Petroleum Oils Supply

Revolving LC: Continuous Payment Structure in Trade Finance

In long-term trade contracts… opening a new LC for every shipment can be inefficient. This is where Revolving LC is used.

WHAT IS REVOLVING LC?
A Revolving LC is an LC that automatically renews or reinstates after each use or within a specific period.
No need to issue new LC every time
Suitable for repeated shipments

ACTUAL FLOW (STEP BY STEP)

STEP 1 – Contract Agreement (SPA)
Buyer & Seller agree:

Multiple shipments
Payment via Revolving LC

STEP 2 – LC ISSUED (MT700)
Issuing Bank issues LC via SWIFT MT700
Includes revolving terms
Examples:

Monthly shipment
Quantity-based limit
Value-based limit

STEP 3 – FIRST SHIPMENT
Seller:

Ships goods
Submits documents

STEP 4 – PAYMENT
Bank pays based on compliant documents

STEP 5 – LC REINSTATED (REVOLVES)
LC value resets automatically
Based on:

Time (e.g. monthly)
Or usage (after each shipment)

STEP 6 – REPEAT CYCLE
Process repeats:
Shipment → Documents → Payment → Reset

TYPES OF REVOLVING LC

Time-based
Renew every period
Value-based
Renew after amount used

KEY FEATURES

Efficient for long-term contracts
Reduces administrative work
Continuous supply support

RISKS (IMPORTANT)

Accumulated exposure for buyer
Bank risk increases over time
Requires strong monitoring

REALITY (IMPORTANT)
Revolving LC does NOT mean unlimited
Always has:

Limit
Conditions
Validity

SWIFT INVOLVED

MT700 → LC issuance
MT707 → Amendment

KEY INSIGHT
“Revolving LC is not about one transaction… it is about managing continuous trade flow.”

CONCLUSION

Ideal for long-term supply contracts
Requires clear structure & control
Must be monitored carefully

Need help structuring Revolving LC or reviewing terms? Feel free to reach out.

CONTACT US FOR ASSISTANCE:

WhatsApp:
IR. Zaki
http://www.wasap.my/60192297179/OilPetroleum

(Mr. Saif)
http://www.wasap.my/60105375779/OilPetroleum

(Ms. Nur)
http://www.wasap.my/601129291396/OilPetroleum

Email:
gngroup.sb@gmail.com
sales.gngroupsb@gmail.com

Website:
https://www.gngroupsupplies.com/
https://gngroupsupplies.blogspot.com/

Revolving Letter of Credit (LC), Full Process & Structure Explained