Revolving L/C

A revolving L/C refers to a letter of credit whose amount, after being partially or fully utilized, can automatically restore to the original amount and be used again. It is mainly applicable to scenarios where the buyer and seller have signed a long-term contract for delivery in installments with relatively short intervals between each delivery, such as regular supply of raw materials, components, etc. Its core feature is "revolving use," which saves on L/C issuance procedures and costs and avoids multiple L/C openings. Revolving L/Cs are divided into two types: revolving by time (e.g., automatically restoring each month) and revolving by amount (e.g., restoring after a certain amount is used). When using one, attention should be paid to: clarifying the revolving conditions (automatic, semi-automatic, or non-automatic), the cumulative maximum limit, and whether unused amounts in each period can be carried forward. Compared with ordinary L/Cs, it reduces the cost of multiple L/C openings; unlike standby L/Cs, it is used for actual goods trade payment rather than guarantee. In practice, vigilance should be maintained against the issuing bank's credit risk and refusal to pay caused by unclear revolving clauses.