Evergreen Guarantee - Notice of not to renew

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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muimui07
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Joined: Wed Nov 21, 2018 6:48 pm
First Name: Anne
Last Name: Miao
Organization: HSBC
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Evergreen Guarantee - Notice of not to renew

Post by muimui07 »

Applicant served notice of not to renew (the notice) for evergreen NG to beneficiary through issuing bank ie guarantor.

Beneficiary wrote to issuing bank that they declined the notice due to non compliant of certain business document from the applicant. Hence, BG should continue to auto renew.

Noted BG has the clause whereby upon serving notice to benef, they could either ask for one last extension of the BG or they could draw on the BG

So as an issuing bank, the guarantor; what should we do other than relaying the beneficiary messages to applicant?

Can we reject the benef letter citing the bg clause mentioned above?

Thank you.
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picant
Posts: 1963
Joined: Wed Aug 20, 2008 1:49 pm

Re: Evergreen Guarantee - Notice of not to renew

Post by picant »

Hi Pal,

I understand that the Bank Guarantee contains an extend or pay facility too. So, the risk for the applicant and issuing bank is that , within the validity of the guarantee, the beneficiary may call the guaranteed amount or asks for a 1 year extension.
This is a deal between applicant and beneficiary, Issuing bank must wait for their agreement and acts consequently.
Other comments appreciated
Ciao
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