The Discounting Letter of Credit is utilized when a beneficiary of an existing letter of credit seeks to receive payment earlier than the specified maturity date, typically to improve cash flow or reduce financial exposure. This document is particularly relevant in international trade transactions where Canadian companies or financial institutions are involved. The agreement specifies the discount rate, calculation methodology, and conditions for early payment, ensuring compliance with Canadian banking regulations and international banking practices (UCP 600). It's commonly used in situations where the original letter of credit has a deferred payment term, and the beneficiary prefers immediate access to funds, albeit at a discounted value. The document must adhere to strict Canadian federal banking laws while maintaining consistency with international trade finance practices.
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1. Letter Reference and Date: Unique reference number and date of the letter
2. Addressee Details: Full details of the beneficiary of the letter of credit
3. Original Letter of Credit Reference: Details of the original letter of credit being discounted, including issuing bank and amount
4. Discounting Terms: Specific terms of the discounting arrangement including the discounting rate and calculation method
5. Payment Instructions: Details of how and when payment will be made, including bank account details
6. Documentary Requirements: List of required documents that must be presented for the discounting to take effect
7. Compliance Statement: Statement confirming compliance with UCP 600 and relevant banking regulations
8. Authorization: Statement of the bank's authorization to proceed with the discounting arrangement
1. Recourse Provisions: Optional section detailing whether the discounting is with or without recourse to the beneficiary
2. Transfer Restrictions: Section needed when there are specific restrictions on further transfer of the discounted letter of credit
3. Insurance Requirements: Required when specific insurance coverage is needed for the underlying transaction
4. Sanctions Compliance: Additional compliance statements needed for transactions involving certain jurisdictions or parties
5. Tax Implications: Section addressing specific tax considerations, required when dealing with cross-border transactions
1. Discount Calculation Schedule: Detailed breakdown of the discount calculation methodology and examples
2. Required Documents Checklist: Comprehensive list of all required documents with specific requirements for each
3. Original Letter of Credit: Copy of the original letter of credit being discounted
4. Bank Authorization Forms: Standard forms required by the bank for processing the discounting arrangement
5. Fee Schedule: Detailed breakdown of all applicable fees and charges
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Manufacturing
Import/Export
Commodities Trading
Retail
Wholesale
Agriculture
Mining
Energy
Shipping and Logistics
Relevant Teams
Trade Finance
International Banking
Treasury
Legal
Compliance
Credit Risk
Operations
Documentary Credits
Global Transaction Services
Export Finance
Relevant Roles
Trade Finance Manager
International Banking Officer
Finance Director
Treasury Manager
Chief Financial Officer
Trade Operations Manager
Compliance Officer
Documentary Credits Specialist
Banking Relationship Manager
Export Finance Manager
Senior Credit Officer
International Trade Specialist
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