Trade Finance Expertise

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

Guarantees are documentary in nature and purely based on the terms and conditions along with the rules and law as applicable. Let’s look at the article 8 of URDG-758 to understand the require parties and details which need to be mention to make it valid conditional undertaking. Article-8-URDG-758 Content of instructions and guarantees All instructions should be clear in the application received from either applicant or instructing party to issue the guarantee. When guarantee is being issued all the information must be clearly re-keyed as per application or the requirement. It should avoid excessive details which may make it lengthy and complicated. It is recommended that all guarantees should specify: Applicant with name and address. B eneficiary with name and address. Guarantor's name with issuing branch address. A reference number or other information identifying the underlying relationship on which guarantee may be based. A reference number or other information iden

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. G uarantees  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 c