Addendum to how a letter of credit works – L/C Extension

Addendum to how a Letter of Credit works

Hi all, this is an addendum to my previous article on how an LC works.. If there is a requirement for an LC to be extended, for whatever reason, the seller has to contact the buyer who opened the LC and they will have to inturn contact the issuing bank with valid reasons for the extension.. Based on this reason the LC may or may not be extended..

Usual reasons for LC extension requests could be :

  • delay in the export material being ready
  • delay in the carrying vessel – due to weather or issues from the shipping line’s side
  • if there is any unprecedented customs stop on the export cargo
  • non-availability of suitable container
  • cargo inspection certificates not ready
  • non-availability of a vessel during the time frame required

What has been your experience or issues with the extension of LC..??

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5 comments on “Addendum to how a letter of credit works – L/C Extension”

  1. By Aleksandrs Reply

    Hello, I hope you will be able to assist me with major task I have been given.
    I work in Supply chain Company and we are 4PL for all our major customer and we are looking to removing HBL issue to carrier/consignees.
    I have two customers where we have HBL’s in place and we want to replace HBL with other document of title that will allow us to release goods exported from Pakistan.
    Customer 1) this account is carrier direct (where customer negotiates all of the rates and nominates carriers and haulage providers) and we as 4PL issue HBL for all shipments from Pakistan to UK. (this customer has both L/C and non L/C suppliers)

    Customer 2) We combined structure where we have shipments from Pakistan to UK as carrier direct and Pakistan Singapore as NVOCC and we also issue HBL. (this customer has both L/C and non L/C suppliers)
    We have look into replacing with FCR however as FCR is no-negotiable document we cant use it. We was thinking to ask carrier to issue SWB however this cant be used for goods release at the UK for shipments from Pakistan.

    Basically I am a bit stuck here, and don’t know how to approach this and get this resolve.

  2. By Shahid Khan Jadoon Reply

    wheater we have to send L/C extension request to issuing bank before L/C expiry date (how many days?) or we have to send the L/C extension request to issuing bank before latest date of shipment????
    e.g Latest date of shipment is 5 april and L/C expiry date is 26 april (21 days after latest shipment date)

    as written in L/C opening form.

    • By Manaadiar

      Hi Shahid, that would depend at what stage the shipment is.. If you know for a fact that the shipment is going to be delayed and there is no way you will be able to ship it before the latest date of shipment specified on the L/C, then it is better to seek the extension before that date.. Similarly if you are certain that you will not be able to submit all docs to the bank (after shipment is effected) then you would need to advise the bank about the extenuating circumstances and ask them for an extension..