An Introduction to Letters of Credit phần 4 pdf

39
List of National Export Credit Agencies and
International Development Banks Export Credit
Agencies
Following are some of the most frequently used Gov-
ernment Financing Sources.
Australia
Export Finance and Insurance Corporation (EFIC)
Austria
Oesterreichische Kontrollbank Aktiengesellschaft
(OEKB)
Belgium
Office National Du Ducroire Creditexport
Brazil
Instituto De Ressequros Do Brasil (IRB)
Carterira Do Comerico Exterior-Banco Do Brazil S/A
(CACEX)
Canada
Export Development Corporation (EDC)
Denmark
Eksportkreditradet (EKR)
Dansk Eksportfinansieringsfond (EF)
France
Compagnie Francaise D’Assurance Pour Le Commerce
Exterieur (COFACE)
Germany
Hermes Kreditversicherungs A.G.
Ausfuhrkredit-Gesellschaft mbh (AKA)
Kreditanstalt Fur Wiederaufbau (KFW)
India
Export-lmport Bank of India

Italy
Sezione Speciale Per L'Assicurazione Del Credito All
Esportazione (SACE)
Mediocredito Centrale
Japan
Ministry of International Trade and Industry (MITI)
Export-Import Bank of Japan (J-Eximbank)
Korea
Export-Import Bank of Korea
Mexico
Fondo Para El Fomento De Las Exportaciones De
Productos Manufacturados (BANCOMEXT)
Netherlands
Nederlandsche Credietverzekering Maatschappij
(NCM)
De Nederlandsche Bank (DNB)
New Zealand
Export Guarantee Office (EXGO)
Spain
Compania Espanola De Seguros de Credito a la
Exportacion (CESCE)
Export Finance
Sweden
Exportkreditnamnden (EKN)
A/B Svensk Exportkredit (SEK)
Switzerland
Export Risiko Garantie (ERG)
Taiwan
Export-lmport Bank of the Republic of China (Taiwan)
United Kingdom

Export Credits Guarantee Department (ECGD)
United States
Export-Import Bank of the United States (Eximbank)
Private Export Funding Corporation (PEFCO)
Overseas Private Investment Corporation (OPIC)
U.S. Agency for International Development (AID)
U.S. Department of Agriculture-Commodity Credit
Corporation (CCC)
International Development Banks
African Development Bank (ADB)
Inter-American Development Bank (IDB)
International Bank for Reconstruction and
Development (IBRD) (The World Bank)
International Finance Corporation (IFC)
Multilateral Investment Guarantee Agency (MIGA)
LETTERS OF CREDIT
U.S. Dollar Banker’s
Acceptance Financing
U.S. Dollar Banker’s Acceptances, normally
used for short-term financing of goods in
the Channels of Trade, are discussed in this
chapter.
C H A P T E R
7
42
The Beneficiary’s ultimate objective in requesting a
Letter of Credit is to receive funds of and from a bank
rather than the applicant. The previous chapters dealt
with transactions payable at “sight” where the bank

makes payment against presentation of conforming
“sight” drafts and/or documents under a Letter of Credit.
However, drafts may also be drawn payable in the future
(normally anywhere from 30 to 180 days “sight” or
“date”). Such drafts are “accepted”, rather than paid, by
the Drawee Bank upon determination that documents
comply. A bank “accepts” a draft drawn on it by placing
the word “Accepted” on the face of the draft, dating
and signing the notation. This type of draft, payable in
U.S. dollars, drawn on and accepted by a bank, is a
Banker’s Acceptance. The accepted draft is the
unconditional obligation of the Accepting Bank to pay
at maturity.
When the Beneficiary (exporter) of a Letter of Credit
agrees to Letter of Credit terms stating that payment will
be available by acceptance of drafts drawn at “60 days
sight,” the Beneficiary is extending credit terms to the
Applicant (buyer), by agreeing to wait 60 days for pay-
ment. Thus, when the Beneficiary presents conforming
draft(s) and documents to the Paying-Accepting Bank,
it does not expect payment at “sight” but rather it
expects the bank to “accept” the draft and to receive
payment 60 days later.
A Banker’s Acceptance is a time draft drawn on a
bank which is accepted by the bank and is payable at a
predetermined future date. Once “accepted,” the draft
becomes a marketable instrument which the Beneficiary
may sell at a discount to any bank. A Banker’s Accep-
tance can provide an immediate source of funds for the
Beneficiary and can simultaneously defer payment by

