The Trade Finance Letter of Credit is a fundamental instrument in international trade finance, particularly crucial in UAE's position as a global trading hub. It is used when businesses need a secure payment method for international transactions, especially when parties don't have established trading relationships. The document is governed by UAE Federal Law No. 18 of 1993 and UAE Central Bank regulations, while also conforming to international UCP 600 standards. This dual compliance ensures both local legal enforceability and international recognition. A Trade Finance Letter of Credit typically includes detailed specifications about the transaction, required documents, payment terms, and timeframes, serving as a risk mitigation tool for both importers and exporters. It's particularly relevant in the UAE's business environment, where international trade forms a significant portion of commercial activities across various free zones and mainland operations.
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1. Letter Reference and Date: Unique identification number of the LC and issuance date
2. Form of Documentary Credit: Specification that this is an irrevocable documentary credit and its type (e.g., sight, deferred payment)
3. Applicant Details: Full name and address of the party requesting the LC (usually the buyer)
4. Beneficiary Details: Full name and address of the party in whose favor the LC is issued (usually the seller)
5. Issuing Bank Details: Name and address of the bank issuing the LC
6. Currency and Amount: Currency and maximum amount for which the LC is issued
7. Available With/By: Specifies the bank with which the credit is available and the manner of availability
8. Expiry Date and Place: Final date for presentation of documents and location where presentation must be made
9. Shipment Terms: Latest shipment date, partial shipments/transshipment permissions, and shipping details
10. Description of Goods/Services: Precise description of the goods or services being traded
11. Required Documents: List of all documents required for presentation
12. Payment Terms: Specific conditions and timing of payment
13. Bank Charges: Allocation of banking charges between parties
1. Transferability Clause: Required when the LC needs to be transferable to a second beneficiary
2. Revolving Conditions: Included for revolving LCs, specifying the revolving terms and conditions
3. Red Clause: Used when advance payment to the beneficiary is permitted
4. Back-to-Back Provisions: Included when the LC is part of a back-to-back arrangement
5. Green Clause: Used when storage of goods is involved with advance payment
6. Standby Provisions: Specific provisions for standby LCs, including trigger events for payment
7. Confirmation Instructions: Instructions regarding confirmation by another bank, if required
1. Commercial Invoice Template: Prescribed format for the commercial invoice
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. Certificate of Origin Requirements: Format and content requirements for certificate of origin
5. Inspection Certificate Requirements: Requirements for third-party inspection certificates if applicable
6. Amendment Format: Standard format for any future amendments to the LC
7. Bank SWIFT Details: Complete banking coordinates for all involved banks
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking & Financial Services
International Trade
Manufacturing
Retail
Commodities Trading
Oil & Gas
Construction
Agriculture
Automotive
Electronics
Textiles
Mining
Pharmaceuticals
Food & Beverage
Relevant Teams
Trade Finance
International Banking
Corporate Banking
Risk Management
Compliance
Treasury
Financial Operations
Supply Chain
Procurement
International Sales
Documentary Credits
Trade Operations
Relevant Roles
Trade Finance Manager
Import/Export Manager
Documentary Credits Officer
Chief Financial Officer
Treasury Manager
Financial Controller
Trade Operations Manager
Credit Risk Officer
Compliance Officer
Banking Relationship Manager
Supply Chain Manager
Procurement Manager
International Sales Manager
Trade Finance Analyst
Documentary Collections Specialist
Letter of Credit Specialist
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