The Letter of Credit (LOC) is a fundamental trade finance instrument widely used in the United Arab Emirates' international trade landscape. This document type is essential when parties seek a secure method of payment in cross-border transactions, particularly given the UAE's position as a global trade hub. The LOC provides security to both buyers and sellers by having a bank guarantee the payment, subject to the presentation of specified documents. Under UAE law, Letters of Credit are governed by Federal Law No. 18 of 1993 (Commercial Code) and Federal Law No. 14 of 2018 (Central Bank Law), while also adhering to international standards such as UCP 600. The document typically includes detailed terms regarding payment conditions, document requirements, shipping terms, and compliance requirements, making it particularly relevant for businesses engaged in import/export activities through UAE ports and free zones.
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1. Letter Header: Issuing bank's letterhead, reference number, date, and type of credit
2. Parties Details: Full details of the applicant (buyer), beneficiary (seller), issuing bank, and any advising/confirming banks
3. Credit Amount: Currency and amount of the credit, including any tolerance levels
4. Validity: Expiry date and place for presentation of documents
5. Payment Terms: Method of payment (sight, deferred, negotiation, acceptance) and timeline
6. Documentation Requirements: Detailed list of required documents (commercial invoice, transport documents, insurance, etc.)
7. Goods Description: Detailed description of goods/services, quantity, unit price, delivery terms
8. Shipment Terms: Latest shipment date, partial shipments, transhipment provisions
9. Bank Instructions: Specific instructions for handling documents and payments
10. Governing Law: Reference to UAE law and UCP 600 applicability
1. Confirmation Instructions: Used when confirmation is requested from another bank
2. Transfer Conditions: Include when the credit is transferable
3. Back-to-Back Provisions: Required for back-to-back credit arrangements
4. Revolving Terms: Include for revolving letters of credit
5. Red Clause Provisions: Used when advance payment provisions are included
6. Green Clause Provisions: Include when storage of goods provisions are required
7. Standby Provisions: Specific terms for standby letters of credit
1. Schedule A - Document Checklist: Detailed checklist of all required documents and their specifications
2. Schedule B - Goods Specification: Detailed technical specifications of goods when too lengthy for main body
3. Schedule C - Banking Instructions: Specific instructions for document handling and payment procedures
4. Appendix 1 - Form of Draft: Template for bills of exchange if required
5. Appendix 2 - Form of Transport Documents: Specific requirements for transport documentation
6. Appendix 3 - Form of Demand: Template for making demands under the credit
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Import/Export
Manufacturing
Retail
Commodities Trading
Oil and Gas
Construction
Logistics and Supply Chain
Agriculture
Textile Industry
Electronics and Technology
Automotive
Relevant Teams
Trade Finance
International Banking
Documentary Credits
Treasury
Risk Management
Compliance
Finance
Procurement
Supply Chain
Legal
Operations
Credit Administration
Relevant Roles
Trade Finance Manager
Documentary Credits Officer
International Banking Officer
Import/Export Manager
Treasury Manager
Trade Operations Manager
Credit Risk Officer
Compliance Officer
Finance Director
Chief Financial Officer
Banking Relationship Manager
Supply Chain Manager
Procurement Manager
Letter of Credit Specialist
International Trade Specialist
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