the Applicant.
Banker’s Acceptances are regulated in the U.S. by the
Board of Governors of the Federal Reserve System (the
“Board”). A time draft drawn on and accepted by any
member bank of the Federal Reserve System (or any
foreign bank subject to the International Banking Act
reserve requirements) is a “Banker's Acceptance.” There
are two types of Banker’s Acceptances—“Eligible
Banker’s Acceptances” and “Ineligible Banker’s Accep-
tances.” If a Banker’s Acceptance grows out of an
eligible transaction, as defined by the Board, and
involves a time draft with a tenor of six months or less, it
is an Eligible Banker’s Acceptance. If it does not grow
out of an eligible transaction or if it involves a draft with
a tenor of more than six months, it is an Ineligible Banker’s
Acceptance.
Eligible Banker’s Acceptances
Banker’s Acceptances of either type are permissible.
However, Eligible Banker’s Acceptances are favored by
the Board. Both types are freely negotiable. The Board
does not require the Accepting Bank to post reserves
against Eligible Banker’s Acceptances. This makes them
more appealing to banks, increases the size of the
Eligible Banker’s Acceptance market and lowers the
overall cost to the Beneficiary. The Banker’s Acceptance
market is comprised of banks, brokers, other institutions
and private investors who both buy and sell Banker’s
Acceptances. The cost of a Banker’s Acceptance is equal
to the discount rate determined by the market. The dis-
counting bank deducts the charge from the face amount

of the draft. The balance of the draft is paid to the Ben-
eficiary. Alternatively, the charge may be paid by the
Applicant if the Beneficiary and Applicant agree in ad-
vance.
Eligible Transactions
An Eligible Banker’s Acceptance must grow out of
one of the following eligible transactions:
• The import or export of goods;
• The domestic shipment of goods; or
• The storage of readily marketable staples. (A “readily
marketable staple” is defined by the Board to mean
manufactured goods or raw materials which are non-
perishable, generally produced, well-established in
commerce and have an easily ascertainable price.)
The transaction underlying the Banker’s Acceptance
must meet the following requirements of the Board:
1) The transaction must involve a draft (drawn on and
accepted by any member bank of the Federal Reserve
System or any foreign bank subject to the International
Banking Act reserve requirements) with a tenor of six
months or less.
2) The transaction must be self-liquidating. This means
that the borrower is to apply the proceeds from the sale
43
or resale of the goods toward payment of the accepted
draft.
3) The transaction must not involve dual financing.
4) The goods covered by the transaction must be in the
“Channels of Trade.” Goods in the “Channels of Trade”
means goods which are being manufactured, packaged,

shipped, received, stored or resold.
Eligible Banker’s Acceptance financing has been put
to a variety of uses. Any individual, corporation or firm
involved in the shipment of goods payable in U.S.
dollars should consider Banker’s Acceptance financing
as a short-term financing tool. The following illustrates
how Banker’s Acceptance financing may be used.
U.S. Exports and Imports
Time Draft Export Letter of Credit:
Financing to the importer in connection with a
U.S. export—In Illustration 12 on page 45 a Missouri
Beneficiary presents documents together with a 90 day
“sight” draft drawn on Citibank, New York, and requests
the draft be accepted. Upon examination, Citibank
determines that the documents conform to the Letter of
Credit and also that the transaction meets the Board’s
requirements for Eligible Banker’s Acceptances. It places
an “acceptance” stamp and also an “eligibility” stamp
on the face of the draft, thus creating an Eligible Banker’s
Acceptance (as illustrated on page 46, Illustration 13),
returns the accepted draft to the payee-drawer-benefi-
ciary, and forwards the documents to the Issuing Bank.
Since the Beneficiary did not request that Citibank
discount the draft upon acceptance, the Beneficiary
holds the accepted draft and presents it at maturity to
Citibank for payment. The draft matures and becomes
payable on November 3, which is 90 days from the date
on which the draft was accepted. By agreeing to ship on
90-day terms the Beneficiary has granted credit terms to
the importer. On an acceptance Letter of Credit, the

