The Letter of Credit (LOC) is a fundamental instrument in international trade finance, providing security and payment assurance to parties involved in cross-border transactions. Under Australian jurisdiction, LOCs are governed by both domestic banking laws and international conventions, particularly the UCP 600. This document is typically used when there's a need for a secure payment method in international trade, especially when parties don't have established trading relationships or when local regulations require formal banking channels. The LOC contains specific details about the transaction, including payment terms, document requirements, and conditions that must be met for payment release. It's particularly crucial in Australian trade contexts where geographical distance often necessitates robust payment security mechanisms.
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1. Letter Reference Number: Unique identification number for the LOC
2. Date of Issuance: The date when the LOC is issued
3. Type of Credit: Specification of whether it's irrevocable, confirmed, transferable, etc.
4. Applicant Details: Full name and address of the buyer/importer requesting the LOC
5. Beneficiary Details: Full name and address of the seller/exporter who will receive payment
6. Issuing Bank Details: Name and address of the bank issuing the LOC
7. Currency and Amount: The currency and maximum amount available under the LOC
8. Expiry Date: The date and place where the LOC expires
9. Documentary Requirements: List of documents required for payment (e.g., commercial invoice, transport documents)
10. Payment Terms: Conditions and timing of payment, including any partial shipments or transhipment terms
11. Governing Law: Statement that the LOC is subject to UCP 600 and Australian law
1. Advising Bank Details: Details of the bank advising the LOC to the beneficiary, used when there's an intermediary bank
2. Confirmation Instructions: Instructions regarding confirmation, used when a confirmed LOC is requested
3. Transfer Conditions: Terms for transferring the LOC, included only for transferable LOCs
4. Special Conditions: Any additional terms or conditions specific to the transaction
5. Red Clause: Advance payment provisions, included only when advance payments are permitted
6. Green Clause: Storage provisions, included when goods need to be stored before shipment
7. Back-to-Back Provisions: Terms for back-to-back LC arrangements, used in intermediary trade situations
1. Schedule A - Description of Goods: Detailed description of the goods being traded, including quantity, unit price, and specifications
2. Schedule B - Shipping Terms: Detailed shipping instructions, including port of loading/discharge, latest shipment date
3. Schedule C - Document Checklist: Comprehensive list of required documents with specific format requirements
4. Appendix 1 - Bank Forms: Standard forms required by the issuing bank for document presentation
5. Appendix 2 - Special Instructions: Any special handling or processing instructions for the banks involved
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Manufacturing
Import/Export
Commodities Trading
Retail
Agriculture
Mining
Energy
Shipping and Logistics
Construction
Heavy Industry
Relevant Teams
Trade Finance
International Banking
Treasury
Legal
Compliance
Risk Management
Operations
Finance
Procurement
International Sales
Supply Chain
Credit Administration
Relevant Roles
Trade Finance Manager
International Banking Officer
Documentary Credits Specialist
Import/Export Manager
Treasury Manager
Trade Operations Officer
Compliance Officer
Banking Relationship Manager
Chief Financial Officer
Finance Director
International Sales Manager
Procurement Manager
Supply Chain Manager
Credit Risk Manager
Legal Counsel
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