Guarantees
The guarantee, in plain terms
An SBLC is an undertaking by your own bank, not a transfer of money. It is the most misunderstood part of this kind of transaction — here is how it actually works.
Your own bank issues the instrument and transmits it bank to bank (SWIFT MT760). The funds stay with you, simply blocked. You pay only on arrival of the goods at the destination port, after validation of the documents and the quality inspection.
The coverage period states how much of the contract you guarantee. Many buyers commit to twelve months and then stop after the first shipment. Six months of coverage gives the producer confidence the contract will run to term — and that is precisely what earns you the best price per ton.
On the seller's side we work only with HSBC USA. You therefore deal with a first-tier bank under US law, not with an unfamiliar institution — with the recourse that comes with it, for you as much as for the seller.
Guarantees
Fully operational, unconditional, irrevocable, transferable and divisible. Issued by one of the 50 largest world-class banks, valid one year and one day, confirmed by the recipient bank.
After SBLC acceptance, the seller's bank issues within 72 hours a performance bond equal to 2% of the nominal value, in the name of the buyer or its consignee.
Quality and weight determined at the load port by SGS or a similar first-class independent inspector. Certificate final and binding, at the seller's cost.
On arrival at the destination port, after validation of documents and quality inspection: payment within 72 business hours.
In practice
Five points that decide whether a file moves or stalls. We would rather you raise them now than three weeks in.
A documentary L/C is a payment instrument: your bank pays the seller once the documents conform. It is used at every shipment. An SBLC is a security instrument — it is only ever called if you fail to pay. In normal operation it is never drawn. You settle each shipment by MT103 against documents, and the guarantee stays untouched from the first shipment to the last.
Watch the base, because this is where buyers over-estimate the effort. The 20% is calculated on the face value of the SBLC — that is, on the months you actually cover: three, four or six monthly shipments. Not on the total contract. On a twelve-month contract covered six months, you block 20% of those six months, not 20% of the year. And it is your bank that holds it, in your own account. Not the seller’s bank, not a third party, not us. Nothing leaves your institution.
Case 1 — you already have a line with your bank. Your bank issues the MT760 itself. You block 20% of the cover and pay only your bank’s own issuing fees. Cheapest route, and the fastest when the line already exists.
Case 2 — you have no line, and the instrument is leased. A first-tier bank issues it on your behalf. That costs 8 to 10% — and it is already built into the price per metric ton shown on the pricing page. Nothing is added afterwards. In both cases the instrument is handled by HSBC United States, never by an institution you cannot verify.
In the leasing case, issuance runs at 8 to 10% — and that cost is already built into the price per metric ton you see on the pricing page. It is not added afterwards, and the per-ton price does not move because of it. If your own bank gives you better terms than the market, take them: it lowers your cost, it changes nothing on our side, and our price stays the same.
Three to seven days from the invoice naming the beneficiary to the MT760 being transmitted, once your file is in order. What takes longer is your bank approving the line in the first place — that part is on your side and it is the usual bottleneck. Start it early, in parallel with the LOI, and you will save two to three weeks.
If you do not pay: the seller presents a written demand with a statement of default and the unpaid invoice, and the SBLC is drawn for that amount — not for the whole contract. If the seller does not ship: the 2% performance bond issued by the seller’s bank in your name is called, and the contract’s penalty clause applies — 2% of total contract value, payable within fifteen business days, then ICC arbitration. Neither side can walk away without cost.
The bank on the other side
This is where most sugar deals fall apart: the buyer is asked to send an instrument to a bank nobody can verify, in a jurisdiction with no practical recourse. Here the instrument is handled by HSBC United States — a top-ten global bank, under US law. Your compliance department can check it in a minute, and if something goes wrong you have a real forum to go to. That is not a detail; for most of our buyers it is the reason the file gets approved internally.
Documents
Everything a buyer needs to judge the offer, downloadable without an account and without asking anyone. Nothing here names the producer — that comes later, and under NDA.
Product specification
Product specification
Annex A in full — the twenty contractual parameters, packing, inspection and delivery terms.
2 pages · PDFDownload
Understanding the SBLC
Understanding the SBLC
What the guarantee is, what it costs, who blocks the funds, and what happens if either side fails.
3 pages · PDFDownload
The procedure
The procedure
The eight steps from first contact to payment, the timeline, and when the seller is disclosed.
2 pages · PDFDownload
