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The Discounting Letter of Credit agreement is a crucial trade finance instrument in Indonesia's international trade landscape. This document is utilized when a Letter of Credit beneficiary needs immediate access to funds rather than waiting for the L/C's maturity date. It sets out the legal framework for the discounting transaction, incorporating requirements from Bank Indonesia Regulations, particularly No. 5/11/PBI/2003, and international banking practices such as UCP 600. The agreement is essential for businesses engaged in international trade who seek to optimize their cash flow through trade finance mechanisms. It includes comprehensive details about the discounting arrangement, rights and obligations of parties, risk allocation, and compliance requirements under Indonesian law. The document becomes particularly relevant in scenarios where exporters need to access working capital quickly while ensuring all regulatory requirements are met.

1. Parties: Identification of the discounting bank and the beneficiary of the Letter of Credit

2. Background: Context of the transaction, including details of the underlying Letter of Credit and the reason for discounting

3. Definitions: Definitions of key terms used throughout the agreement, including banking, financial, and technical terms specific to L/C discounting

4. Discounting Terms: Core terms of the discounting arrangement, including the discounting rate, fees, and calculation method

5. Assignment of Rights: Terms regarding the assignment of L/C rights from the beneficiary to the discounting bank

6. Payment Terms: Details of how and when payments will be made, including the discounted amount and settlement process

7. Representations and Warranties: Statements and guarantees made by both parties regarding their capacity, authority, and the validity of the L/C

8. Risk Allocation: Clear designation of risks between the parties, including documentary discrepancies and issuing bank default risks

9. Events of Default: Circumstances constituting default and their consequences

10. Governing Law and Jurisdiction: Specification of Indonesian law as governing law and jurisdiction for disputes