This document is essential for Australian businesses engaged in international trade seeking to improve their cash flow through trade finance arrangements. The Usance LC Discounting agreement enables exporters to receive immediate payment for their goods by selling their deferred-payment Letters of Credit to a bank at a discount. It is particularly relevant when exporters need working capital but have granted extended payment terms to their buyers through Usance LCs. The agreement covers crucial aspects including facility terms, pricing, documentation requirements, and risk allocation, all within the Australian legal framework and banking regulations. It incorporates both domestic requirements under Australian law and international banking practices, making it suitable for cross-border trade finance transactions while ensuring compliance with local regulatory requirements.
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1. Parties: Identification of the parties to the agreement - typically the LC beneficiary (seller) and the discounting bank
2. Background: Context of the agreement, including reference to the underlying LC and trade transaction
3. Definitions: Definitions of key terms used throughout the agreement
4. Discounting Facility: Core terms of the discounting arrangement, including facility limit and availability
5. Discounting Process: Detailed procedures for submission and processing of discounting requests
6. Pricing and Fees: Discounting rate, fees, charges and calculation methods
7. Conditions Precedent: Prerequisites that must be satisfied before the facility becomes available
8. Representations and Warranties: Standard and specific representations made by the LC beneficiary
9. Covenants: Ongoing obligations of the LC beneficiary
10. Events of Default: Circumstances constituting default and consequences
11. Payments: Payment mechanics, timing, and currency provisions
12. General Provisions: Standard legal provisions including notices, amendments, governing law
1. Security Arrangements: Required when additional security or collateral is provided beyond the LC itself
2. Multi-currency Provisions: Needed when discounting facility covers LCs in multiple currencies
3. Relationship Manager: Required for ongoing facilities with dedicated bank relationship management
4. Electronic Trading Platform: Include when transactions will be processed through specific electronic platforms
5. Parent Company Guarantee: Required when parent company guarantee is part of the arrangement
6. Sanctions and Compliance: Enhanced compliance provisions for high-risk jurisdictions or parties
1. Schedule 1 - Facility Particulars: Specific details of the facility including limits, pricing, and tenor
2. Schedule 2 - Form of Discounting Request: Standard form for submitting discounting requests
3. Schedule 3 - Conditions Precedent Documents: List of required documents to be provided before facility activation
4. Schedule 4 - Authorized Signatories: List of persons authorized to submit discounting requests
5. Schedule 5 - Calculation of Discounting Rate: Detailed methodology for calculating the applicable discount rate
6. Appendix A - Compliance Certificates: Standard forms for ongoing compliance certification
7. Appendix B - LC Documentation Requirements: Checklist of required LC and supporting documents
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