Standby Letter of Credit

The Standby Letter of Credit is a document that serves as a guarantee of payment to the beneficiary in case the applicant fails to fulfill their obligations. It is an important document in international trade and finance as it provides security and assurance to the parties involved.

 

The document starts with a quote that includes a utilisation request. The utilisation request is a formal request made by the applicant to arrange for a letter of credit to be issued by the issuing bank. The request includes the proposed utilisation date, the facility to be utilised, the amount, and the specified terms and conditions in the letter of credit.

 

The utilisation request also confirms that the conditions in the agreement will be satisfied on the date of the request. This ensures that the applicant is eligible to request the issuance of the letter of credit.

 

The document includes an attachment of a proposed letter of credit. This attachment provides detailed information about the terms and conditions of the letter of credit, including the beneficiary, the expiration date, and any specific requirements or instructions.

 

The document concludes with a statement that the utilisation request is irrevocable. This means that once the request is made, it cannot be withdrawn or canceled without the consent of the beneficiary.

 

Schedule 1 of the document requests the attachment of the proposed letter of credit. This schedule serves as a reminder to the applicant to include the necessary documentation with the utilisation request.

 

Overall, the Standby Letter of Credit is a crucial document in international trade and finance that provides security and assurance to the parties involved. It outlines the details of the utilisation request and includes an attachment of the proposed letter of credit.

How to use this document?

1. Make a utilisation request: Prepare a formal request to arrange for a letter of credit to be issued by the issuing bank. Include the proposed utilisation date, the facility to be utilised, the amount, and the specified terms and conditions in the letter of credit.

2. Ensure satisfaction of conditions: Confirm that the conditions in the agreement will be satisfied on the date of the utilisation request. This ensures eligibility to request the issuance of the letter of credit.

3. Attach proposed letter of credit: Include a copy of the proposed letter of credit with the utilisation request. The letter of credit should provide detailed information about the beneficiary, expiration date, and any specific requirements or instructions.

4. Declare irrevocability: State that the utilisation request is irrevocable, meaning it cannot be withdrawn or canceled without the consent of the beneficiary.

5. Follow Schedule 1: Remember to attach the proposed letter of credit as requested in Schedule 1 of the document. This serves as a reminder to include the necessary documentation with the utilisation request.

By following these steps, you can effectively use the Standby Letter of Credit to provide security and assurance in international trade and finance transactions.