{"id":5191,"date":"2019-03-02T00:29:12","date_gmt":"2019-03-02T05:29:12","guid":{"rendered":"https:\/\/www.letterofcredit.biz\/?p=5191"},"modified":"2023-06-30T10:02:29","modified_gmt":"2023-06-30T14:02:29","slug":"revocable-and-irrevocable-letters-of-credit","status":"publish","type":"post","link":"https:\/\/www.letterofcredit.biz\/index.php\/2019\/03\/02\/revocable-and-irrevocable-letters-of-credit\/","title":{"rendered":"Revocable and Irrevocable Letters of Credit"},"content":{"rendered":"<p><span style=\"color: #339966;\">Revocable Letters of Credit:<\/span> Revocable letter of credit can be modified or <a href=\"https:\/\/www.letterofcredit.biz\/index.php\/2018\/05\/30\/how-to-cancel-a-letter-of-credit\/\">cancelled<\/a> by the <a href=\"https:\/\/www.letterofcredit.biz\/index.php\/2018\/05\/31\/issuing-bank\/\">issuing bank<\/a> after its issuance at any moment without seeking the beneficiary&#8217;s consent.<\/p>\n<p>There is one exception regarding the revocation of the credit.<\/p>\n<p>Issuing bank must <a href=\"https:\/\/www.letterofcredit.biz\/index.php\/2018\/06\/04\/reimbursement-and-reimbursing-bank\/\">reimburse<\/a> any <a href=\"https:\/\/www.letterofcredit.biz\/index.php\/2018\/06\/01\/nominated-bank\/\">nominated<\/a> or <a href=\"https:\/\/www.letterofcredit.biz\/index.php\/2018\/06\/02\/2004\/\">confirming bank<\/a> with which the revocable letter of credit has been made <a href=\"https:\/\/www.letterofcredit.biz\/index.php\/2018\/09\/11\/field-41a-available-with-by\/\">available<\/a> if these banks fulfill their obligations under the documentary credit terms against <a href=\"https:\/\/www.letterofcredit.biz\/index.php\/2018\/06\/05\/complying-presentation\/\">complying presentation<\/a> before they receive the amendment or cancellation notice from the issuing bank.<\/p>\n<p><iframe title=\"Revocable and Irrevocable Letters of Credit\" width=\"720\" height=\"405\" src=\"https:\/\/www.youtube.com\/embed\/-KIGzYCTY2U?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p>A revocable letter of credit can serve as a limited security payment method to the <a href=\"https:\/\/www.letterofcredit.biz\/index.php\/2018\/08\/18\/field-59-beneficiary\/\">beneficiaries<\/a>, because they are subject to amendment or cancellation without their prior knowledge.<\/p>\n<p>As a result revocable letters of credit are not used frequently in international trade.<\/p>\n<p><a href=\"https:\/\/www.letterofcredit.biz\/index.php\/2018\/10\/20\/latest-version-of-ucp-what-are-the-differences-between-ucp-400-ucp-500-and-ucp-600\/\">UCP 500<\/a>,which is the previous letters of credit rules published by ICC, was indicated that a letter of credit may be either revocable or irrevocable.<\/p>\n<p>UCP 500 assumed that a letter of credit is irrevocable in default of the indication whether it is revocable or irrevocable.<\/p>\n<p>Current letter of credit rules, UCP 600, do not cover revocable letters of credit. This point is made clear in article 3 of UCP 600:<\/p>\n<blockquote class=\"td_quote_box td_box_center\"><p><strong>A credit is irrevocable even if there is no indication to that effect.<\/strong><\/p><\/blockquote>\n<p><span style=\"color: #339966;\">Irrevocable Letter of Credit:<\/span> <a href=\"https:\/\/www.letterofcredit.biz\/index.php\/2018\/07\/05\/what-is-irrevocable-letter-of-credit-definition-and-application\/\">Irrevocable Letter Of Credit (ILOC)<\/a> is a letter of credit type which can not be cancelled or amended by the issuing bank without the agreement of the <a href=\"https:\/\/www.letterofcredit.biz\/index.php\/2018\/01\/16\/parties-to-letters-of-credit\/\">parties of the letter of credit<\/a> transaction.<\/p>\n<p>For example, issuing bank has no power to modify letter of credit terms if beneficiary does not find them acceptable.<\/p>\n<p>In other words, every amendment at least requires beneficiary&#8217;s acceptance in order to be effective.<\/p>\n<p>Irrevocable letters of credit give much more payment security to the beneficiaries than revocable letters of credit because of the reasons explained above. As a result, irrevocable letters of credit are the types of LCs that dominantly seen on the market place.<\/p>\n<p>Banks will only add their confirmation to the irrevocable letters of credit. A confirming bank is not obligated to add its confirmation to any amendment. Also, transferable letters of credit should not be issued in a revocable form.<\/p>\n<p>Letters of credits are transmitted through banks via a secure and authenticated system which is called <a href=\"https:\/\/www.letterofcredit.biz\/index.php\/2018\/10\/05\/swift-messages-in-letters-of-credit\/\">SWIFT<\/a>.<\/p>\n<p>There are various swift message types for different situations. For example banks use <a href=\"https:\/\/www.letterofcredit.biz\/index.php\/2018\/10\/05\/mt-700-swift-message-field-specifications\/\">MT700<\/a> (Message Type 700) when issuing a letter of credit.<\/p>\n<p>We will examine SWIFT messages in detail later on.<\/p>\n<p>Here we want to explain one section of MT700 swift message (Issue of a Documentary Credit) which contains the information regarding the type of the documentary credit.<\/p>\n<p>In order to understand the letter of credit type we need to check <a href=\"https:\/\/www.letterofcredit.biz\/index.php\/2018\/08\/02\/field-40a-form-of-documentary-credit\/\">Field 40A<\/a> in a MT700 swift message. This field contains the necessary information regarding the form of the documentary credit. There are seven possibilities as seen below.<\/p>\n<ul>\n<li>IRREVOCABLE : The documentary credit is irrevocable.<\/li>\n<li>REVOCABLE: The documentary credit is revocable.<\/li>\n<li>IRREVOCABLE TRANSFERABLE: The documentary credit is irrevocable and transferable.<\/li>\n<li>REVOCABLE TRANSFERABLE: The documentary credit is revocable and transferable.<\/li>\n<li>IRREVOCABLE STANDBY: The standby letter of credit is irrevocable.<\/li>\n<li>REVOCABLE STANDBY: The standby letter of credit is revocable.<\/li>\n<li>IRREVOC TRANS STANDBY: The standby letter of credit is irrevocable and transferable.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Revocable Letters of Credit: Revocable letter of credit can be modified or cancelled by the issuing bank after its issuance at any moment without seeking the beneficiary&#8217;s consent. There is one exception regarding the revocation of the credit. Issuing bank<\/p>\n","protected":false},"author":1,"featured_media":5197,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[58,54,57],"tags":[265,24,496],"class_list":["post-5191","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-irrevocable-letter-of-credit","category-letter-of-credit-types","category-revocable-letter-of-credit","tag-irrevocable-letter-of-credit","tag-letter-of-credit-types","tag-revocable-letter-of-credit"],"_links":{"self":[{"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/posts\/5191","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/comments?post=5191"}],"version-history":[{"count":0,"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/posts\/5191\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/media\/5197"}],"wp:attachment":[{"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/media?parent=5191"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/categories?post=5191"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/tags?post=5191"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}