Do letters of credit have expiry dates?

Do letters of credit have expiry dates?[i]

 Rupnarayan Bose[ii]

“Date”, in relation to documentary credits, appears in various contexts in the UCP. We come across expressions such as “expiry date of credit”, “last day for presentation”, “expiry date for honour or negotiation” or simply “expiry date”. This article attempts to interpret these expressions in the context of documentary credits and proposes what “expiry date” as stated in a credit is supposed to signify.

An L/C, in many ways, is similar to a contract[iii]. A credit’s author is called the issuing bank. When a bank issues a letter of credit, it takes on certain financial risks and responsibilities on behalf of its client (applicant). According to sub-Article 7(b) of UCP 600: “An issuing bank is irrevocably bound to honour as of the time it issues the credit.” Thus, the date of issue of a credit (SWIFT Field 31C, MT700) is when, as far as the issuing bank is concerned, a letter of credit comes into being.

While it is for the issuer to set the terms of the documentary credit, it’s for the beneficiary to accept or act on it. The beneficiary is not obliged to (contd...)

[The complete article is available in the book 'Beyond Trade Finance', published on 13-Apr-2021 by Notion Press, and available at https://notionpress.com/read/beyond-trade-finance or at https://www.amazon.in/dp/1638508666]

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[i] Published in DCInsight, pp 16, Vol 19 No. 2, April-June 2013.

[ii] CEO, International Trade Services. Website: www.internationaltradeservices.in. Contact: rnbose@gmail.com.

[iii] Refer to this author’s article “Some random thoughts on the UCP”, LC Monitor-Trade Services Update, Special Edition, January 2011.

[iv] Refer to article Wanted: A more positive Article 15, Rupnarayan Bose, DCInsight, Vol. 18, No. 4, October-December 2012.