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This is a Utilisation request made by or on behalf of the Applicant for a Documentary Letter of Credit to be issued by an Issuing Bank for a Beneficiary (Seller).
It is a payment mechanism used in international trade to provide an economic guarantee for parties from a creditworthy bank. All letters of credit require the Beneficiary to present a draft and specified documents in order to receive payment, hence the name "documentary credit". The most common scenario for a Letter of Credit to be issued is where two parties enter into an agreement or a deal, and they do not know each other’s credibility well enough.
This document should be carefully read by the Agent, the Seller and the Recipient of the Letter (the Purchaser).
Both the Agent and the Recipient should sign and return a copy, and once signed, both parties should get a copy. To avoid any future disputes, both parties may wish to have their signatures witnessed.
If either party wishes to amend the agreement in the future, both parties should agree to do so, and the original agreement and amendments should be recorded in writing and signed by both parties.