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Revocable Credit This type of credit may be amended or cancelled without the beneficiary's consent. Therefore, a revocable letter of credit does not constitute a legally binding undertaking by the issuing bank to make payment. However, the issuing bank must reimburse another bank with which a revocable letter of credit had been made available for sight payment, acceptance or negotiation – for any payment, acceptance or negotiation made by such bank prior to receipt by it of notice of amendment or cancellation.
It is generally used when the applicant and the beneficiary are members of the same group of companies. Little protection is offered to the exporter with a revocable credit and they are rarely seen. This type of letter of credit is rarely used because it fails to provide adequate security for the beneficiary. |
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RELATED ARTICLES
Export Bills For Collection Export Bills For Collection is a documentary collection or a clean collection where the seller (drawer) sends through his banker (Remitting Bank) financial and/or commercial documents which represent the underlying goods to the buyer (drawee) through his banker (Collecting Bank) with instructions that the documents be released to the buyer either against payment or acceptance of the bill. Export Bills Negotiation Export bills negotiation is payment (with or without recourse) or acceptance made under documents presented under Documentary Credit subject to Uniform Customs and Practices for Documentary Credits ICC publication No 500 of 1993. Irrevocable Credit means the credit cannot be amended or cancelled without the agreement of all parties (the beneficiary, the applicant and the issuing bank). A credit therefore should clearly indicate whether it is revocable or irrevocable. In the absence of such indication, the credit shall be deemed to be irrevocable. An irrevocable letter of credit can neither be amended nor cancelled without the agreement of all parties to the credit. Under UCP500 all letters of credit are deemed to be irrevocable unless otherwise stated. Standby Letters of Credit A standby letter of credit is used as support where an alternative, less secure, method of payment has been agreed. They are also used in the United States of America in place of bank guarantees. Should the exporter fail to receive payment from the importer he may claim under the standby letter of credit.
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