Deferred Lc for Canada

Deferred Lc Template for Canada

A Deferred Letter of Credit is a specialized banking instrument governed by Canadian banking and commercial laws, providing a secure method of payment in international trade transactions. Unlike sight LCs, it includes a specified payment delay period after document presentation. The document establishes the terms and conditions under which the issuing bank commits to pay the beneficiary at a future date, typically after a predetermined period from the presentation of compliant documents. It incorporates provisions from Canadian banking regulations, international trade laws, and commonly accepted international banking practices, particularly UCP 600.

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What is a Deferred Lc?

The Deferred LC serves as a crucial trade finance instrument in international commerce, particularly relevant under Canadian jurisdiction. It is typically used when buyers require extended payment terms while still providing sellers with bank-backed payment security. The document outlines the specific terms of the deferred payment, usually ranging from 30 to 180 days after document presentation, and includes detailed requirements for document presentation, compliance checks, and payment execution. This type of LC is especially valuable in scenarios where importers need time to sell goods before making payment, or where extended credit terms are standard industry practice. The document must comply with Canadian banking regulations, international banking practices (UCP 600), and relevant trade laws.

What sections should be included in a Deferred Lc?

1. Letter of Credit Number: Unique identification number of the LC

2. Date of Issue: Date when the LC is issued

3. Applicant Details: Full name and address of the party requesting the LC (typically the buyer)

4. Beneficiary Details: Full name and address of the party in whose favor the LC is issued (typically the seller)

5. Issuing Bank Details: Name and address of the bank issuing the LC

6. Amount and Currency: Credit amount and currency specification

7. Availability and Maturity: Terms of when and how the credit is available, including deferred payment period

8. Required Documents: List of documents required for presentation

9. Shipment Terms: Details of shipment including latest shipment date and partial shipments allowance

10. Presentation Period: Time period within which documents must be presented

11. Deferred Payment Terms: Specific terms regarding the deferred payment, including maturity calculation

12. General Terms and Conditions: Standard terms including applicable rules (typically UCP 600)

What sections are optional to include in a Deferred Lc?

1. Advising Bank Details: Details of the advising bank if LC is advised through another bank

2. Confirmation Instructions: Instructions regarding confirmation if LC is to be confirmed

3. Transferability Clause: Include when LC needs to be transferable

4. Revolving Terms: Include for revolving LCs specifying reinstatement terms

5. Red Clause Terms: Include if advance payment provisions are required

6. Back-to-Back Provisions: Include if LC is part of a back-to-back arrangement

7. Special Instructions: Any additional instructions or conditions specific to the transaction

What schedules should be included in a Deferred Lc?

1. Schedule A - Document Requirements: Detailed list and format of required documents

2. Schedule B - Shipping Terms: Detailed shipping requirements and specifications

3. Schedule C - Goods Description: Detailed description of goods or services covered

4. Appendix 1 - Form of Presentation: Standard format for document presentation

5. Appendix 2 - Payment Calculation: Formula and examples for calculating payment dates and amounts

6. Appendix 3 - UCP 600 Reference: Relevant UCP 600 articles applicable to this LC

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Cost

Free to use

Relevant legal definitions

Clauses

Relevant Industries

International Trade

Banking and Financial Services

Manufacturing

Retail

Commodities Trading

Agriculture

Energy

Mining

Construction

Automotive

Textiles

Technology Hardware

Chemical Industry

Pharmaceutical

Relevant Teams

Trade Finance

International Banking

Corporate Banking

Treasury

Risk Management

Compliance

Legal

Operations

Supply Chain

Finance

Credit Administration

Documentary Credits

International Trade Operations

Relevant Roles

Trade Finance Manager

International Banking Officer

Documentary Credits Specialist

Import/Export Manager

Treasury Manager

Credit Risk Officer

Trade Operations Manager

Relationship Manager - Corporate Banking

International Trade Specialist

Compliance Officer

Financial Controller

Supply Chain Manager

Chief Financial Officer

Banking Operations Manager

Documentary Collections Officer

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Import Bill Under Lc

A Canadian-law governed agreement establishing terms and conditions for import transactions using Letters of Credit, defining rights and obligations of all parties involved in international trade transactions.

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What is a Deferred Lc?

What sections should be included in a Deferred Lc?

What sections are optional to include in a Deferred Lc?

What schedules should be included in a Deferred Lc?

Authors

Alex Denne

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