A Direct Letter of Credit is a crucial financial instrument in international trade transactions, particularly within the Malaysian banking framework. This document is utilized when a buyer (importer) needs to provide payment security to a seller (exporter) in an international trade transaction. The Direct Letter of Credit, governed by Malaysian law and international banking practices (UCP 600), represents a bank's irrevocable commitment to pay the seller upon presentation of compliant documents. It is particularly relevant in Malaysia's dual banking system, which accommodates both conventional and Islamic banking principles. The document includes specific details about the transaction, payment terms, required documentation, and shipping requirements, providing a secure payment mechanism that protects both parties' interests in international trade deals.
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1. Bank Reference Details: Issuing bank's details, reference numbers, and date of issuance
2. Beneficiary Information: Complete details of the beneficiary including name, address, and bank account information
3. Applicant Information: Complete details of the applicant (buyer) including name, address, and reference details
4. Credit Amount and Currency: Specific amount of the letter of credit and currency denomination
5. Form of Credit: Specification that this is an irrevocable direct letter of credit
6. Expiry Details: Expiry date and place of the letter of credit
7. Shipment Terms: Latest shipment date, partial shipment/transhipment permissions, and shipping details
8. Document Requirements: List of required documents for credit settlement (invoices, transport documents, certificates etc.)
9. Payment Terms: Specification of payment terms, timing, and method
10. Special Conditions: Any additional terms or conditions specific to this letter of credit
1. Islamic Banking Compliance: Required when the letter of credit needs to comply with Shariah principles
2. Transferability Clause: Include when the credit needs to be transferable to another beneficiary
3. Back-to-Back Arrangements: Include when the credit is part of a back-to-back letter of credit structure
4. Red Clause Provisions: Include when advance payment features are required
5. Green Clause Provisions: Include when storage of goods provisions are needed
1. Schedule A - Document Requirements: Detailed list and format of all required documents for presentation
2. Schedule B - Goods Description: Detailed description of the goods or services covered by the letter of credit
3. Schedule C - Banking Instructions: Specific instructions for processing and payment
4. Appendix 1 - UCP 600 Compliance: Reference to specific UCP 600 articles applicable to this letter of credit
5. Appendix 2 - Standard Banking Forms: Required banking forms and formats for document presentation
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Import/Export
Manufacturing
Commodities Trading
Retail
Wholesale
Agriculture
Mining
Oil and Gas
Textiles
Electronics
Automotive
Relevant Teams
Trade Finance
International Banking
Treasury
Legal and Compliance
Risk Management
Operations
Documentary Credits
Corporate Banking
International Trade Operations
Finance
Procurement
Supply Chain
Relevant Roles
Trade Finance Manager
International Banking Officer
Import/Export Manager
Chief Financial Officer
Treasury Manager
Documentary Credits Specialist
Compliance Officer
Trade Operations Manager
Banking Relationship Manager
Letter of Credit Specialist
International Trade Specialist
Finance Director
Supply Chain Manager
Procurement Manager
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