Quoting from [Catalyst]:

Replying to [Ranger]:

I have absolutely no disagreement with you on the point that you have made. A BG can be issued for several reasons - including an advance under a Red Clause Credit.

The points of my article were these:

(1) An LC is a *direct* responsibility of the issuing bank. The buyer does not at all come into the picture (his relation is with the issuing bank and no further). The LC is the primary instrument in a transaction.

(2) In contrast, a BG comes into operation (is invoked) *only when* the buyer has failed to perform his bit. The BG issuing bank is therefore the *second* line of defence, it is not the primary party.

Quoting from [Poisson]:

Quoting from [Catalyst]:


Replying to [Ranger]:


I have absolutely no disagreement with you on the point that you have made. A BG can be issued for several reasons - including an advance under a Red Clause Credit.


The points of my article were these:


(1) An LC is a *direct* responsibility of the issuing bank. The buyer does not at all come into the picture (his relation is with the issuing bank and no further). The LC is the primary instrument in a transaction.


(2) In contrast, a BG comes into operation (is invoked) *only when* the buyer has failed to perform his bit. The BG issuing bank is therefore the *second* line of defence, it is not the primary party.

Don't feel shy...if you want to say something, please get on with it....!

Quoting from [Catalyst]:

Quoting from [Poisson]:

Quoting from [Catalyst]:



Replying to [Ranger]:



I have absolutely no disagreement with you on the point that you have made. A BG can be issued for several reasons - including an advance under a Red Clause Credit.



The points of my article were these:



(1) An LC is a *direct* responsibility of the issuing bank. The buyer does not at all come into the picture (his relation is with the issuing bank and no further). The LC is the primary instrument in a transaction.



(2) In contrast, a BG comes into operation (is invoked) *only when* the buyer has failed to perform his bit. The BG issuing bank is therefore the *second* line of defence, it is not the primary party.

Don't feel shy...if you want to say something, please get on with it....!

You are right, Iit's all about  what's the rules or regulation they're subject to, as we know the LC is subject to UCP 600 and ISBP (if expressly stated) , and International Bank Guarantee if it's Standby LC it's subject to UCP or ISP 98. but in my country there are regulation of BG from government that regulate differently with international rule.

Notes : if red clause LC wants to be guaranted, you can use green Clause ( red clause LC that countered by warehouse receipt as collateral)

Thanks

Quoting from [Catalyst]:



Bank Guarantees and LCs are financial instruments often used in inland or international trade when suppliers or vendors do not have established business relationships with their counterparts. The difference between the two instruments is the position of the bank relative to the buyer and seller of goods or services. The difference is as explained below.


A letter of credit is a bank’s DIRECT undertaking to the supplier (called the beneficiary) to pay. When a letter of credit is in use, the issuing bank does not wait for the buyer to default, and for the seller to invoke the undertaking.


In contrast, a guarantee is a written contract stating that IN THE EVENT the primary party (the buyer) is unable or unwilling to pay its dues to the supplier the bank, as guarantor to the transaction the BG issuer would pay (the client's debt) to the supplier.


In other words, a bank guarantee is an undertaking of a bank on behalf of its customer. But this comes into play ONLY WHEN the principal party (the buyer) has failed to pay its supplier. (Do note this key point.)


Essentially, the bank becomes a co-signer for its customer's purchases.


Hence, in a BG the initial claim is still settled primarily (i.e., first) against the bank's client, and not the bank itself. Should the client default, ONLY THEN would the bank (which has issued the BG) agree to pay for it's client's debts on behalf of its client. This is a type of contingent guarantee.


A bank guarantee, therefore, is more risky for the merchant and less risky for the bank. But this is not the case with a letter of credit (LC).


With a bank guarantee, if a client defaults the bank assumes liability. With a letter of credit, liability rests solely with the issuing bank (this being the key difference and the key advantage in an LC) which then must collect the money from its client.


