Why "direct payment standby letter of credit has broken through the traditional security nature of standby letter of credit"?

Standby letter of credit refers to the third party (applicant) at the request of the guarantor or issuing bank to the other party (beneficiary) to open the guarantor or issuing bank to take the first payment in the event of the applicant fails to perform the relevant contract, the guarantor or issuing bank to assume the first payment responsibility for a kind of independent guarantee of the letter of credit. Standby letters of credit are divided into 1, performance standby letters of credit 2, prepayment standby letters of credit 3, bidding/tendering standby letters of credit 4, counter-guarantee standby letters of credit 5, financing standby letters of credit 6, insurance standby letters of credit 7, commercial standby letters of credit 8, direct payment standby letters of credit

Characteristics of Standby Letters of Credit

1. Independence

The obligations of the issuer under the standby letter of credit performance does not depend on:

(1) the issuer's right and ability to obtain reimbursement from the applicant;

(2) the beneficiary's right to receive payment from the applicant;

(3) the invocation of any reimbursement agreement or underlying transaction in the standby; or

(4) the issuer's knowledge of the performance or default of any reimbursement agreement or underlying transaction or not.

2. Irrevocability

The Issuer may not modify or revoke its obligations under the Standby unless otherwise provided in the Standby or with the consent of the Beneficiary.

3, mandatory

Standby certificate in the opening of the binding, regardless of whether the applicant authorizes the opening of the certificate, the issuer of the fee, or whether the beneficiary receives or because of reliance on the standby certificate or modify the action, it is mandatory for the issuer.

4. Documentary

The obligation of the issuer depends on the promptness of the document and on a superficial examination of the documents requested.

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