non operative lc and performance bond

we want to have 2% perfromance bond guarantee issued by seller, before we issue a irrevocable lc at sight. the idea is if the seller is not genuine we do not want our lc expenses to occur. but seller says they will open the PBG 2% only after recieving the Non-operative version o the LC. however, our bank says as per UCPDC norms governing the intrnational procedures for LC opening, there is no such term as non-operative LC. we want an immediate solution to this fact. so that we are no at any risk, before opening of the LC documentary credit

Quoting from [bitchem]:

we want to have 2% perfromance bond guarantee issued by seller, before we issue a irrevocable lc at sight. the idea is if the seller is not genuine we do not want our lc expenses to occur. but seller says they will open the PBG 2% only after recieving the Non-operative version o the LC. however, our bank says as per UCPDC norms governing the intrnational procedures for LC opening, there is no such term as non-operative LC. we want an immediate solution to this fact. so that we are no at any risk, before opening of the LC documentary credit

It appears you may be a broker or an agent being the first beneficiary on a transferable L/C.  If your looking for an MT 705 on the transferable part of an L/C its not going to happen.  The other fact remains, why would you consider opening an L/C to a company you have not verified.

But, on the other hand if the seller truly wants your business then I see no reason not to issue a performance bond.  The problem as I see it is more a contractual problem than a payment problem.  Are you refering to an L/C without a formal contract?  Performance bonds are issued on contracts not L/C's for failures to comply to the specifics within the body of the contract.

Anyone, thats traded internationally knows that L/C's have nothing to do with contracts between parties.  Also, I feel that your bank branch may not fully understand L/C's if they actually refered to something called UCPDC.  UCP 600 is the only standard on all types of documentary credits, ISP 98 is for Standby Letters of Credit, ICC publication 458 on Demand Guarantees (BG'S), and URC 522 Documentary Collections.

I will go one better though, I invite you to contact one of Alibaba's members who is an expert in the field of banking, as well as a teacher and has written a couple of books on the subject.  His name is Catalyst in the forums and you can find him in the Payment and Finance forum here on alibaba.  You could also contact him through his Alibaba portal at http://www.alibaba.com/company/11163257.html   He is a fellow countryman of yours and can help you with the specifics as they are required in India.  He is very well liked in the forum and highly respected for his advice and continued contributions.

Best regards,

Ranger

Just have a look at this answer from Ranger, that is the true deal of alibaba's user forum and even if he gave a 100% good answer he still refer to anothe member who he belive can give a better answer than his (Catalyst) in my world that is a good man

Michael you and a few other few guys here still blow me away with your ower all knowlage

Quoting from [bitchem]:

we want to have 2% perfromance bond guarantee issued by seller, before we issue a irrevocable lc at sight. the idea is if the seller is not genuine we do not want our lc expenses to occur. but seller says they will open the PBG 2% only after recieving the Non-operative version o the LC. however, our bank says as per UCPDC norms governing the intrnational procedures for LC opening, there is no such term as non-operative LC. we want an immediate solution to this fact. so that we are no at any risk, before opening of the LC documentary credit.

 

 

While I would agree with both the other posters, if you are true to your worries then try contacting a factor company who, for a profit, will verify all things related to the trade.  Shipments, histories, companies, trading history, etc.  they are not willing to risk their money on a faulty deal.  They do offer you the option of net terms, their money upfront, and other security issues. 

So if you really worry about your supply chain they are worth looking into. Just type in Factoring Companies on Internet search and go from there.

 ComputerHysteria - while you are right about that being an alternative there is one lil problem with that, the poster is in India.  The banking laws within India are different than they are in the U.S.   I only know of 4 banks in India that will do this and as of yet none shall we say non-financial companies like we have in the U.S.   In otherwords they have shareholders in the U.S. but in India its the depositiors money they are playing with.  Intuit in the U.S. is a well known factoring company.  Actually any company involved in reverse mortgage lending is involved in factoring.

Like I say a good idea and one that I really didnt think of because the poster was in India.  Two on your input though.

Ranger