issuer’s and confirmer’s duty to honor is to accept and,
at maturity, to pay.
Financing to the Beneficiary and the importer in
connection with a U.S. export—Had the Beneficiary
requested that Citibank discount the draft upon
acceptance, Citibank would have purchased the accepted
draft from the Beneficiary at the time of acceptance and
would have paid the Beneficiary the net proceeds (face
amount of the draft less the discount calculated at
the then current market discount rate). The amount of
the discount is calculated at Citibank’s discount rate for
the discount period, i.e., the number of days from the
date of purchase to the date of the draft’s maturity. If
the accepted draft had been discounted on August 5,
for 90 days, at a rate of 8% per annum, the discount
would be equal to two thousand dollars ($2,000.00). The
calculation is the amount of the draft, times the discount
rate, times the number of days until maturity, divided by
360 equals the discount ($100,000.00 x 8% x 90 ÷ 360 =
$2,000.00). The net amount paid to the Beneficiary would
be ninety eight thousand dollars ($98,000.00). Both the
Beneficiary and the Applicant would receive financing:
the Applicant because it does not have to pay until the
maturity date; the Beneficiary because it receives
payment by discounting the draft immediately.
Time Draft Import Letter of Credit:
Financing to the Beneficiary and the importer in
connection with an overseas export—In Illustration 14
on page 47 an overseas Beneficiary extends credit to
its U.S. importer by using a Banker’s Acceptance. (In

the previous illustration, a U.S. Beneficiary extends
credit to its overseas importer by using a Banker’s
Acceptance.) A Banker’s Acceptance in U.S. dollars
enables the overseas Beneficiary to sell the accepted
draft and receive discounted funds immediately either
from Citibank or from one of the dealers in the U.S.
banker’s acceptance market.
Illustrations 12 and 14 demonstrate that Banker’s
Acceptance Financing in U.S. dollars operates similarly
for U.S. exports and imports. For exports to the U.S., the
overseas Beneficiary draws a draft on a U.S. bank. The
procedure for discounting drafts or paying at maturity
is the same for U.S. exports and imports. It is also the
same for domestic shipments and for shipments between
foreign countries in U.S. dollars.
Refinancing “Sight” Draft Letters of Credit
Financing to importers—Importers can use Banker’s
Acceptance financing in connection with “sight” draft
Letters of Credit. For example, a U.S. importer can
arrange for a Letter of Credit involving a draft payable at
44
“sight.” After payment under the Letter of Credit is made
to the Beneficiary and the Issuing Bank has debited the
importer’s account, the importer may arrange for the
bank to “refinance” the import for a specific period, for
example 60 days, by using a Banker’s Acceptance.
Under this arrangement, the importer draws a draft on
its bank payable at 60 days “sight.” The bank accepts
the draft, discounts it, and pays the face value of the
draft, less the discount, to the importer. At maturity, the

importer is required to pay the full face value of the draft
from the sale of the imported goods.
Pre-Export Financing
A U.S. exporter with a firm contract of sale may draw
a time draft on its bank. The bank accepts the draft,
discounts it, and pays the face value of the draft, less
the discount, to the exporter. The exporter uses the funds
to secure and prepare the goods for export. The
proceeds from the sale of the exported goods are used
to pay off the Banker’s Acceptance at maturity.
Shipments within the United States
Shipments by land, rail, or other means of transporta-
tion from one point to another within the U.S. may be
financed by Banker’s Acceptances in a manner similar
to international shipments.
Storage within the United States or Overseas
Eligible Banker’s Acceptances created to finance
the storage of goods must cover merchandise defined
as a “readily marketable staple” (i.e., coal, natural gas,
petroleum, grain, precious metals, etc.). Title to any
financed staple must be in the name of the accepting
bank at the time the Banker’s Acceptance is created.
Title to the goods is represented by a third party ware-
house receipt or other document giving the accepting
bank clear title at the time the Banker’s Acceptance is
created.
Collections
Import “sight” collections may be refinanced in the
same manner as “sight” draft Letters of Credit, as
discussed above. Export collections may be financed as

