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This document is essential for trade finance transactions in Pakistan where exporters seek to monetize their deferred-payment letters of credit. The Usance LC Discounting agreement serves as the primary legal framework for transactions where banks purchase the rights to future LC payments at a discount, providing immediate liquidity to exporters. It is commonly used in sectors with longer payment cycles and international trade operations. The document must comply with State Bank of Pakistan regulations, the Banking Companies Ordinance, and international banking practices including UCP 600. It typically includes comprehensive details about discount rates, payment terms, risk mitigation measures, and compliance requirements. This agreement type is particularly relevant for Pakistani exporters dealing with international buyers who operate on deferred payment terms, helping bridge the working capital gap in international trade transactions.

1. Parties: Identification of the discounting bank and the beneficiary/seller seeking discounting of the LC

2. Background: Context of the underlying LC transaction and the purpose of the discounting arrangement

3. Definitions: Definitions of key terms used in the agreement including banking, LC, and discounting-related terminology

4. Discounting Facility Terms: Core terms of the discounting facility including amount, tenor, and discount rate

5. LC Details and Conditions: Details of the underlying LC being discounted and conditions precedent for discounting

6. Payment Terms: Terms regarding payment calculations, processing, and settlement arrangements

7. Representations and Warranties: Standard and specific representations by the beneficiary regarding the LC and underlying transaction

8. Covenants: Ongoing obligations of the beneficiary during the tenor of the discounting

9. Risk Allocation: Distribution of risks between parties and recourse provisions

10. Events of Default: Circumstances constituting default and consequent remedies

11. Governing Law and Jurisdiction: Specification of Pakistani law as governing law and jurisdiction for disputes

12. Notices: Communication protocols between parties

13. Execution: Signature blocks and execution formalities