An Operative Letter of Credit is a fundamental instrument in international trade finance, used when businesses need secure payment mechanisms for cross-border transactions. This document is particularly relevant in the Philippine context, where it must comply with local banking regulations while adhering to international standards. The Operative Letter of Credit provides a bank's irrevocable commitment to pay, typically used when an importer (buyer) wants to purchase goods from an exporter (seller) with payment security. It includes specific details about the transaction, required documents, payment terms, and conditions that must be met for payment release. The document is governed by Philippine banking laws, BSP regulations, and international banking practices (UCP 600), making it a legally robust instrument for international trade financing.
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1. Letter Head and Date: Bank's letterhead, reference number, and date of issuance
2. Beneficiary Details: Full name and address of the beneficiary (seller/exporter)
3. LC Number and Type: Unique LC reference number and specification that this is an irrevocable LC
4. Amount and Currency: Credit amount and currency specification
5. Applicant Details: Full name and address of the applicant (buyer/importer)
6. Expiry Details: Expiry date and place for presentation of documents
7. Available With/By: Specification of how the credit is available (sight, deferred payment, acceptance, or negotiation)
8. Shipment Terms: Latest shipment date, partial shipments, transhipment provisions
9. Document Requirements: List of required documents (commercial invoice, transport documents, insurance documents, etc.)
10. Special Conditions: Any specific conditions or requirements for the LC
11. Bank Authorization: Authorized signatures and bank stamps
1. Transferability Clause: Include when the LC 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 Credit Terms: Include for LCs that automatically renew
5. Back-to-Back Provisions: Include when the LC supports a back-to-back LC arrangement
6. Confirmation Instructions: Include when confirmation by another bank is required
1. Schedule A - Commercial Invoice Requirements: Detailed specifications for the format and content of commercial invoices
2. Schedule B - Transport Document Requirements: Specific requirements for bills of lading or other transport documents
3. Schedule C - Goods Description: Detailed description of goods, including specifications, quantities, and unit prices
4. Schedule D - Insurance Requirements: Specific requirements for insurance coverage and documentation
5. Appendix 1 - Additional Banking Instructions: Specific instructions for corresponding banks or additional banking arrangements
6. Appendix 2 - Document Presentation Schedule: Timeline and requirements for document presentation
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
International Trade
Manufacturing
Agriculture and Food
Retail
Mining and Resources
Construction
Textile and Garments
Electronics and Technology
Pharmaceutical
Automotive
Energy and Utilities
Relevant Teams
Trade Finance
International Banking
Credit Operations
Documentary Credits
Treasury
Risk Management
Compliance
Legal
Finance
Procurement
Supply Chain
International Sales
Relevant Roles
Trade Finance Manager
International Banking Officer
Credit Manager
Import/Export Manager
Treasury Manager
Documentary Credits Specialist
Trade Operations Officer
Compliance Officer
Risk Manager
Chief Financial Officer
Banking Relationship Manager
Trade Finance Analyst
Supply Chain Manager
Procurement Manager
Financial Controller
International Sales Manager
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