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If your customer's LC Is Expired, what shall we do?

2020-01-10

                          What if the L/C is expired, what shall we do?


Although there are many different payment methods in international trade, it is believed that most suppliers still accept TT and LC, because these two payment methods are relatively safe and guaranteed, but LC is a little more complicated than TT. So today we are going to learn about LC payment methods and what to pay attention to.


LC (letter of credit) LC is mainly composed of sight LC and usance LC, that is, LC at sight or LC XX days. Although both of them are letters of credit, the time of payment varies, so does the risk. As for the specific difference and risk degree of different letters of credit, we need to learn more for a detailed understanding, here we take LC at sight as an example.


LC has two dates that need special attention, one is the latest delivery date and the other is the validity period of LC. 


The latest delivery date is the latest shipment date, that is, the shipment date shown on the bill of lading. If you miss the latest delivery date, you will incur the discrepancy fee or even the customer’s refusing to pay. So the consequences can be imagined. Therefore, it is important to verify the latest delivery date with the factory when reviewing the LC draft so as to avoid reducing risks and avoiding losses. In addition, the validity of LC is generally about 15-20 days different from the latest delivery date. But what should I do if I miss the expiry date of LC but haven't shipped yet? Here's a case about LC expiration.

Recently, my customer Q has encountered some troubles. One of the shipments of LC at sight has to reject the shipment due to the expiration of LC. 


Because the customer needs this batch of goods urgently, so the latest date of delivery and validity period the customer set is short. Due to the customer order quantity is large, the production time is really urgent, so the order had not been able to finish in the latest delivery within the time. but when the goods were completed, the customer required not to make the shipment with the reason that the LC had expired and the Banks had cleaned up the LC documents and the documents will not be accepted. if we didn’t hold on the shipment, it will be likely to lead to the goods stranded in port. Actually what the customer said is not alarmist. the LC is from the bank guarantee. If it is expired and we insist on delivery, it is equivalent to send out the goods without any guarantee. the customer can refuse to pay. if customers have a bad reputation that the supplier is likely to face great loss. So we must be aware of LC.


Then what should we do if we really can't deliver the goods within LC's limited time?


Firstly, we can negotiate with the customer to extend the latest delivery date and validity period of LC about half a month before it expires, and then complete the delivery within the new deadline. Why about half a month earlier? Considering that the amendment of LC requires a certain amount of time, some large companies may apply for complicated procedures, so they also need to reserve a certain amount of time. it is necessary to know the deadline of LC customers, and timely follow up to avoid rejection of overdue products.

 

However, if the LC expires for a long time but the goods are not delivered yet, we can negotiate with the customer to open a new letter of credit, and then complete the delivery within a new period. Above two ways are compared results of idealism, another case is the customer is likely to be refused to open LC or extend the validity of the LC, that this case can negotiate with our customer to make Banks accept expired LC, but of course, the prestige good customer for company, as long as the customer agrees to accept the expired LC can also be done in accordance with the normal process transactions, but also must remember let customers give you a formal written confirmation email, lest in the case of any disputes at least some protection.



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