Does a Longer L/C Expiry Date Mean Greater Risk? And Is the Word “Clean” Really Necessary on a Bill of Lading?

In international trade, many disputes arise not because parties misunderstand UCP 600, but because they mix up legal requirements with commercial practices.

A reader recently asked Mr. Old Man about two common concerns in timber imports from Africa:

• whether the L/C expiry date must be linked to the shipping transit time, and
• whether removing the word “Clean” from “Clean On Board Bill of Lading” would expose the importer to greater risks.

These are practical questions that many importers quietly wonder about but rarely discuss openly.

Question

Dear Mr. Old Man,

We signed an import contract for timber from Africa.

When issuing the L/C to our supplier, we stipulated that the expiry date and place would be 12 days after the shipment date, at the negotiating bank in Angola.

However, they disagreed and requested that the L/C expiry date be 50–60 days after the shipment date, arguing that the transit time from Africa to Vietnam is around 40 days.

I believe this request is unreasonable because the validity period of the L/C is simply the latest date by which the beneficiary must present documents to the bank, and it should not depend on the transit time of the goods. Moreover, the supplier has confirmed that preparation of the documents only takes about 8–10 days after shipment.

In addition, they also requested that in Field 46A we remove the word “Clean” from the phrase “Clean On Board”, arguing that shipping lines in Africa do not normally type the word “Clean” on Bills of Lading covering timber cargoes.

In my opinion, as long as the Bill of Lading contains no adverse clauses or negative remarks, it should still be considered fully compliant even without the word “Clean”.

However, if we remove the word “Clean” from the L/C, I worry that even if the goods are externally damaged and the Bill of Lading contains negative remarks, the document might still be considered acceptable and the bank would have to make payment.

I would greatly appreciate Mr. Old Man’s views on the above situations.

Thank you very much.

N.H.

____

Answer

Dear N.H.,

Thank you for your interesting question.

1) Extension of the L/C Expiry Date

Field 31D, titled “Date and Place of Expiry,” refers to the date and place where the credit ceases to be available for presentation of documents under the L/C.

However, this date is subject to:

(i) the presentation period stipulated in Field 48 of the L/C (if any); or

(ii) Article 14(c) of UCP 600, which provides that documents, including original transport documents, must be presented no later than 21 days after the date of shipment, but in any event not later than the expiry date of the credit.

Therefore, in your specific case, stipulating in Field 31D that the L/C expires 50–60 days after shipment should not, by itself, be a matter of concern.

If Field 48 of the L/C does not specify a presentation period, then the default rule under UCP 600 applies, meaning documents must be presented no later than 21 days after shipment. Any presentation beyond this period would be considered a late presentation, even if it is still made before the expiry date of the credit.

Strictly speaking, the transit time of the goods has no legal connection with the validity of the L/C. However, in practice, beneficiaries often request a longer expiry period for operational reasons such as courier delays, internal banking procedures, delays in obtaining original transport documents, or documentary formalities in the exporting country.

If your intention is to require the beneficiary to present documents within 10 days after shipment, you may expressly state this in Field 48. However, Mr. Old Man would not recommend imposing such a tight requirement because, if the beneficiary fully understands the UCP rules, they may instead ask you to expressly allow a longer presentation period than the default 21 days (!?).

2) Removal of the Word “Clean” from the Bill of Lading Requirement

A clean Bill of Lading is understood to mean a Bill of Lading that bears no clause or notation expressly declaring defective conditions of the goods or their packaging.

Under UCP 600 Article 27, banks will only accept clean transport documents unless the credit specifically allows otherwise.

Importantly, the word “CLEAN” itself does not necessarily have to appear on the Bill of Lading, even where the L/C requires a “Clean On Board” Bill of Lading.

Therefore, removing the word “clean” from the L/C does not mean that banks may accept Bills of Lading containing adverse clauses regarding damaged goods or defective packaging.

As long as the Bill of Lading contains no negative remarks concerning the apparent condition of the goods or packaging, it will still be regarded as a clean transport document under UCP 600.

Accordingly, you may remove the word “clean” from the L/C as requested by your trading partner without materially increasing your documentary risk.

Kind regards,

Mr. Old Man