A Commercial Letter of Credit is a crucial financial instrument used in international trade transactions within the Indian legal framework. It serves as a secure payment mechanism where a bank (the issuing bank) guarantees payment to a seller on behalf of a buyer, provided that the seller meets specific documentary requirements. The document is particularly essential when parties are dealing across borders and need a reliable payment assurance. It includes detailed specifications about the transaction, required documents, payment terms, and shipping requirements. Under Indian jurisdiction, these letters of credit must comply with the Banking Regulation Act 1949, FEMA 1999, and international banking practices (UCP 600). They are commonly used in import-export transactions where parties seek to minimize trading risks and ensure smooth transaction completion through bank-mediated payment guarantees.
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1. Letter of Credit Number and Date: Unique identification number and issuance date of the LC
2. Issuing Bank Details: Complete name, address, and SWIFT code of the bank issuing the LC
3. Applicant Details: Full name, address, and contact information of the party requesting the LC (typically the buyer)
4. Beneficiary Details: Full name, address, and contact information of the party in whose favor the LC is issued (typically the seller)
5. Currency and Amount: Specified currency and maximum amount for which the LC is issued
6. Type of Credit: Specification of whether the LC is irrevocable, confirmed/unconfirmed, transferable/non-transferable
7. Expiry Date and Place: Clear statement of when and where the LC expires
8. Available With/By: Specification of where and how the credit is available (sight, deferred payment, acceptance, negotiation)
9. Partial Shipments/Transhipment: Whether partial shipments and transhipment are allowed or prohibited
10. Loading/Dispatch From/To: Ports or places of loading and discharge
11. Latest Date of Shipment: Final date by which shipment must be made
12. Description of Goods/Services: Detailed description of the goods or services covered by the LC
13. Documents Required: List of all documents that must be presented for payment
14. Additional Conditions: Any special conditions or terms that must be met
15. Bank Charges: Specification of which party bears which bank charges
1. Confirmation Instructions: Used when confirmation from another bank is requested, specifying the confirming bank's role and responsibilities
2. Transfer Conditions: Included when the LC is transferable, specifying the terms and conditions for transfer
3. Back-to-Back LC Provisions: Used in cases where a back-to-back LC arrangement is permitted
4. Red Clause Provisions: Included when advance payment facilities are provided to the beneficiary
5. Green Clause Provisions: Used when storage facilities and advance payment are provided
6. Revolving Credit Terms: Included when the LC is revolving, specifying the terms of reinstatement
7. Standby Provisions: Used when the LC serves as a standby instrument
8. Insurance Instructions: Detailed when specific insurance requirements need to be specified beyond standard terms
1. Schedule A - Documents Required: Detailed list and specifications of all required documents including format, copies needed, and special requirements
2. Schedule B - Goods Specification: Detailed technical specifications of the goods, including quality standards, quantity, and packaging requirements
3. Schedule C - Payment Terms: Detailed breakdown of payment terms, including any special conditions or partial payment arrangements
4. Schedule D - Shipping Terms: Detailed shipping instructions, including Incoterms, specific routing requirements, and delivery schedules
5. Appendix 1 - Standard Banking Forms: Standard forms required by the issuing bank for documentation
6. Appendix 2 - UCP 600 References: Specific articles of UCP 600 applicable to this LC
7. Appendix 3 - Amendment Format: Standard format for any future amendments to the LC
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Import/Export
Manufacturing
Retail
Commodities Trading
Agriculture
Textiles
Pharmaceuticals
Automotive
Electronics
Heavy Industry
Mining
Oil and Gas
Chemical Industry
Consumer Goods
Relevant Teams
Finance
International Trade
Treasury
Banking Operations
Trade Finance
Risk Management
Compliance
Legal
Procurement
Supply Chain
Commercial Operations
Credit Control
Documentary Credits
International Business Development
Relevant Roles
Trade Finance Manager
Import/Export Manager
Chief Financial Officer
Treasury Manager
Banking Operations Manager
Documentary Credits Specialist
International Trade Specialist
Compliance Officer
Risk Manager
Finance Director
Supply Chain Manager
Procurement Manager
Credit Controller
Banking Relations Manager
Commercial Director
International Business Development Manager
Trade Operations Officer
Letter of Credit Analyst
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