discussed in Pre-Export Financing.
Ineligible Banker’s Acceptances
Although generally less attractive than Eligible
Banker’s Acceptances, Ineligible Banker’s Acceptance
financing may be an attractive alternative to direct
borrowing during periods when bank funds are limited
and customers’ borrowing needs are extraordinary.
An “Ineligible Banker’s Acceptance” involves a
draft(s) drawn on and accepted by any member bank of
the Federal Reserve System or any foreign bank subject
to the International Banking Act reserve requirements
and has the following characteristics:
• the transaction does not meet the Board’s requirements
i.e., the draft has a tenor longer than six months or
does not involve the import or export of goods, the
domestic shipment of goods, or the storage of readily
marketable staples;
• the drafts are typically discounted at a higher rate;
• the discounting bank may be required to post reserves;
and
• the drafts are marked “Ineligible” on their face.
Importers and exporters needing to finance
merchandise, internationally or within the U.S., should
investigate Banker’s Acceptance financing. At times,
such financing may be more advantageous than direct
borrowing. During periods of “tight money” (when banks
have limited funds to meet all customer borrowing needs),
banks may be willing to provide Banker’s Acceptance
financing despite a limited availability of funds for
direct loans.

45
Illustration 12 – Export Letter of Credit – ACCEPTANCE FINANCING
Citibank, N.A.
New York, New York
Confirmed Irrevocable Straight Letter of Credit May 11, 20_
Mail To: The Missouri Corporation
1000 Broadway Citibank Ref. 30030029
St. Louis, MO 91230 Issuer’s Ref. 1500
Ladies and Gentlemen:
At the request and for the account of The Royale German Bank, Frankfurt, Germany we are
advising you that it has issued this Irrevocable Letter of Credit in your favor for the account of The
German Export Co., for a sum or sums not exceeding a total of U.S. $100,000.00, available with
Citibank, N.A. by acceptance of your draft(s) at 90 DAYS AFTER SIGHT on us subject to the
following:
Expiration Date: August 22, 20_ Latest Shipping Date: August 1, 20_
Transshipment not allowed Partial shipment not allowed
Shipment from: Port of New York, NY Shipment to: Port of Bremen, Germany
and accompanied by the following documents:
1) Full set original On Board Ocean Bills of Lading issued to order, blank endorsed, notify the
buyer, marked “Freight Prepaid.”
2) Full set Marine Insurance Policy or Certificates, including War Risks, losses payable to the
order of the assured and endorsed in blank.
3) Commercial invoice, original and two copies, stating that it covers: “5000 yds. window
screening, C.I.F. Bremen.”
4) Packing list in triplicate showing goods packed in plastic containers.
This Letter of Credit must accompany all draft(s) and documents. When presenting your draft(s)
and documents or when communicating with us you must mention our reference number shown
above.
The issuer of this Letter of Credit engages with you that each draft drawn under and in compliance
with the terms of the Letter of Credit will be duly if presented on or before the expiration date.

We confirm this Letter of Credit and hereby undertake with you to honor each draft drawn and
presented with the above specified documents if presented to us at Citicorp North America, Inc.,
Servicer for Citibank, N.A., 3800 Citibank Center, Bldg. F, 1st Floor, Sort 3000, Tampa, Florida
33610, or such other address as we may advise from time to time.
This Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication 500 (the “UCP”). Our confirma-
tion to you is subject to the UCP and, as to matters not addressed by the UCP, is subject to and
governed by New York State and applicable U.S. federal law.
Sample Letter of Credit
Authorized Signature
Citibank, N.A.
New York, New York
Confirmed Irrevocable Straight Letter of Credit May 11, 20_
Mail To: The Missouri Corporation
1000 Broadway Citibank Ref. 30030029
St. Louis, MO 91230 Issuer’s Ref. 1500
Ladies and Gentlemen:
At the request and for the account of The Royale German Bank, Frankfurt, Germany we are
advising you that it has issued this Irrevocable Letter of Credit in your favor for the account of The
German Export Co., for a sum or sums not exceeding a total of U.S. $100,000.00, available with
Citibank, N.A. by acceptance of your draft(s) at 90 DAYS AFTER SIGHT on us subject to the
following:
Expiration Date: August 22, 20_ Latest Shipping Date: August 1, 20_
Transshipment not allowed Partial shipment not allowed
Shipment from: Port of New York, NY Shipment to: Port of Bremen, Germany
and accompanied by the following documents:
1) Full set original On Board Ocean Bills of Lading issued to order, blank endorsed, notify the
buyer, marked “Freight Prepaid.”
2) Full set negotiable Marine Insurance Certificates, including War Risks.
3) Commercial invoice, original and two copies, stating that it covers: “5000 yds. window

