QUESTIONS RELATED TO SBLC

QUESTION

Dear Duc Nguyen Huu

Sincere greetings!

How are you Bank Master?

I encountered a problem in my work. My buyer has agreed to the transaction, but the seller first needs the buyer to provide SBLC, because the buyer requires an SGS report from the seller.

This report requires a payment of US$10,000.

Although the amount is small, the seller believes that If the buyer regrets after providing the report, the seller will suffer losses.

So, the seller hopes that the buyer will provide SBLC (amount of US$10,000) as proof to guarantee the transaction.

In conclusion, my questions are:

1/ There are many types of SBLC, right?  Which SBLC is the safest for the buyer?

(if the buyer provides it to the seller, and the buyer will worry that the seller runs away, he will lose $10,000)

2/ Will banks provide SBLC with only $10,000?

3/ What if the buyer provides the SBLC while the seller does not provide the SGS report, and how can the SBLC be cancelled?

Please help me provide advice to the buyer on the above issues, thank you very much!

Best Regards ️

T.L

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ANSWER

Hi,

1, Like guarantees, SBLC has various types depending on the purpose of guarantee: payment or advance payment guarantee, performance guarantee, quality guarantee, warranty…

The buyer is usually requested to provide payment SBLC, that is to say, in case the buyer fails to pay according to the sales contract, the beneficiary can demand the SBLC issuer to pay under the SBLC.

In your specific case, perhaps the seller agrees to provide SGS Report but wants the buyer to pay SGS Report cost. The seller shall pay the cost in advance and claim payment under SBLC if the buyer fails to reimburse the seller for the cost that the sell has paid.

2. The buyer’s bank may agree to issue an SBLC with such amount if the buyer meets the bank’s requirements, e.g., deposit funds to secure the payment of the SBLC
3. To ensure that the seller will provide SGS Report, the SBLC may stipulate a condition that triggers the payment under the SBLC, for example:

In case of demand for payment being made under this SBLC, the beneficiary must present:

(1) Demand for payment certifying that the buyer has failed to pay the SGS cost

(2) SGS Report…

The SBLC may state the conditions for termination of the SBLC as follows:

This SBLC shall expire on, say, 30/12/20xx or the payment under the contract/SBLC has been made, whichever occurs first.

Hope it is helpful.

Best regards,

Mr. Old Man