presentation of an acceptance certificate issued by the applicant. the certificate is to be presented no later than 360 days from the date of shipment. my question is, what should be the expiry date of the credit? should the expiry cover latest date of shipment + 360 days?

[danohng]

From the scenario below, it's seem that there are more on workability issue rather than to determine the expiry date. Normally the presentation of document would be before the expiry date (take into consideration the latest shipment date + the period allow for presentation), but applicant's certificate may come in 360 days after the shipment date that will only make the presentation complete create uncertainty. If the applicant refuse to issue the certificate for whatsoever reason after 1 year, what will be the issuing bank action ?

Note that ISBP para 4 state that a credit should not require presentation of documents that are to be issued or countersigned by the applicant. If a credit is issued including such terms, the beneficiary must either seek amendment or comply with them and bear the risk of failure to do so.

Any comment are most welcome..

[vivekkrish]

The issuing bank should specify the time limit if the same is not specfied any time before the expiry .

ideally they should have extended the LC expiry by 360 after latest presentation date

[coopermoon]

Hi,
Expiry date does not need to cover the said acceptance period, because acceptance of applicant is not covered by either UCP or ISBP and 20 pct of the lc will be effected outside of it. As a matter of fact, as Danohng comment, 20 pct of this credit is not workable..
Payment of 20 pct of lc is not depend on complying presentation, neither issuing bank nor nominating bank can take the responsibility of this part. Only applicant can decide whether to pay or not. That's why no need to issue the lc to cover the period until acceptance.. it may occur outside the lc validity..
On the other hand beneficary may ask the expiry date to cover this period just to feel comfort but this would not offer any guarantee under that lc even it is issued as it asks.
Shortly I mean that you need to issue your lc considering the latest shipment date+period for presentation excluding applicant's acceptance period. Therefore, even you include and issue latest shipment date+acceptance period (say 360 days) for expiry date, you do not promise anything to the beneficary for that part 20 pct in your case.. due to the reasons I mentioned above.
I would appreciate any other comment...
Rgds,

[Negotiator]

Dear all,

Most of us may agree that a credit, requiring a document to be issued by applicant, is undesirable. I think it is irrelevant to this subject.

Although the credit required the acceptance certificate to be issued by applicant, it seems that it should be presented by beneficiary anyway. In this respect, the acceptance certificate would be a kind of document which should be presented under the credit, therefore, I think the acceptance certificate is also subject to the expiry date. (and to the latest date of presentation, too.) If the expiry date of the credit does not cover 360 days from the date of shipment, beneficiary cannot help presenting a document, which is necessary to receive remaining 20% of the payment, after the expiry date. It will lead the beneficiary to the risk of non-payment.

Any comments appreciated. Regards.
Lee

[berry]

i agree with the negotiator. the expiry date should cover 360. in this case the expiry should be latest date of shipment + 360 days.