LC EXPIRES WHERE? ADVISING BANK, NOMINATED BANK OR ISSUING BANK?

Introduction

The place of expiry is sometimes confused with the country of the advising bank or the place where documents are presented. But are they necessarily the same? Jawad from Pakistan raises an interesting question.

Question

Dear Sir,

I hope you are doing well.

I have a question regarding the expiry place of an LC.

We received an LC where the advising bank is in the UAE, and we added UAE as the place of expiry. The customer has now requested to change the expiry place to Bahrain.

Please advise whether the expiry place can be different from the country where the LC is advised and where the documents are to be presented.

Thank you.

Regards,

Jawad Ahmed
Pakistan

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Answer

Dear Jawad,

Thank you for your question.

Whether the place of expiry is in the issuing bank’s country or in the beneficiary’s country depends on the availability of the LC.

Suppose the issuing bank’s country is Bahrain and the beneficiary’s country is UAE.

• If the LC is available with the issuing bank by acceptance, deferred payment or payment, the place of expiry would normally be Bahrain.
• If the LC is available by negotiation with a nominated bank in the beneficiary’s country, the place of expiry would normally be UAE.
• If the LC is available with a nominated bank located in another country, e.g. Singapore, the place of expiry would normally be Singapore.

That is to say, the place of expiry is normally the same as the place where the LC is available.

Exception

In practice, there are cases where an LC is available with the issuing bank by payment, deferred payment or acceptance, yet the place of expiry is in the beneficiary’s or advising bank’s country.

This arrangement is intended to help the beneficiary avoid “late presentation” or “LC expired” discrepancies that could arise from delays in forwarding documents from the presenting bank to the issuing bank.

Conclusion

In view of the above, the place of expiry and the place of presentation/availability are normally the same, but not always. It depends on the availability of the LC and the terms stipulated in it.

In your case, if the LC is available with the issuing bank, the place of expiry would normally be the issuing bank’s country, not the country of the advising bank.

Best regards,
Mr. Old Man