The Discounting Letter of Credit is a vital trade finance instrument used when a beneficiary of a Letter of Credit requires early access to funds before the L/C maturity date. Under German law, this document formalizes the arrangement whereby a bank purchases the rights to the L/C proceeds at a discount, providing immediate liquidity to the beneficiary. The document must comply with the German Banking Act (KWG), German Commercial Code (HGB), and relevant EU regulations while incorporating international banking practices. It typically includes detailed terms of the discount, calculation methodologies, representations about the underlying trade transaction, and document handling procedures. This instrument is particularly valuable in international trade where German companies are involved as exporters seeking to optimize their cash flow while maintaining the security of L/C-backed transactions.
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1. Reference Details: Original L/C number, date, and issuing bank details
2. Beneficiary Details: Complete information of the L/C beneficiary requesting the discount
3. Original L/C Terms: Key details of the original L/C including amount, maturity, and goods description
4. Discounting Request: Formal request for discounting, including the amount to be discounted
5. Discount Terms: Specific terms including discount rate, fees, and calculation method
6. Payment Instructions: Details of where and how the discounted amount should be paid
7. Representations: Beneficiary's confirmations regarding L/C validity and goods shipment
8. Authorization: Authority to debit/credit relevant accounts and handle document presentation
1. Security Arrangements: Required when additional security or collateral is being provided for the discounting
2. Recourse Terms: Include when specific recourse conditions are agreed beyond standard terms
3. Document Handling Instructions: When special instructions for handling L/C documents are needed
4. Insurance Coverage: When specific insurance requirements are to be highlighted or confirmed
5. Tax Provisions: Required when special tax considerations or withholding requirements apply
6. Assignment Instructions: When proceeds or rights under the L/C are being assigned as part of the arrangement
1. Original L/C Copy: Copy of the original Letter of Credit and any amendments
2. Discount Calculation Schedule: Detailed calculation of discount amount, fees, and net proceeds
3. Required Documents List: Checklist of documents required for L/C presentation
4. Shipping Documents: Copies of relevant shipping documents if already available
5. Bank Mandate: Specific banking forms and account operation mandates
6. Authorized Signatory List: List of authorized signatories with specimen signatures
Relevant legal definitions
Clauses
Relevant Industries
Banking & Financial Services
International Trade
Import/Export
Manufacturing
Commodities Trading
Shipping & Logistics
Agriculture
Energy
Retail
Wholesale
Relevant Teams
Trade Finance
Treasury
International Banking
Credit Risk
Documentary Credits
Export Sales
Financial Control
Corporate Banking
Legal
Compliance
Operations
Relevant Roles
Trade Finance Manager
Treasury Manager
Export Finance Specialist
Banking Operations Manager
Credit Risk Officer
Documentary Credits Specialist
International Trade Specialist
Finance Director
Chief Financial Officer
Commercial Banking Manager
Trade Operations Officer
Relationship Manager - Corporate Banking
Export Sales Manager
Financial Controller
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