The Commercial Letter of Credit is a fundamental instrument in international trade finance, particularly crucial in the Saudi Arabian market where it bridges domestic and international commerce. This document is typically used when parties seek a secure payment method in cross-border transactions, providing assurance to sellers about payment and to buyers about delivery conditions. The Letter of Credit incorporates specific requirements from Saudi Arabian banking regulations, including compliance with Islamic finance principles and SAMA guidelines. It details the conditions under which payment will be made, typically including shipping documents, inspection certificates, and other trade-related documentation. The document's structure follows international banking standards while maintaining compliance with local Saudi regulations, making it essential for businesses engaging in international trade with Saudi Arabian entities.
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1. Issuing Bank Details: Complete name, address, and SWIFT code of the issuing bank
2. LC Number and Date: Unique letter of credit reference number and date of issuance
3. Applicant Details: Full name, address, and contact information of the buyer/importer
4. Beneficiary Details: Full name, address, and contact information of the seller/exporter
5. Amount and Currency: Maximum credit amount and currency denomination
6. Expiry Date and Place: Validity period and location where the LC expires
7. Payment Terms: Specification of payment conditions (sight, deferred, acceptance, or negotiation)
8. Shipment Terms: Latest shipment date, partial shipments, transhipment provisions
9. Documents Required: List of all required documents for LC presentation
10. Goods Description: Detailed description of merchandise, quantity, unit price
11. Incoterms: Specified international commercial terms defining responsibilities
12. Presentation Period: Time period within which documents must be presented after shipment
1. Transferability Clause: Include when the LC needs to be transferable to another beneficiary
2. Red Clause: Include when advance payment to the beneficiary is permitted
3. Revolving Credit Terms: Include for recurring trade relationships where the LC automatically renews
4. Back-to-Back Provisions: Include when the LC may be used as collateral for another LC
5. Confirmation Instructions: Include when confirmation by another bank is required
6. Special Conditions: Include any additional terms specific to the transaction or required by Saudi regulations
7. Islamic Finance Compliance: Include specific provisions ensuring Sharia compliance when required
1. Schedule A - Document Requirements: Detailed checklist of required documents and their specifications
2. Schedule B - Shipping Schedule: Detailed timeline for shipment and delivery milestones
3. Schedule C - Product Specifications: Detailed technical specifications of goods being traded
4. Appendix 1 - Bank Forms: Standard forms required by the issuing bank for document presentation
5. Appendix 2 - SAMA Compliance Checklist: Checklist ensuring compliance with Saudi Arabian Monetary Authority requirements
6. Appendix 3 - UCP 600 Reference: Relevant UCP 600 articles applicable to this specific LC
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Manufacturing
Import/Export
Retail
Wholesale
Commodities Trading
Oil and Gas
Construction
Agriculture
Textile
Automotive
Electronics
Mining
Petrochemicals
Relevant Teams
Trade Finance
International Banking
Legal
Compliance
Risk Management
Treasury
Operations
Documentary Credits
Islamic Banking
Corporate Banking
Import/Export Operations
Financial Control
Relevant Roles
Trade Finance Manager
Letter of Credit Specialist
International Trade Compliance Officer
Banking Operations Manager
Credit Risk Officer
Import/Export Manager
Treasury Manager
Documentary Credits Officer
Trade Finance Analyst
Shipping and Logistics Manager
Financial Controller
Chief Financial Officer
Banking Relationship Manager
Compliance Officer
Islamic Banking Specialist
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