SBLC (standby letters of credit), also known as guaranteed letter of credit, refers to the letter of credit opened for the purpose of loan financing or guaranteed debt repayment instead of paying off the price of commodity transactions. The issuing bank guarantees that if the applicant fails to perform its obligations, the beneficiary can be reimbursed by the issuing bank as long as he draws a bill of exchange to the issuing bank according to the provisions of the standby letter of credit and attaches the statement or supporting documents of the applicant's failure to perform his obligations. The standby letter of credit is only applicable to some provisions of the uniform customs and Practice for Documentary Credits (No. 500), which are part of UCP600.
Multifunctional financial products integrating guarantee, financing, payment and related services are widely used in international business because of their wide range of uses and flexible operation.
In December 1995, the United Nations General Assembly adopted the Convention on independent guarantees and standby letters of credit drafted by the United Nations Commission on international trade law; On January 1, 1999, ICC Publication No. 590 international standby letter of credit practices (ISP98) came into force as an authoritative international practice specifically applicable to standby letters of credit. According to the definition of "standby letter of credit is an irrevocable, independent, documentary and binding commitment after it is issued" in ISP98, as a special standard for standby letter of credit, in addition to allowing it to exist independently, the revision should consider whether UCP600 is still necessary to involve standby letter of credit. The final majority opinion is that the standby letter of credit can still continue to apply to UCP600. 1. Irrevocability. Unless otherwise specified in the standby certificate or with the consent of the other party, the issuer shall not modify or revoke its obligations under the standby certificate. 2. Independence. The performance of the issuer's obligations under the standby letter of credit does not depend on: ① The issuer's right and ability to obtain payment from the applicant. ② The beneficiary has the right to receive payment from the applicant. ③ A reference in a standby letter to any reimbursement agreement or underlying transaction. ④ Whether the issuer knows about the performance or default of any repayment agreement or underlying transaction. 3. Follow unisexuality. The obligations of the issuer depend on the presentation of documents and the apparent examination of the required documents. 4. Mandatory. The standby letter of credit is binding after it is issued. It is mandatory for the issuing bank whether the applicant authorizes it, whether the issuer charges a fee, or whether the beneficiary receives it or takes action due to reliance on the standby letter of credit or amendment. Standby letter of credit, also known as guarantee letter of credit, performance letter of credit and commercial bill letter of credit, is the certificate that the issuing bank promises to undertake certain obligations to the beneficiary at the request of the applicant, that is, the issuing bank guarantees that when the issuing applicant fails to perform its obligations, the Beneficiary only needs to draw a bill (or not draw a bill) to the issuing bank in accordance with the provisions of the standby letter of credit, The reimbursement of the issuing bank can be obtained by submitting the statement or supporting documents of the applicant's failure to perform its obligations. Standby letter of credit belongs to bank credit, and the issuing bank guarantees that the issuing bank will pay when the applicant fails to perform his obligations. If the applicant has fulfilled the agreed obligations, the letter of credit does not need to be used. Therefore, for the beneficiary, standby letter of credit is a way to obtain compensation in case of breach of contract by the applicant, which has the nature of guarantee. At the same time, the standby letter of credit has the legal characteristics of the letter of credit. It is independent of the transaction contract it guarantees as the basis for its opening. The issuing bank deals with the documents related to the letter of credit, but has nothing to do with the transaction contract. To sum up, standby letter of credit not only has the general characteristics of letter of credit, but also has the nature of guarantee. The payment responsibility of the standby L / C issuing bank is different from that of the documentary L / C issuing bank. In the standby letter of credit business, the standby letter of credit is a kind of bank guarantee and a kind of bank credit. Once it is opened, the issuing bank must bear the primary payment responsibility. The payment responsibility of the issuing bank of documentary credit is also primary. As long as the beneficiary submits the documents specified in the credit and the documents are "consistent", the issuing bank must pay immediately, regardless of whether the applicant makes payment at this time.
STANDBY LETTER OF CREDIT APPLICATION