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The Letter of Credit Agreement serves as a fundamental document in trade finance, establishing the framework under which a bank will issue letters of credit on behalf of its client. In the Philippine context, this agreement must comply with both local banking regulations, particularly those set by the Bangko Sentral ng Pilipinas (BSP), and international banking practices such as the UCP 600. The document is essential when businesses engage in international trade and require a secure payment mechanism. It details the credit facility terms, collateral requirements, fees, and parties' obligations, while incorporating specific Philippine law requirements regarding foreign exchange, anti-money laundering compliance, and banking operations. This agreement is particularly crucial for importers seeking to establish ongoing letter of credit facilities with their banks to support their regular trading activities.

1. Parties: Identification of the applicant (buyer), the issuing bank, and any other relevant parties such as the beneficiary bank

2. Background: Context of the transaction, including the underlying commercial transaction necessitating the letter of credit

3. Definitions: Definitions of key terms used throughout the agreement, including banking and trade finance terminology

4. Letter of Credit Facility: Details of the LC facility including amount, type, purpose, and validity period

5. Conditions Precedent: Prerequisites that must be satisfied before the LC facility becomes available

6. Fees and Charges: Comprehensive breakdown of all applicable fees, charges, and commission rates

7. Payment Terms: Terms and conditions for payments, including reimbursement obligations and payment mechanisms

8. Representations and Warranties: Standard declarations by the applicant regarding their legal and financial status

9. Covenants: Ongoing obligations of the applicant during the life of the LC

10. Events of Default: Circumstances that constitute default and their consequences

11. Security Arrangements: Details of any collateral or security provided for the LC facility

12. Bank's Rights and Remedies: Powers and rights of the bank in various circumstances, including default

13. Governing Law and Jurisdiction: Specification of Philippine law as governing law and jurisdiction for disputes