Trade Finance Expertise

URDG 758 article 23 sets out detailed provisions for the handling of an extend or pay demand. Article-23, URDG 758 a. Where a complying demand includes, as an alternative, a request to extend the expiry, the guarantor may suspend payment for a period not exceeding 30 calendar days following its receipt of the demand. First thing to note is that the demand must be a complying demand for this reason. If it is not a complying demand, the guarantor should either reject the demand or ask for a waiver from the counter‑guarantor or instructing party, as the case may be. In case it is a complying demand, the guarantor has the option either to pay the demand or to suspend payment for 30 calendar days following the day of the receipt of the demand. During this period of suspension, the guarantor may make a complying demand under the counter‑guarantee so that the counter‑guarantor would have the sufficient time to contact the applicant or instructing party to make the decision on the basi

A guarantor must pay in the currency specified in the guarantee, and whatever that currency may be. Since it would be unusual for a guarantee to fix a monetary sum without identifying the currency, this provision should not cause too much problems. Article -21 URDG-758  Currency of Payment   A. The guarantor shall pay a complying demand in the currency specified in the guarantee, except exceptions given in below sub article.   B. If the guarantor is not able to make payment on any date on which a payment is to be made under the guarantee due to: The guarantor is unable to make payment in the currency specified in the guarantee due to an impediment beyond its control. It is illegal under the law of the place for payment to make payment in the specified currency in the guarantee. In these cases, a guarantor shall make payment in the currency of the place for payment even if the guarantee indicates that payment can only be made in the currency specified in the guarantee. The instr

Upon presentation to a guarantor, it is important that we know how long the guarantor may take to examine the presentation and then pay or reject the demand. Similarly, prior to UCP 500 provided that the time limit for checking a presentation under a letter of credit should be a reasonable time not exceeding seven banking days. The concept of a ‘reasonable time’ created problems over the actual time allowed. However, a new approach was adopted in UCP 600 so the nominated bank and the issuing bank were each allowed five banking days to check the documents. Time for examination of demand and payment A. If a presentation of a demand does not indicate that it is to be completed later, the guarantor shall, within five business days following the day of presentation, examine that demand and determine if it is a complying demand. This period is not shortened or otherwise affected by the expiry of the guarantee on or after the date of presentation. However, if the presentation indicates

This article sets out the principal provisions relating to the examination of a demand and very similar to Article-14 of UCP-600, one can easily understand if handles the commercial  letter of credit.   Article-19 URDG-758-Examination A. The guarantor shall determine, on the basis of a presentation alone, whether it appears on its face to be a complying presentation. An examiner is not required to make any enquiry about any aspect of the presentation in order to be able to determine whether it is a complying presentation. However, one need to check that whether the demands comply with the terms and conditions of a guarantee, URDG-758 and ISDGP; only bases upon the guarantor’s visual examination of the documents. It cannot hold someone else’s understanding nor information obtained from some other sources such as search engine. The sentence ‘on its face’ does not refer to a simple front and the back of the demand/document but extends to the review of data within a document in order to

A demand need to contain the reference for the guarantor to identify the  relationship with the guarantee. Each demand is separate and a guarantor may start the examination process once able to identify the guarantee reference .  Article-18 URDG Separateness of each demand A. A demand that is not a complying demand or withdrawing a demand does not waive or otherwise prejudice the right to make another timely demand, whether or not the guarantee prohibits partial or multiple demands. Each demand is separate from other demand. Even If a partial or multiple demands are prohibited, and beneficiary presents  a non-complying demand which rejects, then the beneficiary can present another demand which comply as per guarantee terms on or before maturity date or event. A demand will not be counted, by the time it is comply and guarantor pays off. . B . Payment of a demand that is not a complying demand does not waive the requirement for other demands to be complying demands. Payment of a n

Article 16 relates to the obligations  of receiver of the demands to notify the counter guarantor and/or instructing party without delay. Article-16 URDG Information about demand   The guarantor shall without delay inform the instructing party or, where applicable, the counter-guarantor of any demand under the guarantee and of any request, as an alternative, to extend the expiry of the guarantee. The counter-guarantor shall without delay inform the instructing party of any demand under the counter-guarantee and of any request, as an alternative, to extend the expiry of the counter-guarantee. This article relates to the passing of information down in sequence from the guarantor to the counter‑guarantor and to the instructing party without delay that it has received a demand.  The guarantor must pass on information about the demand without waiting to check whether the demand is a complying demand. This enables the counter‑guarantor and/or the instructing party to know promptly that a