A Clean Letter of Credit is a specialized banking instrument used when parties require a secure payment mechanism with minimal documentation requirements. Unlike traditional documentary credits, this type of Letter of Credit typically requires only a simple written demand for payment, making it particularly attractive for certain types of transactions where detailed documentation is unnecessary or impractical. Under German law, these instruments must comply with the German Commercial Code (HGB), Banking Act (KWG), and relevant EU regulations, while also adhering to international banking standards such as UCP 600. The document is commonly used in international trade, financial transactions, and situations where the beneficiary requires a strong payment guarantee from a reputable banking institution. It represents an irrevocable commitment by the issuing bank to pay, provided the simple conditions specified in the letter are met.
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1. Letter Reference and Date: Unique identification number of the LC and issuance date
2. Issuing Bank Details: Complete name and address of the issuing bank
3. Beneficiary Details: Full name and address of the party receiving the letter of credit
4. Applicant Details: Full name and address of the party requesting the letter of credit
5. Amount and Currency: Specified amount and currency of the letter of credit
6. Expiry Date and Place: Validity period and location where the LC expires
7. Payment Terms: Specific conditions for payment including timing (at sight, deferred, etc.)
8. Transaction Details: Brief description of the underlying commercial transaction
9. Document Requirements: List of required documents for payment, typically minimal for clean LC
10. Bank Instructions: Specific instructions for processing and payment
11. Governing Law Declaration: Statement of German law governance and UCP 600 applicability
12. Authentication: Official bank signatures and authentication details
1. Transferability Clause: Include when the LC needs to be transferable to another beneficiary
2. Revolving Terms: Include for LCs that automatically renew under specified conditions
3. Confirmation Instructions: Include when confirmation by another bank is requested/required
4. Partial Shipment/Drawing Terms: Include when partial drawings are allowed or prohibited
5. Special Instructions: Include for any unique requirements or conditions
6. SWIFT Authentication: Include when LC is transmitted via SWIFT system
7. Anti-Money Laundering Declaration: Include when required by specific compliance requirements
1. Payment Schedule: Details of payment timing and installments if applicable
2. Bank Contact Details: List of relevant banking contacts and communication channels
3. Fee Schedule: Breakdown of banking charges and fees
4. Document Handling Instructions: Detailed instructions for document processing and delivery
5. Authorized Signatories: List of authorized bank officials who may sign/authenticate the LC
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Import/Export
Manufacturing
Wholesale Trade
Retail
Logistics and Transportation
Professional Services
Commodities Trading
Energy
Agriculture
Relevant Teams
Treasury
International Trade
Finance
Legal
Compliance
Risk Management
Corporate Banking
Trade Operations
Credit Administration
Documentary Credits
Relevant Roles
Trade Finance Manager
International Banking Officer
Treasury Manager
Chief Financial Officer
Finance Director
Import/Export Manager
Trade Operations Manager
Compliance Officer
Banking Relationship Manager
Credit Manager
Legal Counsel
Risk Manager
Corporate Banking Officer
Financial Controller
International Trade Specialist
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