The Direct Letter of Credit is a fundamental financial instrument used in international trade transactions governed by South African law. This document is typically employed when a buyer needs to provide payment security to an overseas seller, and the seller is satisfied with the direct commitment of a South African bank without requiring additional confirmation. The Direct Letter of Credit contains detailed specifications about the transaction, including payment terms, document requirements, and shipping conditions, all structured to comply with both South African banking regulations and international standards (UCP 600). It's particularly useful in cross-border transactions where parties seek a secure, standardized payment mechanism that balances the interests of both buyers and sellers while ensuring regulatory compliance with South African foreign exchange controls and banking legislation.
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1. Bank Details and Reference: Issuing bank's details, letter of credit number, and date of issuance
2. Beneficiary Information: Complete details of the beneficiary including full name, address, and bank account information
3. Applicant Information: Complete details of the applicant (buyer) including full name, address, and reference numbers
4. Credit Amount and Currency: Precise specification of the credit amount, currency, and any tolerance levels
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. Payment Terms: Specification of payment terms, including whether payment is at sight or deferred
8. Required Documents: Detailed list of all required documents for credit utilization
9. Shipment Terms: Details of shipment including latest shipment date, partial shipments, and transhipment conditions
10. Description of Goods/Services: Precise description of the goods or services covered by the letter of credit
11. Governing Law and Jurisdiction: Statement of South African law as governing law and UCP 600 application
1. Transfer Conditions: Include when the letter of credit is transferable, specifying the terms and conditions of transfer
2. Special Conditions: Any additional conditions or requirements specific to the transaction
3. Back-to-Back Provisions: Include when the letter of credit is part of a back-to-back arrangement
4. Revolving Credit Terms: Include when the letter of credit is revolving, specifying the revolving terms and conditions
5. Red Clause Provisions: Include when advance payment provisions are required, specifying the terms of advance payment
6. Green Clause Provisions: Include when storage provisions are required, specifying terms for storage of goods
1. Schedule A - Document Requirements: Detailed checklist of required documents and their specific requirements
2. Schedule B - Technical Specifications: Detailed technical specifications of goods or services when applicable
3. Schedule C - Banking Instructions: Specific instructions for document presentation and payment procedures
4. Appendix 1 - UCP 600 Disclaimer: Standard disclaimers and relevant UCP 600 provisions
5. Appendix 2 - Fee Schedule: Schedule of bank charges and fees applicable to the letter of credit
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Import/Export
Manufacturing
Retail
Commodities Trading
Agriculture
Mining
Energy
Telecommunications
Construction
Shipping and Logistics
Relevant Teams
Trade Finance
International Banking
Legal
Compliance
Risk Management
Treasury
Operations
Documentary Credits
Import Operations
Export Operations
Financial Control
Credit Risk
Relevant Roles
Trade Finance Manager
International Trade Specialist
Letter of Credit Officer
Banking Operations Manager
Compliance Officer
Treasury Manager
Financial Controller
Import Manager
Export Manager
Documentary Credits Specialist
Risk Manager
Chief Financial Officer
Banking Relationship Manager
Trade Operations Officer
Credit Risk Officer
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