A Direct Letter of Credit is a crucial financial instrument used in international trade transactions under German law. It represents a bank's irrevocable commitment to pay a specified sum to a beneficiary (typically a seller) upon presentation of compliant documents. This document type is particularly relevant when parties seek a secure payment method in cross-border transactions, combining the security of bank guarantees with the flexibility of documentary credits. The Direct Letter of Credit, governed by German banking regulations and UCP 600, includes specific details about the transaction, required documentation, payment terms, and compliance requirements. It's commonly used in import-export transactions where the buyer's bank provides payment assurance to the seller, facilitating international trade while minimizing risks for all parties involved. The document must comply with German banking laws, EU regulations, and international banking practices.
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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 of 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 receiving the Letter of Credit
5. Applicant Details: Complete name and address of the party requesting the Letter of Credit
6. Credit Amount: Currency and amount of the Letter of Credit, including any tolerance levels
7. Available With/By: Terms of availability and method of payment
8. Expiry Date and Place: Validity period and location where the Letter of Credit expires
9. Shipment Terms: Latest shipment date and partial shipment/transhipment conditions
10. Document Requirements: List of required documents for presentation
11. Goods Description: Detailed description of the merchandise covered
12. Payment Terms: Specific conditions and timing of payment
13. Special Conditions: Any additional terms and conditions specific to this Letter of Credit
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 conditions
3. Red Clause: Include when advance payment provisions are required
4. Green Clause: Include when warehouse storage provisions are needed
5. Back-to-Back Provisions: Include when the Letter of Credit is part of a back-to-back arrangement
6. Confirmation Instructions: Include when confirmation by another bank is required
1. Commercial Invoice Template: Standard format for the commercial invoice required under this Letter of Credit
2. Transport Document Requirements: Detailed specifications for bills of lading or other transport documents
3. Insurance Document Requirements: Specific requirements for insurance certificates or policies
4. Inspection Certificate Requirements: Format and content requirements for inspection certificates
5. Bank Reference Numbers: List of all relevant banking reference numbers and codes
6. Amendment Format: Standard format for future amendments to the Letter of Credit
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Manufacturing
Retail
Agriculture
Energy
Commodities Trading
Automotive
Chemical Industry
Textile Industry
Heavy Equipment
Electronics Manufacturing
Pharmaceuticals
Food and Beverage
Relevant Teams
Trade Finance
International Banking
Legal
Treasury
Compliance
Risk Management
Finance
International Sales
Procurement
Supply Chain
Documentary Credits
Trade Operations
Relevant Roles
Trade Finance Manager
Import/Export Manager
International Business Director
Financial Controller
Treasury Manager
Documentary Credits Specialist
Trade Operations Manager
Credit Risk Manager
Banking Relationship Manager
Compliance Officer
Legal Counsel
Chief Financial Officer
Supply Chain Manager
Procurement Manager
International Sales Manager
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