ISSUER OF DOCUMENTS; UNUTILIZED LC AMOUNT

QUESTION

Dear Mr. Nguyen (Old Man),

It’s a surprise and delight to come across your blog which advises on L/C questions. I trust your assistance to bring enlightenment to hundreds if not thousands of people out there.

That said, I have a couple of questions for you. 

1. If the L/C specifies the product description to be of certain quality, does the bank consider (A) the beneficiary’s self prepared documents, i.e. invoice/packing list or (B) third party, independent agency’s test report ? 

[The L/C’s required documents include invoice, packing list, b/l, third party test report, etc.]

2. When a L/C expires, how long will it usually take for the bank to credit the L/C amount back to the applicant if it’s not used at all?   

Hope to hear from you. Thanks!

Best wishes

Aaron

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ANSWER

Dear Aaron,

Thanks for having visited my blog. I would like to answer your questions as follows:

1. Issuer of documents

An invoice is to appear to have been issued by the beneficiary or, in the case of a transferred LC, the second beneficiary (ISBP 745 paragraph C2).

 

A packing list is to be issued by the entity stated in the LC. When the LC does not indicate the name of the issuer, ANY ENTITY may issue a packing list (ISBP 745 paragraphs M2 and M3).

 Similarly, a test report is to be issued by the entity stated in the LC. When the LC does not indicate the name of the issuer, ANY ENTITY may issue a test report.

So, if the applicant wants to receive a document to be issued by a third party or an independent agency, this should be expressly indicated in the LC, e.g., Product Test Report issued by SGS.

2.  When the unutilized amount is credited to the account of the applicant?

It depends.  

If the LC is available with the issuing bank, the issuing bank may credit the unutilized amount back to the account of the applicant on the next day after the expiry day.

If the LC is available with a nominated bank, the issuing bank needs time to ensure that the beneficiary has made no presentation to the nominated bank. It depends on each bank’s policy.  My bank’s policy is that the unutilized LC amount will be credited back to the account of the applicant after 30 days from the LC expiry date.  The unutilized amount would be released earlier if the beneficiary confirms via the advising bank that the beneficiary agrees to cancel the LC and that no presentation has been made.

Kind regards,

Mr. Old Man