WHAT IS A STAND-BY LETTER OF CREDIT (SBLC) ?
Whereas a standard documentary credit is settled if the beneficiary fulfills the credit requirements, a SBLC is settled when the beneficiary declares the non-payment of the debt. It is therefore more a guarantee of payment than an actual means of payment. A STANDBY IS FAR CHEAPER AND MUCH MORE EFFICIENT THAN A LETTER OF CREDIT! Standby are ruled either by the ISP98 – International Standby Practices 1998 (ICC Publication 590), by the UCP 500, related to documentary credit and standby, or by the UN Convention on Independent Guarantees and Stand-by Letters of credit. WHY SENDING CUSTOMERS INSTRUCTIONS FOR OPENING A LETTER OF CREDIT ? Over 65% of the letters of credit are subject to reserves from banks, due to discrepancies. In order to avoid this, it is strongly recommended to send instructions for opening letter of credit with every pro forma invoice or contract, in order to facilitate the opening of the documentary credit and avoid any later expensive modifications. LEAD-eXPORT may help
