The Freely Negotiable Letter of Credit is a specialized financial instrument widely used in Indonesian and international trade transactions. It serves as a secure payment mechanism where an issuing bank commits to pay the beneficiary (typically an exporter) upon presentation of compliant documents, with the unique feature that these documents can be negotiated at any bank of the beneficiary's choice worldwide. This document type is governed by Indonesian banking regulations, particularly Bank Indonesia Regulation No. 5/11/PBI/2003, while also adhering to international standards such as UCP 600. It is commonly used when parties seek maximum flexibility in document negotiation while maintaining the security of a bank-guaranteed payment. The document includes detailed specifications about the transaction, required documents, payment terms, and conditions that must be met for successful negotiation.
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1. Issuing Bank Details: Complete name, address, and SWIFT code of the issuing bank
2. Credit Number and Type: L/C number and specification as freely negotiable
3. Date of Issue: Issuance date and expiry date of the credit
4. Applicant Details: Full name and address of the party requesting the L/C
5. Beneficiary Details: Full name and address of the party in whose favor the L/C is issued
6. Currency and Amount: Credit amount and currency, including any tolerance levels
7. Available With/By: Terms of availability and method of payment
8. Shipment Details: Port of loading, discharge, latest shipment date, and partial shipments/transshipment permissions
9. Document Requirements: List of required documents for negotiation
10. Goods Description: Detailed description of merchandise, quantity, unit price
11. Terms and Conditions: Special conditions, additional terms, and applicable rules (e.g., UCP 600)
12. Authentication: Authorized signatures and authentication details
1. Transferability Clause: Include when the L/C needs to be transferable to a second beneficiary
2. Red Clause: Include when advance payment to the beneficiary is permitted
3. Green Clause: Include when warehouse storage-related advances are permitted
4. Revolving Terms: Include for credits that reinstate automatically for regular shipments
5. Back-to-Back Provisions: Include when the L/C may be used as collateral for another L/C
6. Confirmation Instructions: Include when confirmation by another bank is required
7. Reimbursement Instructions: Include when specific reimbursement arrangements are needed
1. Schedule A - Commercial Invoice Requirements: Detailed requirements for the format and content of commercial invoices
2. Schedule B - Packing List Specifications: Specific requirements for packing lists and packaging details
3. Schedule C - Transport Document Requirements: Detailed requirements for bills of lading or other transport documents
4. Schedule D - Insurance Document Requirements: Specifications for insurance certificates or policies
5. Schedule E - Product Specifications: Detailed technical specifications of the goods
6. Appendix 1 - Bank's Standard Charges: Schedule of applicable bank charges and fees
7. Appendix 2 - Special Instructions: Any additional special instructions for document preparation or shipment
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Manufacturing
Agriculture and Commodities
Retail
Mining and Resources
Textiles and Garments
Electronics and Technology
Oil and Gas
Shipping and Logistics
Import/Export
Construction Materials
Relevant Teams
Trade Finance
International Banking
Treasury
Risk Management
Legal and Compliance
Documentary Credits
Global Transaction Banking
Commercial Banking
Trade Operations
Credit Administration
Finance
Supply Chain Finance
Relevant Roles
Trade Finance Manager
International Banking Officer
Import/Export Manager
Finance Director
Treasury Manager
Documentary Credits Specialist
Trade Operations Manager
Credit Risk Officer
Commercial Banking Manager
Global Transaction Banking Officer
Supply Chain Finance Manager
Chief Financial Officer
International Trade Specialist
Compliance Officer
Letter of Credit Specialist
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