The Usance Letter of Credit serves as a fundamental instrument in international trade finance, particularly when parties seek deferred payment terms while maintaining payment security. This document is essential when importers require extended payment terms but exporters need bank-backed payment assurance. Governed by Canadian federal banking laws and international banking practices (UCP 600), it provides a structured framework for deferred payment in international trade transactions. The document typically includes specific terms regarding payment timing, document requirements, and conditions for payment release. It's particularly relevant in scenarios where the transaction value is significant, the parties are in different jurisdictions, or when regulatory requirements necessitate formal banking channels for international payments.
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1. Letter of Credit Number: Unique identification number assigned by the issuing bank
2. Date of Issue: The date when the Letter of Credit is issued
3. Issuing Bank Details: Complete name and address of the bank issuing the Letter of Credit
4. Applicant Details: Full name and address of the party requesting the Letter of Credit (usually the buyer)
5. Beneficiary Details: Full name and address of the party in whose favor the LC is issued (usually the seller)
6. Currency and Amount: The currency and maximum amount for which the Letter of Credit is issued
7. Expiry Date: The final date until which the documents can be presented
8. Place of Expiry: Location where the Letter of Credit expires
9. Tenor/Usance Period: The credit payment terms (e.g., 60 days from bill of lading date)
10. Available With: The bank with which the credit is available (negotiating/paying bank)
11. Shipment Terms: Details of shipment including latest shipment date and partial shipments/transshipment conditions
12. Required Documents: List of documents that must be presented for payment
13. Additional Conditions: Specific terms and conditions that must be complied with
14. Charges: Specification of which party bears which bank charges
1. Transferability Clause: Include when the Letter of Credit needs to be transferable to a second beneficiary
2. Red Clause: Include when advance payment to the beneficiary is permitted
3. Revolving Terms: Include when the Letter of Credit is revolving (automatically reinstated after each drawing)
4. Back-to-Back Provisions: Include when the Letter of Credit is part of a back-to-back arrangement
5. Confirmation Instructions: Include when confirmation by another bank is required
6. Reimbursement Instructions: Include when specific reimbursement arrangements between banks are required
7. Special Instructions for Bank-to-Bank Communications: Include when specific SWIFT or communication protocols need to be followed
1. Schedule A - Document Requirements: Detailed list of required documents with specific format and content requirements
2. Schedule B - Commercial Invoice Requirements: Specific requirements for the format and content of commercial invoices
3. Schedule C - Transport Document Requirements: Detailed requirements for bills of lading or other transport documents
4. Appendix 1 - Authorized Signatures: Specimen signatures of authorized signatories if required
5. Appendix 2 - Form of Drafts: Format of drafts to be drawn under the Letter of Credit
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Import/Export
Manufacturing
Commodities Trading
Retail
Wholesale
Shipping and Logistics
Agriculture
Mining
Oil and Gas
Textile Industry
Automotive Industry
Construction Materials
Relevant Teams
International Trade Finance
Trade Operations
Credit Risk Management
Treasury
Legal and Compliance
International Sales
Procurement
Supply Chain Operations
Documentary Credits
Global Transaction Services
Relevant Roles
Trade Finance Manager
International Banking Officer
Letter of Credit Specialist
Import Manager
Export Manager
Trade Operations Manager
Credit Risk Officer
Documentary Credits Specialist
Treasury Manager
Chief Financial Officer
International Sales Manager
Procurement Manager
Trade Compliance Officer
Banking Relationship Manager
Supply Chain Manager
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