Letter of Credit Forum

The LC does not need to expire in order for the banks to handle the presentation under URC, but unless the LC has expired, it would make no sense to do so. UCP provisions provide a more robust set of rules which puts more onus on the banks to follow specific guidelines, failing which, the banks would potentially forfeit the right to withold payment. If a dispute under an LC proceeds to court, the UCP articles provide a clear reference point as to where the respective responsibilities of the parties lie.

Under the URC, the bank's reponsibilities are limited; only to follow instructions on the schedule, and release documents either against payment, or acceptance. There is no obligation to extend this role in examining the documents nor enter into any dialogue over the integrity of the documents, insofar as they may relate to the LC.

If the LC has not expired, I would suggest that it would have to be the beneficiary who would be required to give consent for the documents to be handled under URC. An issuing/confirming bank receiving a presentation with specific instructions to handle the presentation under URC, would be absolved of any of its responsibilities under UCP, beacause the tender would no longer be associated with the LC.  This then begs the question: has a drawing been made under the LC, and if not, does the LC balance remain intact?

If the LC has expired, there is a widely held opinion that there is no longer an LC, and by consequence no longer is it subject to UCP provisions. Under these circumstances, some banks impose a requirement that documents may only be handled under URC. Others will argue for the presentation to be subject to UCP, with all the attendant provisions, and respective bank obligations to apply. e.g. for a notice of refusal to be issued for reason of LC expired, and subsequently seek waiver.

So, there is no hard or fast rule but perhaps in a future vrsion of ISBP, this issue could be addressed.