Difference between LC expiry and shipment date expiry.

LC expiry date & Shipment date expiry under Letter of Credit

Some of you in the export import trade may get confused about the date of expiry of Letter of Credit and the date of expiry of shipment under LC  transactions. 

• What is date of expiry of Letter of Credit? 
• What does shipment date under LC mean?  

Let us discuss the difference between LC expiry date and shipment expiry date under Letter of Credit transactions.

What is Shipment date expiry under Letter of Credit?

In a Letter of Credit, there will be a date of shipment of goods and date of expiry of LC. The date of shipment of goods means, the consignment has to be shipped out from seller’s place on or before the last date of shipment of letter of credit. So, the Bill of Lading date should be on or before the date of shipment mentioned on Letter of Credit as 'Shipment Date'. If letter of credit says, ‘ON BOARD’ Bill of lading, the date of ‘on board’ bill of lading should be on or before the date of ‘ON BOARD’ shipment date mentioned in the letter of credit. If letter of credit (LC) just says shipment date, then the BL date can be the date on or before the completion of export customs formalities.

What is expiry date of Letter of Credit?

LC expiry date means the last date to submit the exported documents with bank for negotiation of documents. Here, the exporter need to submit all required documents with bank after export as per the guidelines mentioned in the letter of credit. Means, Letter of Credit is void if shipped goods before the date mentioned in LC for shipment, but not submitted documents for negotiation within the validity period of Letter of Credit.