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

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:
  1. Monthly shipment
  2. Quantity-based limit
  3. 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/