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Letter of Credit

Transferrable Documentary Credit

A Documentary Letter of Credit to be issued by a Bank for a Beneficiary (Seller) on request by an Applicant (Buyer). It is a payment mechanism used in international trade to provide an economic guarantee for parties from a creditworthy bank. This is a transferrable documentary credit from the issuing Bank to the Beneficiary.

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Document Description

The document titled 'Letter of Credit' is a formal letter issued by a bank to a beneficiary, who is party 1 in this case. The purpose of this document is to establish a transferable documentary credit, which allows the beneficiary to receive a specified amount of money upon the presentation of certain documents. The letter is addressed to the party 1 and is dated with the current date.


The letter starts with a salutation, 'Dear Sir/Madam,' and introduces the purpose of the letter. It states that the bank has been mandated by party 2, who is the instructing party, to issue this transferable documentary credit to party 1. The letter emphasizes that party 1 is the beneficiary of this credit.


The letter provides important information such as the beneficiary's name and address, the account number where the amount will be deposited, and the instructing party's name and address. It also mentions the currency amount and the expiry date of the credit, which is subject to the jurisdiction state's laws.


The document specifies that the payment will be made upon the presentation of certain documents. However, it clarifies that the bank will honor the draft and deposit the amount into the specified account only if it complies with the terms of the credit and does not violate any laws of the United States or the United Kingdom. It explicitly mentions the laws restricting participation in foreign boycotts, the U.S. Export Administration Act of 1979, the U.S. Internal Revenue Code, the U.S. Foreign Corrupt Practices Act, and the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of the Organisation for Economic Co-operation and Development.


The letter further states that the credit is irrevocable and non-transferrable. It refers to the Uniform Customs and Practice for Documentary Credits as the governing rules, and it will be construed in accordance with the laws and regulations of the jurisdiction state.


The letter concludes with a closing, 'Yours faithfully,' followed by the name of the bank.


In summary, the 'Letter of Credit' is a formal document issued by a bank to a beneficiary, providing them with a transferable documentary credit. It outlines the terms and conditions of the credit, including the beneficiary's information, account number, expiry date, and the required documents for payment. It also highlights the importance of compliance with relevant laws and regulations.


Each section of the document serves a specific purpose and provides essential information to ensure a smooth transaction between the parties involved.

How to use this document?

1. Review the letter: Read the entire letter of credit carefully to understand its purpose and the terms and conditions outlined.

2. Verify beneficiary information: Ensure that the beneficiary's name and address mentioned in the letter are correct and match the intended recipient.

3. Note the account number: Take note of the account number where the payment will be deposited. Verify that it is the correct account provided by the beneficiary.

4. Understand the expiry date: Pay attention to the expiry date mentioned in the letter. Make sure that the presentation of the required documents occurs before this date to avoid any issues.

5. Familiarize with required documents: Take note of the documents listed in the letter that need to be presented for payment. Understand the specific requirements for each document.

6. Ensure compliance with laws: Be aware of the laws mentioned in the letter, such as those related to foreign boycotts, export administration, corrupt practices, and bribery. Ensure that the transaction does not violate any of these laws.

7. Confirm irrevocable and non-transferrable status: Understand that the credit is irrevocable and non-transferrable, meaning it cannot be canceled or transferred to another party.

8. Follow the Uniform Customs and Practice: Familiarize yourself with the Uniform Customs and Practice for Documentary Credits, as it governs the terms of the credit unless stated otherwise.

9. Seek legal advice if needed: If there are any doubts or concerns regarding the terms and conditions of the letter of credit, consider consulting with a legal professional for guidance.

10. Maintain communication: Stay in touch with the instructing party and the bank to address any questions or issues that may arise during the process. Keep all parties informed and updated throughout the transaction.

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