screening, C.I.P. Bremen.”
4) Packing list in triplicate showing goods packed in plastic containers.
This Letter of Credit must accompany all draft(s) and documents. When presenting your draft(s)
and documents or when communicating with us you must mention our reference number shown
above.
The issuer of this Letter of Credit engages with you that each draft drawn under and in compliance
with the terms of the Letter of Credit will be duly if presented on or before the expiration date.
We confirm this Letter of Credit and hereby undertake with you to honor each draft drawn and
presented with the above specified documents if presented to us at Citicorp North America, Inc.,
Servicer for Citibank, N.A., 3800 Citibank Center, Bldg. F, 1st Floor, Sort 3000, Tampa, Florida
33610, or such other address as we may advise from time to time.
This Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication 500 (the “UCP”). Our confirma-
tion to you is subject to the UCP and, as to matters not addressed by the UCP, is subject to and
governed by New York State and applicable U.S. federal law.
Sample Letter of Credit
Authorized Signature
46
Illustration 13 – Export Letter of Credit – BANKER'S ACCEPTANCE
47
Illustration 14 – Import Letter of Credit – ACCEPTANCE FINANCING
Citibank, N.A.
New York, New York
Irrevocable Negotiation Letter of Credit December 10, 20_
Mail To: Citibank, N.A.
Sao Paulo, Brazil Citibank Ref. 10020000
Ladies and Gentlemen:
At the request and for the account of The City Coffee Servers, Inc., New York we hereby issue our
Irrevocable Letter of Credit in favor of The Brazilian Coffee Growers Inc., Sao Paulo, Brazil for a
sum or sums not exceeding a total of U.S. $190,000.00, available with you by negotiation of the

beneficiary’s draft(s) drawn at 90 DAYS SIGHT on us subject to the following:
Expiration Date: June 22, 20_ Latest Shipping Date: June 1, 20_
Transshipment not allowed Partial shipment not allowed
Shipment from: Brazil Shipment to: New York, New York
and accompanied by the following documents:
1) Full set original On Board Ocean Bills of Lading issued to order, blank endorsed, notify the
buyer, marked “Freight Prepaid.”
2) Full set Marine Insurance Policy or Certificates, including War Risks, losses payable to the
order of the assured and endorsed in blank.
3) Commercial invoice, original and two copies, stating that it covers: “25,000 bags of coffee,
C.I.F. New York.”
This Letter of Credit must accompany all draft(s) and documents and must be presented for
negotiation within 21 days after the date of shipment shown on the Bill of Lading but within the
expiration date. The negotiating bank is to forward all drafts and documents listed herein by airmail
in a single lot to us at Citicorp North America, Inc., Servicer for Citibank, N.A., 3800 Citibank
Center, Bldg. F, 1st Floor, Sort 3000, Tampa, Florida 33610, stating our reference number above.
We hereby undertake with you and the beneficiary that drawings presented in conformity with the
terms of this Letter of Credit will be honored if presented for negotiation on or before expiration and
accepted drafts will be paid at maturity.
This Letter of Credit is subject to the Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication 500 (the “UCP”) and, as to
matters not addressed by the UCP, is subject to and governed by New York State and applicable U.S.
federal law.
Sample Letter of Credit
Authorized Signature
LETTERS OF CREDIT
Standby
The banking industry has found it useful to
distinguish between Commercial Letters of Credit,

