The Deferred LC is a crucial trade finance instrument used when buyers require extended payment terms while ensuring sellers receive bank-backed payment security. This document type is particularly relevant in U.S.-based international trade transactions where the timing of payment is a critical factor. It details the conditions for document presentation, examination criteria, and specific payment terms, typically ranging from 30 to 180 days after document presentation or shipment date. The document must comply with U.S. banking regulations, UCC Article 5, and typically incorporates UCP 600 rules. It's commonly used in large-scale international trade transactions, especially in sectors with longer cash conversion cycles or where suppliers require bank-backed payment assurance while accommodating buyers' working capital needs.
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1. Parties: Identification of all parties involved: Applicant, Beneficiary, Issuing Bank, and any Advising/Confirming Banks
2. Background: Context of the underlying transaction and purpose of the deferred LC
3. Definitions: Definitions of key terms used throughout the LC document
4. Credit Amount and Currency: Specification of the LC amount and currency of payment
5. Validity Period: Expiry date and last date for presentation of documents
6. Payment Terms: Deferred payment terms, maturity date, and calculation method
7. Documentary Requirements: List of required documents for drawing under the LC
8. Presentation Terms: Requirements for document presentation, timing, and location
9. Bank Obligations: Duties and responsibilities of the issuing and other banks
10. Examination of Documents: Standards and timeframes for document examination
11. Discrepancies: Handling of discrepancies in presented documents
12. Governing Law and Jurisdiction: Applicable law and courts for dispute resolution
1. Transferability: Terms for LC transfer rights - include when LC is transferable
2. Revolving Terms: Include when LC is revolving, specifying reinstatement terms
3. Red Clause Provisions: Include for advance payment provisions under the LC
4. Back-to-Back Arrangements: Include when LC is part of a back-to-back structure
5. Electronic Presentation: Terms for electronic document presentation - include when eUCP applies
6. Force Majeure: Include specific force majeure provisions beyond UCP standards
7. Green Clause Provisions: Include when warehouse receipts are acceptable for drawings
8. Sanctions Clause: Include specific sanctions compliance requirements when dealing with high-risk jurisdictions
1. Schedule A - Documentary Requirements: Detailed list of required documents and their specific requirements
2. Schedule B - Fee Schedule: Breakdown of all applicable fees and charges
3. Schedule C - Drawing Schedule: Timeline and conditions for partial drawings if applicable
4. Schedule D - Form of Demand: Standard format for drawing requests under the LC
5. Schedule E - Shipping Terms: Specific shipping requirements and Incoterms
6. Appendix 1 - UCP 600 Exclusions: List of any UCP 600 articles specifically excluded
7. Appendix 2 - Bank SWIFT Details: Banking coordinates and SWIFT codes for all involved banks
8. Appendix 3 - Specimen Signatures: Authorized signatures for relevant parties
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Deferred Lc
A U.S.-governed financial instrument that combines letter of credit security with deferred payment terms for international trade transactions.
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