Facility Cancellation

Facility Cancellation is a term in international trade finance that refers to a bank or financial institution terminating, at the client's request, a credit facility that has been approved but not yet used (such as an L/C facility, packing loan facility, etc.) ahead of schedule. Usage scenarios: when an importer no longer needs the remaining facility, or an exporter voluntarily applies for cancellation after completing a project, in order to avoid commitment fees on the facility. Points to note: cancellation is usually irrevocable and must be notified to the bank in writing; if the facility has been partially used, the cancellation applies only to the unused portion; some agreements provide that a certain fee must be paid for cancellation. Difference from 'Facility Reduction': reduction lowers the total facility amount but retains part of the available amount, while cancellation terminates it completely. Difference from 'Facility Expiry': expiry is natural termination, while cancellation is voluntary early termination. Foreign trade practitioners should carefully read the cancellation clauses in the credit agreement to confirm whether advance notice and fees are required.