A standby L/C is not a payment instrument, it is a guarantee. The issuing bank undertakes to pay against presentation of certain documents stating that an event of default has occurred. You cannot get a "term" standby that say's it will be paid in 30 days (for example) therefore to say it is payable at sight is redundent.
Banks that issue Standby L/C's will process claims and effect payments within their own service delivery standards.
Whether you believe it or not, there are even German Senior banker's not understanding the difference between a payment guarantee and a letter of credit! :-((
It's annoying and depressing.
Besides in my comment I have silently assumed that it is a standby payable "upon first written request" and not something like an accessory "Bürgschaft" which you will remeber from your German time.
But it also depends to how the standby is made out.
In general - as under UCP 500, UCP 600 or ISP 98 a standby is an abstract security for the non-fulfilment of applicants obligations, i.e. payment is due upon fulfilment of documentary conditions.
Then, payment should take place within three banking days. Plus two banking days transfer time makes five banking days or seven calendar days until funds reach beneficiaries. As I said, "should". Under neither rules do you find a specific deadline. And the customs in the different countries are different, too! So, it's best not to expect too much - but after ten calendar days, it should have finally been paid!
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On the other hand "standby" doesn't mean it definitely is submitted to any ICC-Rules and it doesn't necessarily mean it is an abstract security at all.For instance, German Law doesn't define letters of credits nor abstract guarantees as such!
It could also be an accessory security, like the original form of an insurance bond, a french "caution" or a German "Bürgschaft". These bank/insurance securities are only accessory, meaning the "guarantor" has to check, whether the applicant is in deed in default. This - of course - cannot be done in only three days.
Lets all note that a stanby is not the regular LC but a modern form of a Bank guarantee covering a specified event under certain conditions unlike a general bank guarantee. It is governed by ISP 98 and it is also provide for in the UCP 600.
Note that the fields in ISP 98 are not rather reffered to as Rules and not Articles.
Unlike the normal L/C which is based on performance, a Standby covers a default situation, it has got terms which the beneficiary can invoke to claim payment in case of default.
According to rule 2.01B of ISP 98 Standby can be at Sight or deferred by timely acceptance but no provision is made as to how long it takes to hanour sight payment. This i a "lacuna" or loophole in the rule but no one can take advantage of it if they do dont effect payment within a time frame that can be regarded as reasonable which presumably can be like for any other L/C payment i.e 3 working days.
Logically speaking if one looks at rule 5.01 which talks about giving notice of dishonour within 3 days or so but not beyond 7 working days. This definately fixes the responsibility of Banks to either honour sight payment within those days or give a notice of dinshonour.
But what is an alternative to to dishonouring a credit? Its acceptance or payment.
Standby L/C
A standby L/C is not a payment instrument, it is a guarantee. The issuing bank undertakes to pay against presentation of certain documents stating that an event of default has occurred. You cannot get a "term" standby that say's it will be paid in 30 days (for example) therefore to say it is payable at sight is redundent.
Banks that issue Standby L/C's will process claims and effect payments within their own service delivery standards.
Standby LC
Dear Peter
I have never handled standby LC .However when i saw article 2.01b which states an issuer to honor .......by paying amount demanded of it at sight.
Could you please let me know why standby can not be payable at sight.
Suppose if standby lc states the credit is available by presentation of your at sight draft.
Dear Peter
Whether you believe it or not, there are even German Senior banker's not understanding the difference between a payment guarantee and a letter of credit! :-((
It's annoying and depressing.
Besides in my comment I have silently assumed that it is a standby payable "upon first written request" and not something like an accessory "Bürgschaft" which you will remeber from your German time.
-Each long journey starts with a small step-
Best regards
Frammi
There is no official deadline,
but I would expect payment to be received within 7 to 10 calendar days from receipt with issuing/nominated bank
-Each long journey starts with a small step-
Best regards
Frammi
Dear Frammi I feel as per
Dear Frammi
I feel as per article 2.01 c and 5.01,it appears that the time for at sight payment should be within 3 days
If it was my Standby it would commonly be paid within 2 days
But it also depends to how the standby is made out.
In general - as under UCP 500, UCP 600 or ISP 98 a standby is an abstract security for the non-fulfilment of applicants obligations, i.e. payment is due upon fulfilment of documentary conditions.
Then, payment should take place within three banking days. Plus two banking days transfer time makes five banking days or seven calendar days until funds reach beneficiaries. As I said, "should". Under neither rules do you find a specific deadline. And the customs in the different countries are different, too! So, it's best not to expect too much - but after ten calendar days, it should have finally been paid!
____________________________________
On the other hand "standby" doesn't mean it definitely is submitted to any ICC-Rules and it doesn't necessarily mean it is an abstract security at all.For instance, German Law doesn't define letters of credits nor abstract guarantees as such!
It could also be an accessory security, like the original form of an insurance bond, a french "caution" or a German "Bürgschaft". These bank/insurance securities are only accessory, meaning the "guarantor" has to check, whether the applicant is in deed in default. This - of course - cannot be done in only three days.
I hope this explained more than it confused.
-Each long journey starts with a small step-
Best regards
Frammi
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Dear all Lets all note
Dear all
Lets all note that a stanby is not the regular LC but a modern form of a Bank guarantee covering a specified event under certain conditions unlike a general bank guarantee. It is governed by ISP 98 and it is also provide for in the UCP 600.
Note that the fields in ISP 98 are not rather reffered to as Rules and not Articles.
Unlike the normal L/C which is based on performance, a Standby covers a default situation, it has got terms which the beneficiary can invoke to claim payment in case of default.
According to rule 2.01B of ISP 98 Standby can be at Sight or deferred by timely acceptance but no provision is made as to how long it takes to hanour sight payment. This i a "lacuna" or loophole in the rule but no one can take advantage of it if they do dont effect payment within a time frame that can be regarded as reasonable which presumably can be like for any other L/C payment i.e 3 working days.
Logically speaking if one looks at rule 5.01 which talks about giving notice of dishonour within 3 days or so but not beyond 7 working days. This definately fixes the responsibility of Banks to either honour sight payment within those days or give a notice of dinshonour.
But what is an alternative to to dishonouring a credit? Its acceptance or payment.
charlee.