The Interest On Letter of Credit document is essential for international trade finance transactions conducted under UAE jurisdiction. It is typically used when parties need to establish clear terms for interest charges on Letters of Credit, whether in conventional or Islamic banking contexts. The document addresses key aspects such as interest rate calculation methods, payment mechanisms, and compliance with UAE Central Bank regulations and interest rate caps. It includes provisions for both issuing and beneficiary banks, incorporating UCP 600 standards while ensuring compliance with UAE Federal Law No. 18 of 1993 and other relevant banking regulations. This document is particularly crucial for cross-border transactions where interest charges need to be clearly defined and legally enforceable under UAE law.
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1. Parties: Identification of the issuing bank, beneficiary bank, applicant, and beneficiary
2. Background: Context of the LC issuance and the underlying commercial transaction
3. Definitions: Key terms including interest calculation periods, applicable rates, payment mechanisms
4. Letter of Credit Details: Core LC information including amount, validity, and documentary requirements
5. Interest Rate Provisions: Specification of interest rate, calculation method, and payment frequency
6. Payment Terms: Terms for both principal and interest payments, including payment schedule
7. Default and Remedies: Consequences of payment default and available remedies
8. Governing Law and Jurisdiction: Specification of UAE law governance and jurisdiction
9. Notices: Communication procedures between parties
10. Execution: Signature blocks and execution requirements
1. Islamic Banking Compliance: Required when the LC needs to comply with Sharia principles, including profit rate structure instead of interest
2. Security Provisions: Include when additional security or collateral is required for the LC
3. Transfer Rights: Include when the LC needs to be transferable to other beneficiaries
4. Tax Provisions: Required when cross-border transactions involve tax implications
5. Force Majeure: Include when specific force majeure provisions are needed beyond standard UCP terms
6. Syndication Provisions: Required when multiple banks are involved in issuing the LC
1. Interest Calculation Schedule: Detailed methodology for interest calculation, including examples
2. Required Documents: List of documents required for LC activation and drawing
3. Payment Schedule: Detailed schedule of payment dates and amounts
4. Bank Details: Banking coordinates and account details for all parties
5. Compliance Certificates: Ƶ for periodic compliance certifications
6. Form of Drawing Request: Standard format for drawing requests under the LC
Relevant legal definitions
Clauses
Relevant Industries
Banking & Financial Services
International Trade
Manufacturing
Import/Export
Retail
Commodities Trading
Construction
Oil & Gas
Shipping & Logistics
Agriculture
Relevant Teams
Legal
Finance
Treasury
Trade Finance
Risk Management
Compliance
Corporate Banking
International Banking
Documentary Credits
Credit Administration
Relevant Roles
Trade Finance Manager
Corporate Banking Officer
Chief Financial Officer
Treasury Manager
Finance Director
Credit Risk Manager
Compliance Officer
Legal Counsel
Trade Operations Manager
Documentary Credits Specialist
Banking Relationship Manager
Import/Export Manager
Financial Controller
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