Trade Finance & Payment
Standby Letter of Credit
Also known as: SBLC, Standby L/C
A standby letter of credit is a bank guarantee that functions as a backstop rather than a primary means of payment: it is drawn upon only if the party who arranged it fails to perform an obligation, such as paying an invoice or completing a contract. Unlike a commercial letter of credit, which is expected to be paid in the ordinary course against shipping documents, a standby is intended never to be called, serving instead as security that reassures the beneficiary. Standbys support open-account trade, bid and performance bonds, and ongoing supply relationships where a full commercial credit for each shipment would be impractical.
Where this touches customs is collateral. If your duty exposure is large against your balance sheet, the surety will want security behind a continuous bond, and a standby credit is the usual instrument. Budget the bank fee and the tied-up credit line — a real cost of importing at volume that nobody quotes up front.
Related terms
Reviewed by a licensed customs broker. Definitions are general information, not legal or customs advice for a particular shipment. Duty rates, tariff programs and agency requirements change frequently.