Trade Finance Expertise

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

Demand Requirements means  the order of and procedures related to the making of a demand, this article provide some basic and mandatory requirements while making the demands to secure the interests of applicant and beneficiary. Article-15 URDG-758 Requirements for demand A. A demand under the guarantee shall be supported by other documents as well specified in the guarantee, and in any event by a statement, by the beneficiary, indicating in what respect the applicant is in breach of its obligations under the underlying relationship. This statement may be in the demand or in a separate signed document accompanying or identifying the demand. There is a requirement for a statement of breach with demand, whether or not expressly required by the terms of the guarantee, any demand must be supported by a statement by the beneficiary indicating in what respect the applicant is in breach of its obligations under the underlying relationship. This creates a balance between the interests of

A guarantee is an irrevocable undertaking issued by guarantor's to honor the demands upon presentations of valid demands as per terms of the guarantee. URDG-758-Artile-14-Presentation A. A presentation can be made only to the guarantor not to an agent of the guarantor and: Presentation must be made at the place indicated in the guarantee for presentation. If no place is specified, the presentation must be made at the place of issue of the guarantee. A Presentation must be made on or before expiry date or event. This means that the documents must be delivered to the guarantor on or before the expiry date or event. Only dispatch of the presentation before expiry is not sufficient. B. A presentation has to be complete unless it indicates that it is to be completed later. In that case, it shall be completed on or before expiry and the examination period of 5 business day’s start from the following the day when it is completed. This sub-article allows that presenter can make an in

The obligation of the guarantor does not depend on the actual liability of the applicant to the beneficiary under the underlying relationship. It is an undertaking to pay a specified sum on demand as per guarantee terms. Article  12 URDG-758 Extent of guarantor's liability under guarantee A guarantor is liable to the beneficiary only in accordance with, the terms and conditions of the guarantee and, these rules so far as consistent with those terms and conditions, up to the guarantee amount. A guarantor is liable to pay demands which complies with terms of the guarantee, URDG-758 and ISDGP, up to the maximum guarantee’s amount. Article 13 URDG-758 Variation of amount of guarantee A guarantee may provide for the reduction or the increase of its amount on specified dates or on the occurrence of a specified event under the terms of the guarantee which results in the variation of its amount. In order to ensure that the guarantor is able to know the value of the guarantee at any o

This Article of URDG-758 is almost similar to article-10 of UCP-600 rules for documentary credit. People who have already handled the commercial letter of credit can easily co-relate. Amendments A-When guarantor receives the instruction to issue an amendment to the guarantee, if the guarantor for whatever reason is not prepared or is unable to issue that amendment, the guarantor shall without delay so inform the party that gave the guarantor its instructions . A guarantor is under no obligation to accept instructions to issue an amendment unless it has previously agreed to do so. There may be various reasons that guarantor is not in a position to issue the amendment to the guarantee such as exposure expired, not sufficient limits or bank regulatory guidelines, In these situations guarantor should inform the applicant or instructing party as the case may be that they will not be able to issue the amendment. B- An amendment made without beneficiary’s agreement is not binding on the

A guarantee is an irrevocable undertaking. There may be a situation when banks/entities are not in a situation to issue the guarantee due to exposure, regulations, and bank’s internal policy etc., In that case one will not take the applicant or instructing party application in consideration for issuance of the guarantee. Article-9-URDG-758 Application not taken up There may be several reasons that bank/entities (issuer) may deny to issue the guarantee such as exposure expired, no sufficient limit or not agree to do so etc. When at the time of receipt of the application if the banks/entities are not prepared or unable to issue the guarantee, they should without delay so inform the party that gave the instructions. Article-10-URDG-758 Advising of guarantee or amendment a. A guarantee can be advised to a beneficiary by an advising party. By advising a guarantee, either directly or by utilizing the services of another party (second advising party), the advising party signifies to the