Best Trade Solution

Hello all,
I'm new to this and would appreciate your help.

I am a client of a bank, which has issued an LC.
The beneficiary did not take any action whatsoever, time passed and the LC expired 2 weeks ago.
I was glad, until my issuing bank asked for my consent and also the beneficiary's to completely cancel the LC and get my money.
We both have provided our consent Emails/signed paper.
My issuing bank now wants the beneficiary's bank consent also, is it really required?
And they said that the beneficiary's bank should notify us, how will they do it, by Email?
One employee casually said that even if the LC has expired, there is a 45 days "timeout" afterwards?!

Is this all right?

Hi Wafra,

If the beneficiary's bank is the confirming bank, then the issuing bank is right to ask the consent of it. According to UCP article 10, a credit can neither be amended nor cancelled without the agreement of the issuing bank, the conforming bank and the beneficiary.
These are the principal parties of the LC procedure and their consents are required for any amendment or cancellation.
Regarding 45 days timeout after expiry date, first time i hear such a thing. There is no any indication within the ICC rules.

Hello gondem

How long does it usually take for the confirming bank to cancel the LC once it was requested to?
I have asked the benificiary to ask its bank, which they did via email, is the Email alone enough?
I keep on emailing the conforming bank to ask about the process but they ignore replying to me.
The LC has already expired 2 weeks ago, why do we still need a consent?

gondem wrote:Hi Wafra,

If the beneficiary's bank is the confirming bank, then the issuing bank is right to ask the consent of it. According to UCP article 10, a credit can neither be amended nor cancelled without the agreement of the issuing bank, the conforming bank and the beneficiary.
These are the principal parties of the LC procedure and their consents are required for any amendment or cancellation.
Regarding 45 days timeout after expiry date, first time i hear such a thing. There is no any indication within the ICC rules.

Update,
The beneficiary has emailed its bank (the confirming) last tuesday,3 days ago,requesting to cancel, but The confirming bank has not yet replied to the beneficiary's email, we have also emailed them 3 times within 3 days+ the beneficiary's = 4 in total asking about the process without any reply.
Is this normal? It is causing us alot of delay.

I still can't understant why we can't simply terminate the LC, as the benificiary did not take any action towards the order and it has expired 2 weeks ago?! Until when will my money be blocked?! I can't be under the mercy of the beneficiary and its uncooperating bank! Until when?

Dear Wafra,

You're quite right about your complain. First of all, i should have mentioned on my previous reply that if a LC expires; technically, it doesn't exist. Banks, generally, treat this situation like a discrepancy but in fact, the expiry means that the LC doesn't exist anymore.
Your bank (the issuing bank), may be, require a written consent from the parties for its own internal procedure.
But the thing is, your bank itself can take the consent of confirming bank. Banks communicate through swift messages between theirselves. Swift messages are fast, authentic and reliable.
In addition, your bank has requested and authorised the beneficiary's bank to add its confirmation to the LC. So your bank is already in a communication with the confirming bank, and it can request and receive the consent from the confirming bank through swift. Imho, the issuing bank has no right to force you to do this. Because, technically, the applicant is not even a party to a LC. This is why the confirming bank ignores your e-mails.

The conforming bank will respond to issuing bank. So, imho, you must ask your bank to communicate with the confirming bank. Then, they can ask whatever they want to.

Hi,

Before cancellation of the LC issuing bank must be sure that no presentation made to confirming bank within LC validity. Lets assume that presentation made just on the expiry date of the L/C. Confirming bank has 5 working days to determine whether a presentaion complies or not. At the end of this period, in case documents comply, ( and if the LC is sight LC) confirming bank should have sent a swift message confirming receipt of credit conform docs and request reimbursement either from reimbursing bank or issuing bank. Therefore, 2 weeks time after expiry without any action is enough to ensure that an l/c is expired in my opinion. Issuing bank may inform confirming bank that LC expired and will close his files lets say in 2 days, without seeking further approve. Because some banks either not respond or respond weeks later.

However, for deferred payment LC, it is better for issuing bank to seek confirming banks confirm, since
confirming bank might have sent conform documents after examination and documents may be still in Cargo even after 2 weeks.

