CALCULATION OF MATURITY DATE 2

QUESTION

Dear Mr Old Man,

Our bank issued a confirmed L/C. It was confirmed by Bank A in Vietnam.

The L/C stipulated:

41D: available with Bank A by payment
42C: drafts at 90 days after sight

The documents including a draft at 90 days sight were presented to Bank A. Bank A accepted the draft with the maturity date being 90 days after the date it received the documents.

For drafts under confirmed L/Cs, we would calculate the maturity date from the date we receive the documents from the confirming bank and confirm the same to the confirming bank.

So, please let me know which bank is right.

Thank you so much and have a nice day.

Best regards,
MN
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ANSWER

Hi,

Please note that there are four main types of L/C:

(i) L/C available by negotiation (of drafts at sight)
(ii) L/C available by payment (no sight drafts required)
(iii) L/C available by acceptance (of tenor drafts)
(iv) L/C available by deferred payment (no tenor drafts required)

Your L/C that was issued to be available with the confirming bank (Bank A) by payment of drafts at 90 days sight does not belong to any of the above types. It should have been issued to be available with Bank A by acceptance of 90 day sight drafts drawn on Bank A.

Assuming that the L/C was available with Bank A by acceptance of 90 day sight draft drawn on Bank A and the documents presented were complying, the maturity date would be 90 days after the date of receipt of the documents by Bank A.

Bank A was correct in determination of the maturity date of the draft.

You are recommended to refer to ISBP paragraph 46 (see attached below) to know how to calculate maturity date.

Best regards,
Mr. Old Man
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ISBP paragraph 46:
For drafts drawn "at XXX days sight", the maturity date is established as follows:
a. in the case of complying documents, or in the case of non-complying documents where the drawee bank has not provided a notice of refusal, the maturity date will be XXX days after the date of receipt of documents by the drawee bank.
b. in the case of non-complying documents where the drawee bank has provided a notice of refusal and subsequent approval, at the latest XXX days after the date of acceptance of the draft by the drawee bank. The date of acceptance of the draft must be no later than the date the issuing bank accepts the waiver of the applicant.