The Construction Letter of Credit is a vital financial instrument in Indonesian construction projects, particularly for large-scale developments where payment security is essential. It is used when project owners need to provide contractors with guaranteed payment mechanisms that align with construction milestones. The document combines elements of traditional Letters of Credit with specific provisions for construction projects, incorporating requirements from Indonesian banking regulations, construction laws, and international banking practices (UCP 600). This instrument is particularly relevant in the current Indonesian construction market, where secure payment mechanisms are increasingly important for both domestic and international contractors. The Construction Letter of Credit typically includes detailed provisions for progressive payments, document requirements for each payment stage, and specific construction milestone certifications.
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1. Issuing Bank Details: Complete details of the bank issuing the L/C
2. Beneficiary Information: Full details of the construction company/contractor receiving the L/C
3. Applicant Information: Complete details of the party requesting the L/C (project owner/developer)
4. L/C Number and Date: Unique identification number and issuance date of the L/C
5. L/C Amount and Currency: Total value of the L/C and specified currency
6. Project Details: Brief description of the construction project covered by the L/C
7. Expiry Date and Place: Validity period of the L/C and location where documents must be presented
8. Payment Terms: Specified payment conditions, including progressive payment structure if applicable
9. Required Documents: List of documents required for disbursement (work completion certificates, invoices, etc.)
10. Construction Milestones: Key project milestones tied to L/C payments
11. Governing Law: Specification of Indonesian law as governing law
12. UCP 600 Incorporation: Statement incorporating UCP 600 rules
1. Transfer Rights: Include when the L/C needs to be transferable to other contractors or suppliers
2. Back-to-Back L/C Provisions: Include when allowing for back-to-back L/C arrangements with subcontractors
3. Green Project Requirements: Include for construction projects with specific environmental certifications or requirements
4. Force Majeure Provisions: Include when specific force majeure conditions need to be addressed beyond standard UCP provisions
5. Multiple Currency Provisions: Include when payments may be made in multiple currencies
6. Partial Shipment/Drawing Terms: Include when allowing partial completion certificates and related payments
1. Schedule A - Payment Schedule: Detailed breakdown of payment tranches and corresponding construction milestones
2. Schedule B - Required Documents List: Comprehensive list of all required documents for each payment stage
3. Schedule C - Project Timeline: Detailed construction timeline with key dates and milestones
4. Appendix 1 - Technical Specifications: Detailed technical requirements for construction work completion certificates
5. Appendix 2 - Form of Certificates: Standard formats for work completion certificates and other required documents
6. Appendix 3 - Bank Forms: Standard forms required by the issuing bank for payment processing
Relevant legal definitions
Clauses
Relevant Industries
Construction
Infrastructure
Real Estate Development
Banking and Finance
Engineering
Commercial Property
Industrial Development
Residential Development
Mining Infrastructure
Energy Infrastructure
Transportation Infrastructure
Relevant Teams
Legal
Finance
Treasury
Project Management
Risk Management
Commercial
Construction Management
Trade Finance
Documentary Credits
Procurement
Contract Administration
Relevant Roles
Project Finance Manager
Construction Project Manager
Trade Finance Manager
Bank Relationship Manager
Chief Financial Officer
Construction Director
Contract Manager
Treasury Manager
Project Director
Financial Controller
Legal Counsel
Commercial Director
Risk Manager
Documentary Credits Manager
Construction Finance Manager
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