Letters of Credit: Understanding the ISP98 Forms, UCC Article 5, UCP, Draw Procedures and More

Drafting Commercial vs. Standby, Conditional vs. Unconditional, Limited Term vs. "Evergreen" and Transfer Provisions

A live 90-minute CLE webinar with interactive Q&A


Thursday, April 20, 2017
1:00pm-2:30pm EDT, 10:00am-11:30am PDT


This CLE webinar will prepare counsel to draft and review commercial and standby letters of credit (LC) which comply with Article 5 of the UCC, as well as rules of practice, including International Standby Practices 1998 (ISP98) and Uniform Customs and Practice for Documentary Credits (UCP). The panel will discuss standard LC forms currently used by the banking industry (including forms now available for LCs issued subject to ISP98), the various transactions in which LCs are used, procedures for issuance and drawing upon LCs, and key provisions to consider in tailoring an LC to fit your transaction.

Description

At its most basic, an LC is an instrument in which financial institution, at an applicant’s request, agrees to honor a demand for payment made by a beneficiary. LCs are used in a variety of commercial transactions—including construction contracts, leases and import-export transactions—to support an underlying obligation, such as an obligation to pay a purchase price or assure performance of a particular service.

There are two types of LCs—commercial and standby—both of which follow certain rules, forms and procedures dictated by the UCC, ISP98 and/or UCP. Counsel must be able to draft and review LCs compliant with these rules and procedures, and know the role of the applicant, issuer and beneficiary in issuing and drawing upon LCs.

Counsel should also have an understanding of the different uses for LCs and how LCs can be best tailored to fit each transaction, including to which rules the LC should be subject, expiry dates and “evergreen” clauses, whether the LC could be transferable or not transferable, and whether single or multiple draws will be permitted.

Listen as our authoritative panel discusses negotiating and drafting of the key terms in LOCs and provides guidance through the annotated ISP98 forms. The panel will highlight how LOCs are used in commercial and financial transactions, and issues which can arise in making draws on LOCs. The panel will also discuss alternative credit enhancements such as surety bonds and default insurance, and the advantages and disadvantages of each.

Outline

  1. LOC rules and definitions
    1. UCC Article 5
    2. International Standby Practices 1998 (ISP98)
    3. Uniform Customs and Practice for Documentary Credits (UCP)
    4. Standard forms
  2. Collateral and other bank requirements for issuance
  3. Types of LOCs—commercial vs. standby
  4. Deal-specific concerns
    1. Conditional vs. unconditional
    2. Limited (typically one year) term vs. evergreen
    3. Transferabilty
  5. Draw procedures
  6. Bankruptcy considerations
  7. Alternative credit enhancements

Benefits

The panel will review these and other key issues:

  • What essential components should counsel include when structuring and drafting LCs?
  • What UCC requirements should counsel be cognizant of in drafting LCs?
  • What common issues arise in LC practice and how should those issues be handled?
  • What are the potential pitfalls in choosing ISP vs. UCP, and how can counsel address these issues?

Faculty

Jacob A. Manning, Partner
Dinsmore & Shohl,

Mr. Manning advises businesses and individuals in a variety of business transactions, both domestic and cross-border. He drafts and reviews contracts, particularly those involving sales of goods, distributorships and licensing, and construction, vendor and service contracts on behalf of boards of education and other public entities. He also advises businesses and individuals confronted with commercial fraud. He has written and presented on the subject of letters of credit.

Jonathan J. Dunn, Atty
SMTD Law, Irvine, Calif.

Mr. Dunn concentrates his practice in construction law, government and public contracts, creditor’s rights and complex commercial law matters, including real estate, collections and bankruptcy. He has significant experience in complex construction disputes, and also has numerous successes in complex commercial and bankruptcy / creditor cases. He successfully represents clients in trial, litigation, arbitration, and mediations, and handles a multitude of complex commercial litigation, construction and bankruptcy matters at any given time. 

Walter (Buddy) Baker, Vice President, Investment Banking Division
Goldman Sachs & Co., Chicago

Mr. Baker has over 30 years of experience in international trade finance. He authored numerous articles and books Users' Handbook for Documentary Credits under UCP 600, Documentary Payments & Short-Term Trade Finance, and The Regulatory Environment of Letters of Credit and Trade Finance. He frequently presents on letters of credit to bankers and lawyers. He is actively involved in establishing national and international standard practices for letters of credit, including the latest revision of the Uniform Customs and Practice for Documentary Credits, the official ICC guide for examining letter of credit documents, known as International Standard Banking Practices for the Examination of Documents under Letters of Credit, the "eUCP" supplement to the UCP, the International Standby Practices and UCC Article 5.


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