QUESTION
Hi Mr. Old Man,
We have the following case relating to expired L/C.
Our bank sent the issuing bank the documents under the L/C available with the issuing bank by acceptance.
As the L/C expired, the issuing bank sent us a message informing that it treated the documents as a collection. Two weeks later, the issuing bank sent us another message informing that it had released the documents against the applicant’s acceptance and the payment would be made at maturity.
I want to know whether the issuing bank is correct when releasing the documents to applicant upon the applicant’s acceptance without seeking our consent.
Thanks and best regards
Tan
————————–
ANSWER
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 correct to treat the presented documents as a D/A collection and release the documents against the applicant’s acceptance without the presenter’s prior consent. The issuing bank must pay if the applicant fails to pay at maturity.
Kind regards,
Mr. Old Man
