The Reverse Letter of Credit is a crucial financial instrument in Indonesian government procurement and large-scale commercial transactions. It is primarily used when government entities or state-owned enterprises need to provide payment security to suppliers, particularly in international trade scenarios. This document type is governed by Indonesian banking laws and regulations, including Bank Indonesia directives and the Indonesian Civil Code, while also adhering to international banking standards (UCP 600). The Reverse L/C structure is particularly valuable in situations where the buyer's creditworthiness needs to be enhanced through bank backing, commonly seen in major infrastructure projects, defense contracts, or large-scale government purchases. The document details payment terms, documentary requirements, validity periods, and bank obligations, providing a secure payment mechanism that protects both buyer and seller interests.
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1. Parties: Identification of the applicant (buyer/government entity), issuing bank, beneficiary (seller), and advising bank
2. Background: Context of the underlying transaction, including reference to the main commercial contract and purpose of the Reverse L/C
3. Definitions: Key terms used in the document, including banking, trade, and technical terms
4. Credit Amount and Currency: Specification of the L/C value and currency of payment
5. Validity and Expiry: Terms regarding the effective period of the L/C and expiry conditions
6. Documentary Requirements: Detailed list of required documents for payment claim (shipping documents, certificates, etc.)
7. Payment Terms: Conditions and timing of payment, including partial shipments if applicable
8. Bank Obligations: Responsibilities and obligations of the issuing and advising banks
9. Amendments: Procedures for modifying the L/C terms
10. Force Majeure: Provisions for unforeseen circumstances affecting L/C execution
11. Governing Law and Jurisdiction: Specification of Indonesian law and relevant jurisdiction
12. Notices: Communication procedures between parties
1. Negotiation Terms: Include when the L/C is available by negotiation, specifying nominated banks
2. Transfer Rights: Include when the L/C may be transferable to second beneficiaries
3. Back-to-Back Arrangements: Include when allowing for back-to-back L/C structures
4. Red Clause Provisions: Include when advance payment facilities are required
5. Government Approval References: Include when specific government authorizations are required
6. Foreign Exchange Provisions: Include for cross-border transactions requiring specific exchange arrangements
1. Schedule 1 - Document Checklist: Detailed checklist of all required documents and their specifications
2. Schedule 2 - Payment Schedule: If involving installment payments or multiple shipments
3. Schedule 3 - Bank Format Requirements: Specific formatting requirements for banking documents
4. Appendix A - Form of Amendment Request: Standard format for requesting L/C amendments
5. Appendix B - Specimen Signatures: Authorized signatures for all relevant parties
6. Appendix C - UCP 600 References: Relevant articles of UCP 600 specifically applicable to this L/C
Relevant legal definitions
Clauses
Relevant Industries
Government and Public Sector
Banking and Financial Services
International Trade
Infrastructure Development
Construction
Energy and Resources
Manufacturing
Defense and Military Procurement
Healthcare Equipment and Supplies
Transportation and Logistics
Telecommunications
Public Utilities
Relevant Teams
Legal
Finance
Treasury
Trade Finance
Procurement
Government Relations
Compliance
Risk Management
International Banking
Documentary Credits
Contract Administration
Relevant Roles
Trade Finance Manager
Government Procurement Officer
Treasury Manager
Financial Controller
Banking Relationship Manager
International Trade Specialist
Documentary Credits Officer
Compliance Officer
Legal Counsel
Chief Financial Officer
Project Finance Manager
Contract Administrator
Risk Management Officer
Public Sector Procurement Manager
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