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Usance Lc Discounting for United Arab Emirates

Usance Lc Discounting Template for United Arab Emirates

This agreement, governed by UAE law, establishes the terms and conditions for discounting Usance Letters of Credit, enabling exporters to receive immediate payment for their goods while providing banks with a secure trade finance instrument. The document encompasses UAE Central Bank regulations, international banking practices, and optional Shariah-compliant structures, making it suitable for both conventional and Islamic banking arrangements in the UAE's dynamic trading environment. It details the discounting mechanism, pricing structure, rights and obligations of parties, and risk mitigation measures in accordance with UAE financial regulations and international trade finance standards.

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What is a Usance Lc Discounting?

This document is essential for trade finance operations in the UAE, specifically dealing with Usance LC Discounting arrangements between financial institutions and exporters. It's primarily used when exporters need to receive immediate payment for goods sold under a deferred payment Letter of Credit, rather than waiting for the maturity date. The agreement incorporates UAE Central Bank requirements, international banking practices, and can be structured to comply with both conventional and Islamic banking principles. It typically includes detailed provisions for discount calculations, document handling, risk allocation, and default scenarios. The document is particularly relevant in the UAE context given the country's position as a major trading hub and its dual banking system that accommodates both conventional and Islamic financial institutions.

What sections should be included in a Usance Lc Discounting?

1. Parties: Identification of the discounting bank and the beneficiary/seller

2. Background: Context of the LC transaction and purpose of the discounting arrangement

3. Definitions: Key terms used in the agreement including LC-specific terminology

4. Discounting Facility: Core terms of the discounting arrangement including limits and conditions

5. Pricing and Calculations: Discount rate, fees, and calculation methodologies

6. Conditions Precedent: Prerequisites for discounting including document requirements

7. Representations and Warranties: Standard and LC-specific representations by the beneficiary

8. Covenants: Ongoing obligations of the parties during the facility period

9. Payment Mechanics: Process for disbursement and collection of payments

10. Events of Default: Circumstances constituting default and consequences

11. Remedies: Rights and actions available upon default

12. Governing Law and Jurisdiction: UAE law provisions and jurisdiction specifications

What sections are optional to include in a Usance Lc Discounting?

1. Shariah Compliance: Required if the facility needs to be Shariah-compliant, including relevant structuring and principles

2. Security Arrangements: Include if additional security beyond the LC is required

3. Insurance: Required if specific insurance obligations are imposed on the beneficiary

4. Tax Provisions: Include if cross-border elements require specific tax treatments

5. Assignment: Include if rights under the facility may be assigned to third parties

6. Anti-Money Laundering: Include for high-value facilities or where required by bank policy

What schedules should be included in a Usance Lc Discounting?

1. Schedule 1 - Form of Discount Request: Standard form for requesting discounting of specific LCs

2. Schedule 2 - Calculation of Discount Rate: Detailed methodology for calculating the applicable discount rate

3. Schedule 3 - Required Documents: List of documents required for each discounting request

4. Schedule 4 - Fees and Charges: Detailed breakdown of all applicable fees and charges

5. Appendix A - Form of LC: Sample or template of acceptable LC format

6. Appendix B - Compliance Certificates: Templates for various compliance certificates required

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Publisher

Genie AI

Document Type

Letter of Credit

Cost

Free to use

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