The Operative Letter of Credit serves as a fundamental tool in international trade finance, providing security and certainty in cross-border transactions. Governed by English and Welsh law, this document establishes a bank's commitment to pay a specified amount against the presentation of stipulated documents. When using an Operative Letter of Credit, parties benefit from the established legal framework of a major financial jurisdiction, combined with the international standards of UCP 600. The document typically includes detailed payment terms, documentary requirements, and specific conditions that must be met for payment release, making it particularly valuable in complex international transactions where direct payment arrangements might be risky or impractical.
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1. Issuing Bank Details: Full name, address, and reference numbers of the issuing bank
2. Beneficiary Details: Complete identification of the party receiving payment, including full name, address, and banking details
3. Applicant Details: Complete identification of the party requesting the letter of credit, including full name, address, and reference numbers
4. Credit Amount and Currency: Specific amount and currency of the letter of credit, including any tolerance levels if applicable
5. Expiry Details: Clear statement of when and where the credit expires, including the latest presentation date
6. Documentary Requirements: Detailed list of required documents for payment, including specific requirements for each document
7. Payment Terms: Specific conditions under which payment will be made, including timing and method of payment
1. Transferability Clause: Optional clause specifying whether and how the credit may be transferred to another beneficiary
2. Revolving Credit Provisions: Optional terms specifying automatic renewal conditions and limits
3. Red Clause Provisions: Optional terms allowing for advance payment to beneficiary before document presentation
4. Back-to-Back Credit Terms: Optional provisions for when the credit is used to support another letter of credit
1. Document Checklist: Comprehensive checklist detailing all required documents and their specific format requirements
2. Standard Banking Forms: Collection of required banking forms for processing the letter of credit
3. Shipping Schedule: Details of shipping arrangements, requirements, and deadlines if applicable to the transaction
4. UCP 600 References: Specific articles of UCP 600 applicable to this letter of credit
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