Standby documentary creditStandby documentary credit

A conventional documentary credit is issued to provide the seller with an undertaking of payment upon the seller's submission of documents in accordance with the terms and conditions of the credit after shipment has taken place.

A standby documentary credit, on the other hand, is an undertaking which is activated only if something goes wrong between the buyer and the seller and the expected payment does not take place. It therefore allows the seller to enforce a claim.

A standby documentary credit acts as a bank guarantee and is subject to international documentary credit rules and standby rules, whereas international guarantees are not subject to a common set of rules to the same extent.

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