Direct pay standby

nadit · Post by **nadit** » Thu Jan 08, 2009 10:15 pm

I have new importer from USA. we had a number of email conversation. the importer said that he wanna pay by a direct pay standby. i have check the related rules; isp. but could figure it out correctly. could some help me out how i am going to get my payment

picant · Post by **picant** » Fri Jan 09, 2009 12:48 am

Hi Pal,

I read about Direct pay sb in a Citibank booklet "an introduction to letters of credit" year 2000, where there are illustrated various wordings of L/c , SB under ISP98 etc. (Frankly Italian Banks are very cautious with ISP98). Comment is "The beneficiary is expected to draw under the Standby Letter of Credit to obtain payment when due on the underlying contract. The payment type Standby Letter of Credit functions as anmmediate, no-default payment mechanism, under which the beneficiary receives funds of the issuing bank rather than the applicant"

Further problem, IMHO, the L/C is under ISP 98 but as to matters not addressed by ISP98 is subject to and governed by the New York State and applicable US federal law + UCP in force.

I think that a Stand By L/C as per ICC UCP 600, could be more advisable.

However I have no direct experience with such type of payment instrument.

Naturally any comments appreciated

Ciao

shahriar · Post by **shahriar** » Fri Jan 09, 2009 10:31 am

ISP is a manufacturer of great confusion and debate for me in relation of UCP600. the reference of direct pay has been used only once in ISP

These Rules are intended to be applied to standby letters of credit (including performance, financial, and direct pay standby letters of credit).

CDCS study guide defines it as

intended to be the primary means of payment and may or may not be linked to a default in performance or payment

thus direct pay standby is a different idea from others working under the same set of rule. i agree with picant, its like a ordinary LC(UCP version) under ISP98.

since there is no instruction in ISP on how a particular document is to be examined and what will be the standard content of those document, i guess a mere draft will be sufficient to make a demand.

i have looked for the usages of directly payment standby. this is mainly used to pay of dues which are recurring in manner; installment payment or monthly bills. this gives me a feeling that direct pay standby is similar to a revolving letter of credit where there is not much requirement for additional document.

iLC · Post by **iLC** » Fri Jan 09, 2009 7:26 pm

dear shahriar,

its not always necessary to produce a draft for a claim. for example i guess one is not going to prepare a draft for claiming monthly bill. besides, though ISP does not talk about the detail content of any document, still it is possible to ask for documents given that their content is well defined. actually ISP is an extremely flexible rule; much more than UCP. it can be used for almost anything if carefully designed

picant · Post by **picant** » Fri Jan 09, 2009 8:24 pm

Hi Pal,

as previous said in Italy ISP98 had little fortune, I mean not so used! Have you something to post or to send to me showing that ISP98 if good working, so i can put it on discussion next meeting of my group?
I partecipate to the italian translation of ISP98 and I have a copy of the relative commentary, but the few times an Italian Company received a SB under ISP98 , it rejected in favour of L/C or at least a SBLC:

Please contact me at picchi.antonio@virgilio.it

Thanks and Ciao