Revocable L/C

A revocable L/C (Revocable Letter of Credit) refers to a letter of credit that the issuing bank may amend or revoke at any time during the validity period of the L/C without prior notice to the beneficiary. Its core characteristic is that the issuing bank may unilaterally revoke its payment undertaking, and therefore it provides extremely low protection for the beneficiary (exporter). Use cases: usually used where there is an extremely high level of trust between the issuing bank and the beneficiary, or between a parent company and a subsidiary, or in small-value trade. Precautions: the beneficiary faces the risk of being unable to receive payment after the issuing bank revokes the L/C, and if the negotiating bank has already negotiated, the issuing bank still must reimburse, but the beneficiary may still be subject to recourse. Difference from an irrevocable L/C (Irrevocable Letter of Credit): the latter may not be amended or revoked without the consent of all parties and is the most commonly used type in international trade; whereas a revocable L/C, due to its high risk, is no longer recognized under UCP600 (UCP600 recognizes only irrevocable L/Cs) and is rarely used in practice. Foreign trade practitioners should give priority to irrevocable L/Cs unless there is a special basis of trust.