DOCUMENTS PRESENTED UNDER AN EXPIRED L/C

QUESTION

Hi Mr. Old Man,

Our bank presented documents under a Letter of Credit that had already expired.

The issuing bank replied, saying that since the L/C had expired, they would treat the documents as a collection. Two weeks later, they messaged again to say they had released the documents to the applicant upon acceptance, and payment would be made at maturity.

I’d like to know if the issuing bank was correct in doing this without our consent.

Best regards,

T.

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ANSWER

Hi T.,

That’s a good and rather important case — one that banks sometimes mishandle in practice. Let’s break it down carefully.

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1. When the L/C is expired, the issuing bank is off the hook

If documents are presented after the expiry date of the L/C, the issuing bank has no obligation under UCP 600 to honour . The credit is no longer valid — game over.

The issuing bank may:

• Refuse the documents formally, in accordance with Article 16(c) of UCP 600 (notice of refusal + reasons + holding or returning documents),

or

• Simply send a message — often an MT799— stating: “L/C expired; no payment obligation; documents held at your disposal or being returned.”

Either way, the message is clear: the issuing bank is not acting under the L/C anymore.

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2. What it must not do: release documents without consent

Even if the L/C has expired, the documents still belong to the presenting bank (acting on behalf of the beneficiary). The issuing bank has no right to unilaterally convert the documents into a collection (D/A) and release them to the applicant just because they accepted a draft.

That change of handling method must be approved by the presenter.

By releasing the documents to the buyer without your bank’s consent, the issuing bank overstepped. If the buyer fails to pay at maturity, you may have grounds to hold the issuing bank liable for unauthorized handling.

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3. Proper procedure when L/C has expired

Let’s recap the correct actions the issuing bank should take if documents arrive after expiry:

• Do not treat the documents as a valid presentation under UCP 600.
• Do not unilaterally change the method of settlement.
• Do send a clear message stating that the L/C has expired, obligations are discharged, and the documents are either being returned or held pending further instructions.
• Do wait for consent before acting in any other capacity (e.g. collection).

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Takeaway:

• Expired L/C = no more UCP obligations.
• The issuing bank must either return or hold the documents.
• Any further handling (like D/A or D/P) requires explicit instructions from the presenting bank.

Best regards,

Mr. Old Man