used to pay the purchase price for the shipment
of goods, and Standby Letters of Credit, used
for other purposes as discussed in this chapter.
C H A P T E R
8
50
Commercial Letters of Credit issued to pay for
shipments normally require that the Beneficiary
present current bills of lading, insurance certificates,
commercial invoices, etc. Standby Letters of Credit, on
the other hand, are not typically used to pay for a
current shipment of goods and, therefore, documents
evidencing a sale and shipment of goods are not
required. Standby Letters of Credit are frequently used
as a form of payment guarantee in the case of non-
performance by the Applicant of a contractual or other
obligation owed by the Applicant to the Beneficiary.
Standby letters of credit are also frequently used to
effect direct payment to the beneficiary. An example of
the face of an Application form for a Standby Letter of
Credit is shown on page 51 (Illustration 15).
“Guarantee” and “Payment”
Before discussing the variety of purposes served by
Standby Letters of Credit, let us review the two basic
types—the guarantee type (sometimes called “default”)
and the payment type (sometimes called “direct-pay”).
Guarantee (“Default”) Type
Standby Letters of Credit may be issued to provide
funds following a default by the bank’s customer of its
contractual or other obligations. They typically provide

for payment against receipt of the Beneficiary’s state-
ment that the Applicant is in default of its obligation to
the Beneficiary and that the amount demanded is owed
as a consequence of that default. Illustration 16 on page
52 is a guarantee type Standby Letter of Credit. Because
a letter of credit is independent of the underlying
contract, the bank’s obligation to pay under a standby
letter of credit does not depend on whether there has in
fact been a default.
Payment (“Direct Pay”) Type
Illustration 17 on page 53 is a payment type Standby
Letter of Credit. In this case, 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 an
immediate, no-default payment mechanism, under which
the beneficiary receives the funds of the Issuing Bank,
rather than the Applicant.
What Are the Risks?
There are risks in any commercial or financial transac-
tion. With a Standby Letter of Credit, the Issuing Bank
substitutes its creditworthiness for that of its customer,
the Applicant. The Standby Letter of Credit entitles the
Beneficiary to payment from the Issuing Bank, up to a
stated amount, on presentation of strictly complying
documents required by the Standby Letter of Credit.
The primary risks for the Beneficiary are whether the
irrevocable commitment is given by a reputable and
financially sound bank, and whether the Beneficiary can
comply with the Standby Letter of Credit terms and

conditions in every contingency for which payment
might be owed by the Applicant to the Beneficiary.
The Applicant is obligated to the bank for any amount
paid under the Standby Letter of Credit. The primary
risks for the Applicant arise from the fact that the
documents to be presented under a standby Letter of
Credit typically lack intrinsic value. They are frequently
statements signed by the Beneficiary. Therefore, the
Applicant must use sound business judgment when
entering into a contract with a party in whose favor the
Standby Letter of Credit will be issued —judgment that
the Beneficiary will use the Standby Letter of Credit in a
manner consistent with the underlying agreement and
understanding of the Applicant. The need for integrity
exists in every business transaction. It is the Applicant
that assumes this risk.
Whether a Standby Letter of Credit is intended to
function as a guarantee or as a payment mechanism, the
terms and conditions of the Issuing Bank’s relationship
with its customer are established by the Application and
Agreement, shown on page 51 (Illustration 15).
Citibank specialists can assist a customer in complet-
ing the Application and Agreement form. However, the
customer must establish the terms and conditions that
are satisfactory to it.
When the bank’s customer applies for credit, the bank
must decide whether it will assume the credit risk and
other risks arising from the issuance of the Standby
Letter of Credit for the account of that customer. Once
the application is signed by the customer and the risks

to Citibank are accepted by Citibank in reliance on the
application form, the Standby Letter of Credit is issued
according to the application’s specifications.
51
Illustration 15 – Application and Agreement for Irrevocable Standby Letter of Credit
1
1
Front page only.
Application for Standby Letter of Credit
Citibank, N.A., New York, NY 10043
Attn: Standby Letter of Credit Dept., FLA–1, 2 / A
Letter of Credit Reference No. ____________________
Advising Bank (Name and Address)
Applicant (Name and Address)
Beneficiary (Name and Address)
Expiry Date and Place: _____________________
Amount (In specific currency): _____________________
This Application is for the issuance of a standby letter of credit under and subject to the terms and conditions of (select one):
❏ The Agreement for Standby Letter of Credit attached hereto:
❏ The Continuing Agreement for Commercial and / or Standby Letters of Credit dated _____________. ❋
❏ Other (describe):
_________________________________________________________________________________________________________________
Subject to the following terms and conditions, please issue your irrevocable Letter of Credit (hereinafter called the "Credit") to be available by
the beneficiary's draft(s):
Drawn at sight on:
❏ Citibank, N.A., New York, NY
❏ _____________________________________________________________________________________________________________
(Name and Address of Paying Bank, if any)
Accompanied by Beneficiary’s written statement that the amount of any drafts(s) drawn hereunder represent funds due and payable because
of the following reasons (select one):

