The Deferred LC is a crucial trade finance instrument used when buyers require extended payment terms while ensuring sellers receive a bank's payment commitment. This document type is particularly relevant for international trade transactions where Belgian law applies, either due to the location of the issuing bank or by choice of the parties. The Deferred LC combines the security of a traditional Letter of Credit with a built-in credit period, making it especially valuable for importers seeking to manage cash flow while maintaining supplier relationships. It contains specific provisions governing the deferred payment mechanism, typically ranging from 30 to 180 days after document presentation, and incorporates both Belgian banking regulations and international standards (UCP 600). This document is commonly used in various trade scenarios, particularly where the buyer needs time to receive and sell goods before making payment, while the seller benefits from a bank's irrevocable payment commitment.
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1. LC Number and Date: Unique identification number and issuance date of the Letter of Credit
2. Parties: Identification of all parties: Applicant, Beneficiary, Issuing Bank, and any Advising/Confirming Banks
3. Amount and Currency: Credit amount and currency specification, including any tolerance levels
4. Expiry Date and Place: Validity period of the LC and location where documents must be presented
5. Deferred Payment Terms: Specific terms of the deferred payment, including maturity date and calculation method
6. Required Documents: Detailed list of documents required for presentation
7. Shipment Terms: Specifications for shipment including latest shipment date and partial shipments
8. Document Presentation: Requirements and timeline for document presentation
9. Payment Conditions: Conditions that must be met for payment to be effected
10. Bank Charges: Allocation of banking charges between parties
11. Governing Law: Specification of Belgian law and UCP 600 application
1. Transferability: Terms for LC transfer rights, included when the LC is transferable
2. Confirmation Instructions: Instructions regarding confirmation, included when confirmation is requested
3. Back-to-Back Provisions: Terms for back-to-back LC arrangements, included when applicable
4. Revolving Terms: Specifications for revolving credit, included for revolving LCs
5. Red Clause: Advanced payment provisions, included when advance payments are permitted
6. Force Majeure: Extended force majeure provisions, included for high-risk transactions or regions
7. Assignment of Proceeds: Terms for proceeds assignment, included when assignment is permitted
1. Document Checklist: Detailed checklist of required documents with specific format requirements
2. Fee Schedule: Detailed breakdown of all applicable fees and charges
3. Payment Schedule: Timeline of deferred payments if multiple payments are involved
4. Standard Forms: Templates for draft(s), certificates, and other required documents
5. UCP 600 Excerpts: Relevant articles from UCP 600 applicable to this LC
6. Bank's Standard Terms: Issuing bank's standard terms and conditions for LCs
7. Specimen Signatures: Authorized signatures for all relevant parties
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