Standby letter of credit [standby credit letter - also known as secured letter of credit is not to settle the price of the commodity trading for the purpose of credit opened for the purpose of the loan financing or guarantee debt repayment card.
Standby letter of credit is a special form of letters of credit, certificate of the issuing bank to assume an obligation to the beneficiary. Issuing bank to ensure that in issuing the applicant fails to fulfill its obligations, as long as the beneficiary with the provisions of the standby letter of credit issued to the issuing bank money order and be accompanied by a statement issuing the applicant fails to fulfill its obligations or documents can be obtained by the solvency of the issuing bank. The standby letter of credit only applies to the Uniform Customs and Practice for Documentary Credits "(No. 500), part of the terms now UPC600 part of the terms. Applicable provisions of the
standby letters of credit (STANDBY L / C) December,
1995, the United Nations General Assembly adopted the Convention of the drafted by the United Nations Commission on International Trade Law on Independent Guarantees and standby letters of credit; January 1, 1999, the International Chamber of Commerce Publication No. 590, "International Standby letter of credit practice" (referred to as "the ISP98") as specifically applicable to the authority of the standby letter of credit with international practice, and officially came into effect. Opened after that
as defined in accordance with the ISP98 "standby letter of credit is an irrevocable, independent, required document, binding commitments", as the ISP98 specifically regulate the standby letter of credit, in addition to allowed to exist independently of, the amendment to be considered, but is the UCP600 whether it is still necessary to involve standby letters of credit. Final majority opinion is that the standby letter of credit according to still continue to apply UCP600 and World Pipe network informed. Standby letters of credit of
have the following properties:
1. Irrevocable. Unless otherwise specified, or agreed to by the other party, the issuer may not modify or revoke its obligations under a standby in the standby.
. Independence. The fulfillment of the issuer obligations under the standby does not depend on: ① The issuer is right and ability to obtain reimbursement from the applicant. The ② beneficiary right to obtain payment from the applicant. Quoted the ③ standby to any reimbursement agreement or underlying transaction. (4) An issuer to understand whether or not any reimbursement agreement or underlying transaction performance or breach.
3. With single-sex. The issuer's obligations depend on the tips of the documents, and review the required documents on the surface.
4. Mandatory. The standby opening after binding, regardless of whether the applicant authorizes issuance of the issuer whether to accept the costs, or the beneficiary received or relied on the standby or modified to take action, its issuing row is mandatory World Pipe network informed.
Compared to the general letter of credit:
1) commercial letters of credit only when the beneficiary submits the documents to prove that it has to fulfill the underlying transaction obligations, the issuing bank to pay under the credit payments; standby letter of credit beneficiary to provide documentation to prove that the debtor has failed to fulfill the obligations of the underlying transaction, the issuing bank to pay amounts under the credit.
2) commercial letter of credit issuing bank is willing to drafts and documents payments required under the letter of credit to the beneficiary because it shows that the underlying transaction between buyers and sellers normally; standby letter of credit issuing bank is do not want out to the beneficiary according to the provisions of the letter of credit drafts and receipts of payment, because it shows that buyers and sellers trading a problem.
3) commercial letters of credit, always the importer of the goods to applicant, to the exporter as beneficiary; the applicant and the beneficiary of a standby letter of credit issuing either the importer can also export parties.
