Blocking customer liability

With the introduction of Uniform Rules for Documentary Guarantee or URDG 758, the rules for Documentary Guarantee seem to be popular again. It can be imagined from the increasing number of questions that have popped up in recent days. Documentary Guarantee Forum is an effort to develop a platform to discuss these questions.
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srini.sri4u
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First Name: Srinivasan
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Blocking customer liability

Post by srini.sri4u »

Hi all,

Scenario:

Mr.X, a customer of bank ABC, approaches his back to issue a SBLC.....for $100,000 and it is revolving every year(cumulative) for 5 yrs.Kindly clarify on the limit to be blocked on customer's liability.....ie $100,000 or $500,000. Please explain the reason too.

Regards
SRN
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picant
Posts: 1962
Joined: Wed Aug 20, 2008 1:49 pm

Unclear

Post by picant »

Hi Pal,


Is the sblc valid for one year and automatically extended for further 4 years or ....?
Please explain in full.
Thanks
Regards














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leekaiyin55
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First Name: Lee
Last Name: Kai Yin
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Blocking customer liability

Post by leekaiyin55 »

Dear Picant

It should be booked for liability $500,000 in 1st year with reducing $100,000 yearly for subsequent 2nd, 3rd and 4th year till it is expired on expiry date in 5th year. Supposing that there is no drawing in between and SBLC is governed by either UCP600 or ISP98.

Reason: SBLC is irrevocable in nature in the sense that the issuing bank can discharge itself without the consent of the beneficiary and/or confirming bank, if any.

Thank you.
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