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This Discounting Letter of Credit agreement template is designed for use in Saudi Arabia when a beneficiary of a Letter of Credit seeks to obtain immediate payment by selling their rights under the LC to a bank at a discount. The document is essential for trade finance transactions where the beneficiary prefers immediate access to funds rather than waiting for the LC's maturity date. It incorporates necessary Sharia-compliant structures to ensure validity under Saudi Arabian law, while also adhering to international banking practices and UCP 600 guidelines. The agreement includes comprehensive provisions for risk allocation, document handling, and payment mechanics, making it suitable for both domestic and international trade transactions involving Saudi Arabian entities. This template is particularly relevant for large-scale commercial transactions where trade finance and working capital optimization are crucial.

1. Parties: Identification of all parties including the discounting bank, beneficiary, and any other relevant parties

2. Background: Context of the transaction, reference to the original Letter of Credit, and purpose of the discounting arrangement

3. Definitions: Key terms used throughout the agreement, including banking, technical, and financial terms

4. Discounting Terms: Specific terms of the discounting arrangement including the discounting rate, payment terms, and calculation methodology

5. Representations and Warranties: Declarations by the beneficiary regarding their rights under the LC, absence of prior assignments, and authority to enter into the agreement

6. Sharia Compliance: Specific provisions ensuring the transaction complies with Islamic banking principles

7. Assignment of Rights: Terms governing the transfer of rights under the original LC to the discounting bank

8. Payment Mechanics: Detailed process for payments, including timing, method, and currency considerations

9. Documentation Requirements: List of required documents and their handling procedures

10. Risk Allocation: Distribution of risks between parties, including non-payment risks and document discrepancy risks

11. Governing Law and Jurisdiction: Specification of Saudi law as governing law and relevant jurisdiction for disputes