Therefore, the principal character of an LC is that it is a potential claim against the bank, rather than a bank's client. An LC substitutes the bank's credit for its client's. The seller's risk is mitigated from the risk that the buyer will not pay to the risk that the BANK will be unable to pay, which is unlikely.


A letter of credit is less risky for the merchant, but more risky for a bank, though banks accept full liability in both cases.

Quoting from [Catalyst]:



Bank Guarantees and LCs are financial instruments often used in inland or international trade when suppliers or vendors do not have established business relationships with their counterparts. The difference between the two instruments is the position of the bank relative to the buyer and seller of goods or services. The difference is as explained below.


A letter of credit is a bank’s DIRECT undertaking to the supplier (called the beneficiary) to pay. When a letter of credit is in use, the issuing bank does not wait for the buyer to default, and for the seller to invoke the undertaking.


In contrast, a guarantee is a written contract stating that IN THE EVENT the primary party (the buyer) is unable or unwilling to pay its dues to the supplier the bank, as guarantor to the transaction the BG issuer would pay (the client's debt) to the supplier.


In other words, a bank guarantee is an undertaking of a bank on behalf of its customer. But this comes into play ONLY WHEN the principal party (the buyer) has failed to pay its supplier. (Do note this key point.)


Essentially, the bank becomes a co-signer for its customer's purchases.


Hence, in a BG the initial claim is still settled primarily (i.e., first) against the bank's client, and not the bank itself. Should the client default, ONLY THEN would the bank (which has issued the BG) agree to pay for it's client's debts on behalf of its client. This is a type of contingent guarantee.


A bank guarantee, therefore, is more risky for the merchant and less risky for the bank. But this is not the case with a letter of credit (LC).


With a bank guarantee, if a client defaults the bank assumes liability. With a letter of credit, liability rests solely with the issuing bank (this being the key difference and the key advantage in an LC) which then must collect the money from its client.


Therefore, the principal character of an LC is that it is a potential claim against the bank, rather than a bank's client. An LC substitutes the bank's credit for its client's. The seller's risk is mitigated from the risk that the buyer will not pay to the risk that the BANK will be unable to pay, which is unlikely.


A letter of credit is less risky for the merchant, but more risky for a bank, though banks accept full liability in both cases.

We are offering the leasing of bank instruments that can be used to obtain either LC or a bank guarantee.

For further information please email to michael@globalassetslev.com

Quoting from [Michael23]:

Quoting from [Catalyst]:




Bank Guarantees and LCs are financial instruments often used in inland or international trade when suppliers or vendors do not have established business relationships with their counterparts. The difference between the two instruments is the position of the bank relative to the buyer and seller of goods or services. The difference is as explained below.



A letter of credit is a bank’s DIRECT undertaking to the supplier (called the beneficiary) to pay. When a letter of credit is in use, the issuing bank does not wait for the buyer to default, and for the seller to invoke the undertaking.



In contrast, a guarantee is a written contract stating that IN THE EVENT the primary party (the buyer) is unable or unwilling to pay its dues to the supplier the bank, as guarantor to the transaction the BG issuer would pay (the client's debt) to the supplier.



In other words, a bank guarantee is an undertaking of a bank on behalf of its customer. But this comes into play ONLY WHEN the principal party (the buyer) has failed to pay its supplier. (Do note this key point.)



Essentially, the bank becomes a co-signer for its customer's purchases.



Hence, in a BG the initial claim is still settled primarily (i.e., first) against the bank's client, and not the bank itself. Should the client default, ONLY THEN would the bank (which has issued the BG) agree to pay for it's client's debts on behalf of its client. This is a type of contingent guarantee.



A bank guarantee, therefore, is more risky for the merchant and less risky for the bank. But this is not the case with a letter of credit (LC).



With a bank guarantee, if a client defaults the bank assumes liability. With a letter of credit, liability rests solely with the issuing bank (this being the key difference and the key advantage in an LC) which then must collect the money from its client.



