Learn how to draft letters of credit and avoid problems when drawing upon them for payment.
This presentation will walk you through the steps in the life of a letter of credit, identifying pitfalls along the way. The topic will review and illustrate fundamental principles using real-life examples. Our presenter will explain how these principles apply to both commercial and standby letters of credit and how these two types differ. In particular, you’ll learn how to draft letters of credit and how to avoid problems when drawing upon them for payment.
Learning Objectives
- You will be able to describe the basic mechanics and principles of letters of credit.
- You will be able to discuss the use of standby letters of credit.
- You will be able to explain how commercial and standby letters of credit differ.
- You will be able to identify how to avoid problems when drawing upon letters of credit for payment.
Agenda
What Is a Letter of Credit?
- Definition
- Uses
Basic Mechanics and Principles of Letters of Credit
- Structure and Flow
- Principles
- Risk Mitigation
- A Sample LC
Confirmed Letters of Credit
- Adding a Fourth Party to the Structure
- Additional Risk Mitigation
Standby LCs vs. Commercial LCs
- Definition of Standby Letter of Credit
- Characteristics of Standby Letters of Credit
Standby LCs vs. Guarantees and Bonds
- Ancillary and Contract Guarantees, Surety Bonds
- Independent and Demand Guarantees
Rules and Regulations to Be Aware of
- The Uniform Customs and Practice for Documentary Credits
- The Uniform Commercial Code, Article 5
- International Standard Banking Practice for the Examination of Documents Under Documentary Credits
- The International Standby Practices
- The Uniform Rules for Demand Guarantees (International Transactions)
- Anti-Boycott Regulations (International Transactions)
- Office of Foreign Assets Control Sanctions (International Transactions)
Using Standby Letters of Credit
- Credit Line Backup (Instead of Commercial LCs)
- Evergreen L/Cs
- Bid Bonds (Seller Is Applicant)
- Performance/Warranty Bonds (Seller Is Applicant)
- Advance Payment Bonds (Seller Is Applicant)
- Direct-Pay Letters of Credit
ISP vs. UCP vs. URDG
Standby Problems
- Non-Documentary Conditions
- Counter-Guarantees and Local Guarantees
- Automatic Extensions and Non-Extension Notices
- Extend-Or-Pay Drawings
- Court Injunctions
- Bankruptcy of the Applicant
- Insolvency of the Issuing Bank
- Abusive Drawings
Tips, Tricks, and Facts About Standbys
Speakers
Mr Buddy Baker,
Head of Global Trade Solutions Delivery ,
Fifth Third BankWalter (Buddy) Baker, has over 30 years of experience in international trade finance. In May 2009 he joined Fifth Third Bank where he heads their Global Trade Solutions Delivery team. Fifth Third is one of the 20 largest banks in the US and provides a full range of risk mitigation and financing products for exporters and importers. Prior to Fifth Third, Buddy worked for Atradius Trade Credit Insurance, ABN AMRO Bank, Bank of America, Wachovia Bank, and The First National Bank of Chicago. Buddy is a recognized expert in trade finance and author of numerous magazine articles and the books Users’ Handbook to Documentary Credits under UCP600, Documentary Payments & Short-Term Trade Finance, and The Regulatory Environment of Letters of Credit and Trade Finance.
He owns the consulting firm Global Trade Risk Management Strategies, which specializes in educational training, and makes frequent presentations for national associations of exporters, importers, bankers and lawyers. Mr. Baker serves as a member-at-large of the National Letter of Credit Committee of the International Financial Services Association and is actively involved in establishing national and worldwide standard practices for LCs, such as the recent revision of the Uniform Customs and Practice for Documentary Credits (referred to as UCP600), the official ICC guide for examining letter of credit documents, called the International Standard Banking Practices for the Examination of Documents under Documentary Credits, the eUCP supplement to the UCP dealing with electronic documents, the International Standby Practices, and Article 5 of the Uniform Commercial Code.
He acts as an advisor to the Institute for International Banking Law and Practice and also serves on the Board of Directors of the Association of International Credit and Trade Finance Professionals (ICTF), a multinational association of export credit managers. Buddy earned his undergraduate degree at Yale University and his MBA at Northwestern.
Who Should Attend
This live webinar is designed for attorneys, credit and collection managers, presidents, vice presidents, business owners and managers, lending professionals, and accountants.
