The Red Letter of Credit is a crucial trade finance instrument used in situations where sellers require advance funding before shipping goods. This document type is particularly relevant in Australian international trade contexts where exporters need working capital for production or preparation of goods. It differs from standard Letters of Credit by including a 'red clause' that permits the beneficiary to obtain advance payments before shipping. The document must comply with Australian banking regulations, including the Banking Act 1959 and ASIC requirements, while also adhering to international standards like UCP 600. It's commonly used in commodity trades, manufacturing contracts, and situations where suppliers need pre-shipment finance. The document includes detailed terms for advance payment, document presentation requirements, and final payment conditions, making it a complex but valuable tool in international trade finance.
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1. LC Number and Date: Unique identification number and issuance date of the Letter of Credit
2. Applicant Details: Full name and address of the party requesting the Letter of Credit (buyer/importer)
3. Beneficiary Details: Full name and address of the party in whose favor the LC is issued (seller/exporter)
4. Issuing Bank Details: Name and address of the bank issuing the Letter of Credit
5. Amount and Currency: Credit amount and currency specification, including tolerance if any
6. Type and Form of Credit: Specification that this is an irrevocable red clause Letter of Credit
7. Advance Payment Terms: Details of the advance payment facility under the red clause
8. Expiry Date and Place: Validity period and location where the LC expires
9. Shipment Terms: Latest shipment date and shipping details including port of loading/discharge
10. Document Requirements: List of required documents for presentation and payment
11. Payment Terms: Conditions and timing of payment, including advance payment specifications
12. Special Conditions: Any specific conditions or requirements unique to this LC
1. Advising Bank Details: Details of the bank advising the LC to the beneficiary, used when there's an intermediary bank
2. Confirmation Instructions: Instructions regarding confirmation of the LC by another bank, used when additional bank security is required
3. Transferability Clause: Terms allowing the LC to be transferred to another beneficiary, included when the LC needs to be transferable
4. Partial Shipment/Drawing: Terms regarding partial shipments or drawings, included when these are permitted
5. Insurance Instructions: Specific insurance requirements, included when insurance is arranged by the applicant
6. Special Reimbursement Instructions: Used when specific reimbursement arrangements between banks are required
1. Document Presentation Schedule: Detailed list of required documents and presentation requirements
2. Advance Payment Schedule: Detailed terms and conditions for the advance payment under the red clause
3. Goods Description Schedule: Detailed description of the goods being traded
4. Unit Price Schedule: Breakdown of prices if multiple items are involved
5. Bank Authorization Forms: Standard forms required for bank processing
6. UCP 600 Incorporation: Reference to applicable UCP 600 articles and terms
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Import/Export
Manufacturing
Commodities Trading
Retail
Agriculture
Mining
Energy
Textiles
Heavy Industry
Shipping and Logistics
Relevant Teams
Trade Finance
International Banking
Documentary Credits
Export Finance
Import Operations
Compliance
Risk Management
Treasury
Commercial Banking
Legal
Trade Operations
Credit Administration
Relevant Roles
Trade Finance Manager
International Banking Officer
Documentary Credits Specialist
Export Finance Manager
Import Operations Manager
Trade Operations Officer
Compliance Officer
Credit Risk Manager
Banking Relationship Manager
Treasury Manager
Commercial Banking Officer
Trade Finance Analyst
Letter of Credit Specialist
International Trade Specialist
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