Therefore, the principal character of an LC is that it is a potential claim against the bank, rather than a bank's client. An LC substitutes the bank's credit for its client's. The seller's risk is mitigated from the risk that the buyer will not pay to the risk that the BANK will be unable to pay, which is unlikely.



A letter of credit is less risky for the merchant, but more risky for a bank, though banks accept full liability in both cases.

We are offering the leasing of bank instruments that can be used to obtain either LC or a bank guarantee.

For further information please email to michael@globalassetslev.com

Dear Sir,


thanks for this your tips.


I want to ask one more thing, i have one deal is going with hongkong customer who want to buy some good from me. he only ready in 100% lc from hongkong.


this product which i will buy from one of the manufacturer and he will give me 30 days credit.and i am affraid that what if they will not clear the good from port ? what i cant get money from bank as per lc ?


so can you suggest me what i have to reply to him so i can get secure lc.


and also what i have to ask for lc related point that i can be sure for get money ?


Waiting for your reply.


Regards,


Vishal

pramukht@gmail.com

www.pramukhtrading.in

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Quoting from [Pramukh Trading]:


Dear Sir,



thanks for this your tips.



I want to ask one more thing, i have one deal is going with hongkong customer who want to buy some good from me. he only ready in 100% lc from hongkong.


this product which i will buy from one of the manufacturer and he will give me 30 days credit.and i am affraid that what if they will not clear the good from port ? what i cant get money from bank as per lc ?


so can you suggest me what i have to reply to him so i can get secure lc.


and also what i have to ask for lc related point that i can be sure for get money ?


Waiting for your reply.


Regards,


Vishal


pramukht@gmail.com
www.pramukhtrading.in

Sorry to be so late in responding.

If you submit documents exactly as per the LC terms, there is no reason why the documents will not be negotiated by the nominated bank (you might require a bill discounting limit with that bank - it could be your bank too), or for the issuing bank to pay.

The actual buyer (the applicant) has nothing to do as far as payment against an LC is concerned.

Quoting from [Catalyst]:

Quoting from [Pramukh Trading]:



Dear Sir,




thanks for this your tips.




I want to ask one more thing, i have one deal is going with hongkong customer who want to buy some good from me. he only ready in 100% lc from hongkong.



this product which i will buy from one of the manufacturer and he will give me 30 days credit.and i am affraid that what if they will not clear the good from port ? what i cant get money from bank as per lc ?



so can you suggest me what i have to reply to him so i can get secure lc.



and also what i have to ask for lc related point that i can be sure for get money ?



Waiting for your reply.



Regards,



Vishal



pramukht@gmail.com

www.pramukhtrading.in

Sorry to be so late in responding.

If you submit documents exactly as per the LC terms, there is no reason why the documents will not be negotiated by the nominated bank (you might require a bill discounting limit with that bank - it could be your bank too), or for the issuing bank to pay.

The actual buyer (the applicant) has nothing to do as far as payment against an LC is concerned.

Dear Vishal

I am new in this site; and found it very interesting.

I think we all should cooperate to make international trade more simple and safe to everybody.

I am not sure to understand your question; so please let me know if this is correct:

Hong Kong customer want to buy some product from you; and he will pay through a L/C.

You will buy this same product from a local manufacturer, who will give you 30 days credit.

Your concern is what happen if your Hong Kong buyer do not clear the goods from the port...

If this is the case; then you dont have to worry.

You just have to make sure that L/C is irrevocable, 100% payable at sight, against first presentation of clean (on board - if by ship) shipping documents to the advising bank (your bank).

For more safety and quick payment purposes, you may also ask your Hong Kong buyer to make (issue) CONFIRMED L/C.

Then, you have to carefully (VERY CAREFULLY) check (previous to shipment) that documents required by L/C are those that you have negotiated with your Hong Kong buyer; and that you will be able to get after shipment.

If you take this simple steps, then you will not have problems to collect your mony against shipment.

Good luck!!

GORZAK