Hello gondem and Navi,

Thank you so much for the info, now i know my rights,
And no Navi the beneficiary did not cooperate at all,no presentation or papers at ALL, because at the End they decided they want direct transfer not LC.
And gondem the swift idea is sooo relieving! Why didn't my bank just do that! They are acting so unprofessionally and wasting my time and they know there is another compnay waiting for me to cancel this so i can issue a new one!
i got really tired from this whole situation,I literally begged the beneficiary to ask its bank to cancel, no need now!
my issuing bank should have been more professional and told me about this, not to make it harder on me.
I will ask my issuing bank firmly to :
Please terminate the LC as the beneficiary has already asked its bank last week to cancel it.
Also because the LC has already expired nearly 20 days ago,and you already have my consent and the beneficiary's.
You may communicate officialy with the beneficiary's bank through swifts, as i have already sent them emails asking about the process without a reply.
Please terminate this LC ASAP ,as i have another company waiting for us to issue a new LC.

Is this righr or shall i add/remove stuff?

I feel so relived guys thank you so much

Wafra,
Your writing is well enough. Send it to your bank, then call them if they read it and instruct them again to speed up the process. They don't have a legal basis to behave like this. They have no right to block any amount from your account. Frankly, the bank you work with is not doing things in a proper way. Please inform us about the developments.

Although Article 10 indicates that consent to cancellation is required from each of the issuing bank, the confirming bank and the beneficiary, in practice, if the beneficiary elects not to utilise the LC and requests cancellation, whether or not the issuing bank or the confirming bank does not consent or stays silent regarding the cancellation is of no consequence; the LC will not be utilised and is de facto cancelled. the ancillary obligations and exercising of recourse is extraneous to this.The fact that the confirming bank should have a say is more to do with preventing an issuing bank form unilaterally accepting to cancel solely on the instructions of the beneficiary and without informing the confirming bank.

If the place of expiry is with the nominated confirming bank (which it should be if a confirming bank is involved) then as Navi indicates, the issuing bank should factor in the relevant 5 day period for document examination by the confirming bank; their transit period of despatch to the issuing bank; and an additional 5 day period for the issuing bank to examine after receipt by them. In practice, an issuing bank will usually require the donated bank to advise negotiation and despatch so that the issuing bank is primed to arrange reimbursement and to receive knowledge that the LC has been utilised. However, whether the LC is payable at Sight or by Deferred Payment is in m view immaterial to the discussion.

Any presentation received after expiry at the place where the LC is available can certainly be refused on the basis of an assertion that an LC is no longer in place and without regard to the provisions as under Articles 14 and 16. However, in practice, most banks will heed the provisions of the said articles and assert a discrepancy of "LC expired".

So, if taking into account the above time factors it is considered that the LC has expired and that accordingly if a claim or presentation were to be received after the relevant calculated period it would be invalid, I see no reason why further approval should be required of a confirming bank.

Thank you all for answering

Thank you gondem specially for your answers, it made me have the strength to face the bank, they first asked me to show the swift that the beneficiary has sent to its bank to cancel the LC! Then i told them they asked them by email and now you should communicate officially and professionally with their bank, which they did because i finally talked to the manager not the employee that was handeling my case, and the LC was finally terminated 2 days after.
Just a wisdom from all this, that the delay was for my favor at End, because due to currency exchange rate, during 3-4 weeks of delay, the price of merchendise for my new LC dropped so it became cheaper. So thank god.

Thank you all

I'm glad if i could help you.

dear wafra ,
you can also apply a complain and claim for the interest for the delay time , because the issuing bank
did not act according to the icc rules

Dear Wafra,

May I ask which bank you are dealing with?

Saif

Hi Wafra,

Pls refer to UCP 600, sub-art.10(a) a credit can neither be amended nor cancelled without the agreement of the issuing bank, confirming bank (if any) and beneficiary.
so, it is neccessary to get consent from the beneficiary to cancel the L/C.
Beneficiary can contact their bank (from which beneficiary was advice the l/c) to do related requirements and pay some fees and charges (if any) stipulated by that bank for cancelling an l/c. Then, that bank will send Swift msg forwarding ben's consent to cancel to the Issuing bank. at this time, the l/c can be cancelled.

rgds,

If no confirmation is added and if nominated bank is not acting on nomination then the issuing bank and beneficiary will be the only parties of credit. If this is the case then only beneficiary consent is required for cancelling the credit.