Article-6 and 7-URDG-758

Article 6 explains us that guarantors deal with documents not with the goods, services or performance and article 7 gives an idea about non documentary conditions.


URDG 758 - Article 6-Documents v. goods, services or performance

This article is similar to UCP600 article-5. Guarantees are documentary in nature guarantors deal with documents, not with goods, services or performance to which the documents may relate.

URDG 758 - Article 7-Non-documentary conditions

A guarantee should not stipulate a condition other than a date or the lapse of a period without specifying a document to indicate compliance with that condition. For an example it is best practice that guarantee states clearly such as “a demand can only be made after dated 01/01/2023.

A guarantee may indicate lapse of period that guarantee will be expired after 15 days upon submission of certificate of compliance by XYZ Company.

However, if guarantee does not specify any such document and the fulfilment of the condition cannot be determined from the guarantor's own records which means if guarantor is not able to identify or suffice the requirement with their debit and credit records (received or sent by their account).

For an example an advance payment guarantee states “a demand can only be made after receipt of USD 1,00,000.00 as advance payment”. In this situation a guarantor can identify with their statement of account and condition will deemed to be valid conditions if a credit of USD 1,00,000.00 received.

If a guarantee stipulates an index (as below) without calling for a supporting document then the amount will reduced or exceed as specified in index and will deemed to be not a non-documentary condition.

Date                    Guarantee Amt.

01-JAN-23          USD1,00,000.00
01-JUL-23           USD50,000.00
31-DEC-23          USD25,000.00

In the above given example it is clear that guarantee amount will be reduced on the given fixed date as per guarantee terms, this will not deemed to be a non-documentary condition.

What is non-documentary conditions?

A conditions that stipulated in the credit and not able to identify though guarantor’s own record or guarantee index and no supporting document calls for.

For an example guarantee will expire upon shipment, guarantee does not call for any document as a proof of shipment nor any date or lapse of period given.

Last para of this article states, in case a guarantee calls for a document and stipulates the condition as well but the presented document is not meeting and matching the requirement of the guarantee terms, will not be treated as complying presentation and will be quoted as discrepancy.

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Chandan Kumar Yadav
My name is Chandan Kumar Yadav CDCS, CSDG, CITF, PGDIBO,AML-KYC, CCFE, MLIBF, CSF, 6SIGMA a trade finance professional with an experience of 11 years whereas worked with several stages of letter of credit, bank guarantee and on other payments methods of trade transactions such as documentary collection, open accounts, SBLC etc., I have a fair understanding of Trade Based Money Laundering as well, Blogging related to Trade Finance is my passion and I want to share which I know and learn from others, I have worked with Wells Fargo, Yes Bank Limited and Bank of America, India which helped me to gain knowledge, view of Trade Finance and importance of International Trade in world's economy. Trade Finance is thumping product, everyday we are learning something new so in order to keep learning I started this as one of the platform. . Let's Learn Together

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