Guarantee of standby letters of credit, also known as letters of credit and performance letters of credit, commercial paper, letters of credit, it is the certificate of the issuing bank according to the request of the applicant, opened the beneficiary undertake to assume an obligation, that is, the issuing bank to ensure that when issuing the applicant fails to fulfill its obligations, the beneficiary in accordance with the provisions of the standby letter of credit issued to the issuing bank drafts (or not to draw on), and submit a statement or proof for issuing the applicant fails to fulfill its obligations file, you can obtain the issuing line payment. The standby letter of credit bank credit, the issuing bank guarantees payment by the issuing bank issuing the applicant does not fulfill its obligations. If issuing the applicant to fulfill the obligations stipulated in the letter of credit without having to use. Therefore, standby letters of credit, the beneficiary, is prepared for issuing the applicant to obtain compensation for the case of default, the nature of the guarantee. The same time, the standby letter of credit has the legal characteristics of the letter of credit, it is independent of the contract as its opening based on their secured transactions, the issuing bank processing the relevant documents and letters of credit, regardless of the transaction contract. In summary, the standby letter of credit is a letter of credit the general characteristics, but also has the nature of the guarantee. Payment obligations of the
standby letter of credit issuing bank documentary credit the issuing bank's payment obligations are different. In the standby letter of credit business, the standby letter of credit is a bank guarantee, the issuing bank is generally in the position of the secondary obligor, its payment obligations are secondary, that is only in default by issuing the applicant, the issuing bank to bear payment obligations. With the documentary credit the issuing bank's payment obligations is primary, as long as the beneficiary submits a letter of credit provisions of the documents, and documents in line ", the issuing bank must be paid immediately, regardless of the issuing whether the applicant payment. Standby letter of credit in
the first popular in the United States, U.S. law does not allow banks to open a letter of guarantee, bank standby letters of credit instead of the guarantee, then gradually developed into the international contract to provide a performance guarantee of credit instruments, the wide range of uses, such as the bidding of the international project contracting, international leasing, prepaid and credit operations as well as international financing business. International Chamber of Commerce in the 1993 text of the Uniform Customs and Practice for Documentary Credits "expressly provides that the provisions of that convention apply to standby letters of credit, will be the standby letter of credit included in the letter of credit range
standby letters of credit Card (STANDBY the L / C) of standby letters of credit types
many different types, according to the different role of the standby letter of credit in the underlying transaction can be divided into the following eight categories:
1. The performance bond standby letter of credit (PERFORMANCE STANDBY) - to support an addition to the payment of financial obligations other than the performance, including compensation for losses resulting from the applicant in default of the underlying transaction.
2. The advance payment guarantee standby letter of credit (the ADVANCE PAYMENT STANDBY) - used to guarantee the applicant to be borne by the beneficiary of the advance payment obligations and responsibilities. Standby letters of credit are usually used in international project contracting, project owners paid to the contractor the contract price 10% -25% of the project prepayments, as well as an advance payment of export trade of the importer to the exporter.
3. Counter-guarantee standby letter of credit (the COUNTER STANDBY) - also known as standby letters of credit off, it supports additional standby letters of credit opened by the counter-guarantee standby letter of credit beneficiary or other commitments.
4. Financing to ensure that the standby letter of credit (FINANCIAL STANDBY) - to support the payment obligations, including any supporting documents to the borrower's repayment obligations. Standby letters of credit of foreign-invested enterprises to mortgage RMB loans are classified as finance guarantee standby letters of credit.
5. Tender standby letters of credit (TENDER the BOND STANDBY) - It is used to guarantee the applicant the successful execution of the contract obligations and responsibilities, if the bidder fails to fulfill the contract, the issuer must fulfill reparations obligations required under the standby letter of credit to the beneficiary. Tender the amount of standby letters of credit generally offer insured l% -5% (specific proportion depending on the provisions of the tender documents may be).
6. Direct payment of a standby letter of credit (the DIRECT PAYMENT STANDBY) - used to guarantee payment is due, especially due to the absence of any default payment of principal and interest. Already exceeded the traditional nature of guarantee, standby letters of credit just keep mainly used to guarantee enterprises to issue bonds or enters into a contract due to be paid principal and interest obligations.
7. Insurance standby letters of credit (INSURANCE STANDBY) - supports an insurance or reinsurance obligations.
8. Commercial standby letters of credit (COMMERCIAL STANDBY) - it refers to such payment can not otherwise guarantee the payment obligations of the applicant for goods or services.