❏ Applicant of the Credit has failed to comply with terms or conditions of a contract described as: _________________________________
_____________________________________________________________________________________________________________
❏ Applicant of the Credit has been awarded a contract under an offer to bid and has failed to become a party to the contract related thereto
describe): _____________________________________________________________________________________________________
_____________________________________________________________________________________________________________
❏ It has become necessary for the Beneficiary bank or other financial entity to make payment under its undertaking issued on behalf of
Applicant of this Credit, with an expiration date of _________________________, at its counters, in favor of _____________________
_____________________________________________________________________, in relation to _____________________________
_____________________________________________________________________________________________________________.
❋ If a Continuing Agreement is already in place, submit only this Application, with customer's signature and account manager's approvals on page 2
of this form.
Page 1 of 2
52
Illustration 16 – Standby Letter of Credit – IN LIEU OF A CONTRACT PERFORMANCE GUARANTEE
Citibank, N.A.
New York, New York
Irrevocable Standby Letter of Credit November 26, 20_
Archer Construction Associates
456 South Street N.W.
London, England
Sirs:
At the request and for the account of Construction Associates, Milwaukee, Wisconsin, we hereby
issue our Irrevocable Standby Letter of Credit No. 5499, in your favor, for an amount(s) not to
exceed in the aggregate U.S. $100,000.00, effective immediately and expiring on December 31, 20_.
Funds under this Letter of Credit are available to you against your sight draft(s) drawn on us,
mentioning thereon our Letter of Credit No. 5499. Each such draft must be accompanied by your
signed written statement that “Construction Associates has failed to comply with the terms and
conditions of contract #56-71A dated December 15, 20_, for the construction of an Office Complex,”
specifying the paragraph(s) and/or clause(s) in default.
We hereby undertake with you to honor each presentation made in compliance with the terms of

this Letter of Credit, if presented to us at Citicorp North America, Inc., Servicer for Citibank, N.A.,
3800 Citibank Center, Bldg. F, 1st Floor, Sort 3000, Tampa, Florida 33610, or such other address as
we may advise from time to time on or before the stated expiration date.
This Letter of Credit is subject to the International Standby Practices 1998, International Cham-
bers of Commerce Publication No. 590 (“ISP98”), and as to matters not addressed by ISP98 is
subject to and governed by New York State and applicable US federal law.
Sample Letter of Credit
Authorized Signature
53
Illustration 17 – Standby Letter of Credit – AS A PAYMENT MECHANISM
Citibank, N.A.
New York, New York
Irrevocable Standby Letter of Credit January 3, 20_
Construction Associates
456 South 8th Street
Milwaukee, Wl 12345
Sirs:
At the request and for the account of Archer Construction Associates, London, England we hereby
issue our Irrevocable Standby Letter of Credit No. 5656, in your favor, for an amount(s) not to
exceed in the aggregate U.S. $200,000.00, effective immediately and expiring on December 31, 20_.
Funds under this Letter of Credit are available to you against your sight draft(s) drawn on us,
mentioning thereon our Letter of Credit No. 5656. Each such draft must be accompanied by your
signed written statement that “The amount of the draft being presented represents the full payment
for unpaid invoices in accordance with the terms and conditions of Purchase Order No. 345-62.”
We hereby undertake with you to honor each draft drawn under and in compliance with the terms
of this Letter of Credit, if duly presented together with the documents specified to us at Citicorp
North America, Inc., Servicer for Citibank, N.A., 3800 Citibank Center, Bldg. F, 1st Floor, Sort 3000,
Tampa, Florida 33610 on or before the stated expiration date.
This Letter of Credit is subject to the International Standby Practices 1998, International Cham-
bers of Commerce Publication No. 590 ("ISP98"), and as to matters not addressed by ISP98 is

subject to and governed by New York State and applicable US federal law. International Chamber of
Commerce’s Uniform Customs and Practice for Documentary Credits in effect on the date this Letter
of Credit is issued.
Sample Letter of Credit
Authorized Signature