A Clean Letter of Credit serves as a fundamental banking instrument in international trade finance, particularly when there is an established relationship of trust between trading parties. This document type is specifically designed for transactions where extensive documentation is unnecessary, making it more streamlined than traditional documentary credits. Under Malaysian jurisdiction, governed by the Financial Services Act 2013 and international banking practices (UCP 600), the Clean Letter of Credit provides a bank's irrevocable commitment to pay a specified amount to the beneficiary upon presentation of minimal required documents. It is commonly used in recurring trade relationships, intercompany transactions, or when dealing with highly trusted counterparties, offering a balance between payment security and operational efficiency.
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1. Bank Details and Reference: Issuing bank's details, LC number, and date of issuance
2. Beneficiary Information: Complete name and address of the beneficiary (seller/exporter)
3. Applicant Information: Complete name and address of the applicant (buyer/importer)
4. Currency and Amount: The currency and amount of the Letter of Credit, written in both figures and words
5. Expiry Date and Place: The date and location where the Letter of Credit expires
6. Form of Credit: Specification that this is an irrevocable Clean Letter of Credit
7. Payment Terms: When and how payment will be made (at sight, deferred payment, etc.)
8. Documents Required: List of documents required for presentation, noting this is a Clean LC with minimal documentation
9. Presentation Period: Time period within which documents must be presented after the date of shipment
10. Governing Law: Statement that the LC is subject to Malaysian law and UCP 600
1. Transferability Clause: Include when the Letter of Credit needs to be transferable to a third party
2. Confirmation Instructions: Include when confirmation from another bank is required
3. Partial Shipments/Drawings: Include when specifying whether partial shipments or drawings are allowed or prohibited
4. Anti-Money Laundering Declaration: Include when additional compliance declarations are required by the issuing bank
5. Special Conditions: Include when there are additional terms or conditions specific to the transaction
1. Schedule A - Payment Schedule: If payment is to be made in installments or has specific conditions
2. Schedule B - Document Requirements: Detailed list of any specific document requirements or formats
3. Appendix 1 - Bank's Standard Terms: Standard terms and conditions of the issuing bank for Clean Letters of Credit
4. Appendix 2 - Authorized Signatories: List of authorized signatories for document verification, if required
Authors
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Relevant Industries
Banking & Financial Services
International Trade
Import/Export
Manufacturing
Wholesale Trade
Retail
Commodities
Agriculture
Mining
Energy
Telecommunications
Construction
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Relevant Teams
Trade Finance
International Banking
Treasury
Corporate Finance
Legal
Compliance
Risk Management
Operations
Supply Chain
Procurement
Credit Administration
Documentary Credits
Corporate Banking
Relevant Roles
Trade Finance Manager
International Banking Officer
Treasury Manager
Chief Financial Officer
Finance Director
Import/Export Manager
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Banking Relationship Manager
Credit Risk Officer
Documentary Credits Specialist
International Trade Specialist
Corporate Banking Manager
Financial Controller
Supply Chain Manager
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