Letter Of Credit Agreement for Hong Kong

Letter Of Credit Agreement Template for Hong Kong

A Letter of Credit Agreement governed by Hong Kong law establishes the legal framework between a bank and its customer for the issuance of letters of credit. This document outlines the terms and conditions under which the bank will issue letters of credit on behalf of the customer, including facility limits, fees, security requirements, and operational procedures. The agreement incorporates Hong Kong banking regulations and international banking practices, particularly the UCP 600, while ensuring compliance with Hong Kong's Banking Ordinance and related financial regulations. It serves as the master agreement governing all subsequent letter of credit transactions between the parties.

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What is a Letter Of Credit Agreement?

The Letter of Credit Agreement is a crucial document in international trade finance, particularly in Hong Kong's role as a major global financial center. This agreement is used when a customer requires regular letter of credit facilities from a bank to support their international trade operations. It establishes the master terms under which the bank will issue letters of credit, including facility limits, security requirements, fees, and operational procedures. The agreement must comply with Hong Kong's Banking Ordinance and typically incorporates international banking practices such as the UCP 600. It's particularly important for businesses engaged in import/export activities, as it provides a pre-approved framework for obtaining letters of credit without negotiating terms for each transaction. The document reflects Hong Kong's sophisticated banking system and its position as a key hub for international trade finance.

What sections should be included in a Letter Of Credit Agreement?

1. Parties: Identification of the bank (issuing bank) and the applicant (customer requesting the L/C)

2. Background: Context of the agreement, including the applicant's business needs and the bank's willingness to provide L/C facilities

3. Definitions and Interpretation: Definitions of key terms used in the agreement and rules of interpretation

4. L/C Facility: Details of the L/C facility, including the maximum aggregate amount and validity period

5. Application and Issuance: Procedures for applying for and issuing Letters of Credit

6. Fees and Commissions: Banking charges, commission rates, and payment terms

7. Security and Collateral: Security arrangements required by the bank

8. Representations and Warranties: Standard declarations by the applicant about their legal and financial status

9. Undertakings: Ongoing obligations of the applicant during the facility period

10. Events of Default: Circumstances constituting default and their consequences

11. Bank's Rights and Remedies: Actions the bank can take in case of default or breach

12. Payments and Calculations: Payment mechanisms, currency provisions, and calculation methods

13. General Provisions: Standard legal clauses including notices, amendments, and governing law

What sections are optional to include in a Letter Of Credit Agreement?

1. Syndication Provisions: Required when multiple banks are involved in providing the L/C facility

2. Electronic Platform Terms: Needed when the bank provides electronic L/C application and processing facilities

3. Counter-Indemnity: Additional indemnity provisions for complex trade transactions

4. Foreign Currency Provisions: Detailed provisions for L/Cs in multiple currencies

5. Back-to-Back L/C Terms: Required for back-to-back L/C arrangements

6. Transfer and Assignment: Terms for transferable L/Cs or assignment of proceeds

What schedules should be included in a Letter Of Credit Agreement?

1. Schedule 1 - Facility Limits and Sub-limits: Detailed breakdown of facility limits and any sub-limits by type or currency

2. Schedule 2 - Fee Schedule: Comprehensive list of all applicable fees, charges, and commission rates

3. Schedule 3 - Form of L/C Application: Standard form for applying for individual Letters of Credit

4. Schedule 4 - Security Documents: List and copies of required security documents

5. Schedule 5 - Conditions Precedent: List of documents and conditions required before facility activation

6. Appendix A - Standard L/C Terms and Conditions: Bank's standard terms and conditions for L/C issuance

7. Appendix B - Authorized Signatories: List of persons authorized to submit L/C applications and amendments

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

Jurisdiction

Hong Kong

Publisher

Genie AI

Document Type

Letter of Credit

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Banking and Financial Services

International Trade

Import/Export

Manufacturing

Wholesale Trade

Retail

Shipping and Logistics

Commodities Trading

General Commerce

Relevant Teams

Legal

Finance

Treasury

Trade Finance Operations

Risk Management

Compliance

International Banking

Commercial Banking

Credit Administration

Documentary Credits

Relevant Roles

Chief Financial Officer

Treasury Manager

Trade Finance Manager

Import/Export Manager

Finance Director

Banking Relationship Manager

Trade Finance Operations Officer

Credit Risk Manager

Commercial Banking Officer

International Trade Specialist

Compliance Officer

Legal Counsel

Documentary Credits Manager

Senior Banking Officer

Corporate Banking Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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