An Operative Letter of Credit is a crucial financial instrument used in international trade transactions, providing payment security and risk mitigation for parties involved in cross-border commerce. This document, governed by Canadian banking laws and international conventions, particularly UCP 600, represents a bank's irrevocable commitment to pay a specified amount upon presentation of compliant documents. It's typically used when parties seek a secure payment method in international trade, especially when dealing with unfamiliar trading partners or operating in challenging markets. The document specifies payment conditions, documentary requirements, and compliance standards, incorporating both Canadian regulatory requirements and international banking practices. This Letter of Credit structure is particularly relevant for Canadian businesses engaged in international trade, providing them with a standardized and legally robust instrument for conducting global commerce.
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1. Issuing Bank Details: Complete name, address, and reference numbers of the issuing bank
2. Letter of Credit Number: Unique identification number assigned to the Letter of Credit
3. Date of Issue: Date when the Letter of Credit is issued
4. Beneficiary Details: Complete name and address of the party in whose favor the Letter of Credit is issued
5. Applicant Details: Complete name and address of the party requesting the Letter of Credit
6. Currency and Amount: Specified currency and maximum amount available under the Letter of Credit
7. Expiry Date: Date and place of expiry of the Letter of Credit
8. Documentary Requirements: Detailed list of documents required for presentation
9. Payment Terms: Specifications of when and how payment will be made
10. Shipment Terms: Details of shipment including latest shipment date and partial shipments if applicable
11. Presentation Period: Time period within which documents must be presented after shipment
12. Governing Law and Rules: Reference to UCP 600 and Canadian law as applicable
1. Transferability Clause: Include when the Letter of Credit needs to be transferable to another beneficiary
2. Revolving Terms: Include for revolving Letters of Credit specifying reinstatement terms
3. Red Clause: Include when advance payment to the beneficiary is permitted
4. Green Clause: Include when storage of goods is involved with advance payment
5. Back-to-Back Provisions: Include when this LC supports another LC
6. Confirmation Instructions: Include when confirmation by another bank is required
7. Insurance Requirements: Include when specific insurance coverage needs to be specified
8. Special Conditions: Include any transaction-specific conditions or requirements
1. Document Checklist: Detailed checklist of required documents with specific format requirements
2. Goods Specification: Detailed description of goods or services covered by the Letter of Credit
3. Price Schedule: Breakdown of prices if multiple items or shipments are involved
4. Shipping Schedule: Timeline and details of shipment requirements if complex delivery is involved
5. Bank Contact Details: List of relevant contact persons and departments at all banks involved
6. Amendment Form: Standard form for requesting amendments to the Letter of Credit
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Manufacturing
Retail
Commodities Trading
Energy and Resources
Agriculture
Shipping and Logistics
Import/Export
Construction
Technology Hardware
Pharmaceutical
Relevant Teams
Trade Finance
International Banking
Documentary Credits
Global Transaction Banking
Trade Operations
Risk Management
Compliance
Treasury
Legal
International Trade
Banking Operations
Commercial Banking
Credit Analysis
Relevant Roles
Trade Finance Manager
International Banking Officer
Documentary Credits Specialist
Export Finance Manager
Import Operations Manager
Trade Operations Officer
Letter of Credit Analyst
Global Transaction Banking Manager
Compliance Officer
Risk Management Officer
Treasury Manager
International Trade Specialist
Banking Operations Manager
Commercial Banking Relationship Manager
Trade Services Manager
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