The Fronting Fee Letter of Credit is utilized in situations where a bank issues a letter of credit on behalf of a client, typically in international trade transactions within or through the UAE. This document is essential when a company requires a letter of credit but needs to work through a specific bank, often due to credit relationships, jurisdictional requirements, or the beneficiary's preferences. The fronting fee arrangement compensates the issuing bank for using its credit standing and taking on the associated risks. The document is structured according to UAE banking regulations and must comply with both local and international banking standards, including UAE Central Bank requirements and UCP 600 guidelines. It typically includes detailed fee calculations, payment terms, conditions, and compliance requirements specific to UAE jurisdiction.

1. Letter Header: Bank letterhead, date, reference number, and addressee details

2. Subject Line: Clear identification of the document as a Fronting Fee Letter of Credit

3. Reference to Main LC: Details of the primary Letter of Credit being fronted, including LC number and beneficiary

4. Amount and Currency: Specification of the LC amount and currency

5. Fronting Fee Structure: Detailed breakdown of the fronting fee calculation, percentage/basis points, and payment terms

6. Payment Instructions: Details of how and when the fronting fee is to be paid

7. Term and Validity: Duration of the LC and any conditions affecting its validity

8. Bank's Rights and Obligations: Outline of the fronting bank's responsibilities and rights

9. Governing Law and Jurisdiction: Specification of UAE law as governing law and relevant jurisdiction

10. Authorized Signatures: Space for required bank signatories and customer acknowledgment