All about the non-performance letter of credit
A non-performance letter of credit is a bank guarantee document by which the purchaser guarantees his creditor that in the event of default, his bank will be able to replace himself as a debtor, subject to the proof of existence of the claim being presented to the bank by the exporter. RNR Trade Corporation Company Limited (RNR) facilitates non –performance letter of credit to the importers or exporters.
Therefore
it is a documentary promise, payable on the first request, intended to ensure
that the contract, duty or flow of business transactions is performed.
As the
buyer goes to his bank and asks him to pay the seller at a given time, i.e. on
a date or to satisfy a condition, as a means of payment, the non-performance
letter of credit should not be confused with the documentary credit.
In
principle, if all goes well the letter of credit does not have to be put into
effect; it is an extra promise, a form of bank guarantee, so that the recipient
is assured of receiving the balance of his loan, so that it is not a payment
instrument, but a financial arrangement, which is in addition to the marketing
contract.
The non-performance
letter of credit is usually demanded by the beneficiary, but it is the debtor
who makes the request from his bank, which is the issuing bank, that the
notifying bank notifies the creditor or supplier.
The
issuing bank undertakes, on the advice of its client, the client, to pay a
certain amount to the beneficiary for a fixed period of time in the event of
default on the part of its client.
In fact,
if the debtor is not solvent, it is the issuing bank who will have to repay the
notifying bank, at the cost of which the debtor will then be repaid.
Indeed, if
the debtor is not solvent, the issuing bank would have to repay the notifying
bank, with a fee to be repaid by the debtor.
The benefits of a non-performing letter of credit
It is
above all an additional promise for the seller that enables the marketing act
to be realised in better conditions and also to consider upstream payment
methods that are easier to enforce, such as the bank transfer, for example, the
transfer that can be phased while ensuring that the bank guarantee benefits.
Moreover, in the sense of commercial operations,
for operations whose flows are repetitive, this tool is very realistic.
Another gain is that the expense is smaller than
the credit for the documentary.
The various types of non-performance credit letters
There are several types of credit letters that are
non-performing, the most common being those used in international business
relations. The non-performance letter of credit can be used to cover the seller
or the buyer, obviously the most common is the one that protects the seller in
the event of the buyer's non-payment, but the buyer can also apply for this
type of assurance to be enforced to protect against the seller's future
non-performance or partial performance.
• The non-performance letter of
creditin Seller Protection
• The non-performance letter of credit in Buyer
Protection.
Contact Us :
Call : +66 6-4324-5456 (English)
Call : +66 9-9289-4956 (Thai)
Email: info@rnrtradecorp.com
Address : 890/167 The Pano, Rama III Road, Yannawa
District, Bangkok 1012, Thailand
46 Moo 11 Tambon Non Pung Ubon Ratchathani 34190
Thailand
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