The U.S. company I work for deals extensively with international customers. Many contracts require us to post a performance bond against default (~10%) to ensure delivery of a product meeting the customers specifications. In the past, bank standby Letters of Credit had been used for the performance bond, with an expiration date set to after completion of the contract commitments. A cash balance was placed on deposit in a restricted account, and after contract execution the L/C was allowed to expire with no cash leaving the account (unless an event of default had occurred). The bank previously used has been acquired by a larger bank. All existing performance bonds are now being tendered to the beneficiary's bank upon expiration whether or not an event of default has occurred. There are hundreds of thousands of dollars tied up and now the funds are being forwarded to the customer at expiration, default of performance is not considered. Is this the proper way for the bank to handle such performance bonds? Is there a better way to provide performance bonds for international contracts?
International performance bond from a seller's perspective
Re-read your L/C agreements. it sounds like the Bank is in default of the terms and conditions.
You immediately need to file a notice of breach and claim.
You should have the customer file with the bank a Notice of No-Claim or Notice of Completion that signifies that the covenants contained in the L/C have been complied with and that the L/C is now stale.
Letting things just die at a due date, while valid is also a little messy. Document, document, document...