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Revolving LC

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Fri, 08/27/2010 - 03:09
sameertf2010
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Joined: 04/23/2010
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Dear Experts,

We have entered into a contract to make multiple shipments to our Buyer in Europe. We want to opt for revolving LC so that there is only 1LC and same type of documentation. Pls. can you guide on

1. When does the LC revolvment trigger? Whether it's upon Shipment by Bene or upon Payment be Issuing Bank for the prior shipment.

2. What's the difference between Revolving and Re-Instatement Credit

3. Whether Revolvment under the LC is Automatic or whether the Issuing Bank needs to Advise the Bene for  triggering every new revolvement.

Appreciate your detail comments and possible how to word the revolvment clause in the LC so that the Bene and Applicant are very clear on when the LC shall revovle.

Thanks, Sameer 

   

 

 

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Sun, 08/29/2010 - 23:38
#1
sairam
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Joined: 07/21/2010
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Revolving credit

Hi Sameer,

In a Revolving Credit the amount of drawing is re-instated and made available to the beneficiary again until the agreed period of time.  Reinstatement of the credit can be

On notification of payment by the applicant or
Merely on submission of documents.
The maximum value of utilization and period up to which the Credit can be revolved and the number of times credit is allowed to revolve, will be specified in the Credit.

Example:
If importer ‘A’ places an order for import of certain raw materials from ‘B’ for one year.  Value of import EUR 100,000 per month. For one year total value of import will be EUR 1,200,000. If overseas seller ‘B’ insists for a documentary credit for the entire supply for one year, credit value must be for EUR 1,200,000/.   Instead, credit can be opened for EUR 100,000 valid for one year, which will be available on every month.  Issuing Bank establishes a credit for EUR 100,000, which will be valid for one year, on every month.

Once the documents under the credit for the first month are received, the same credit will be reinstated for the next drawings. This is known as Revolving Credit.

NOTE: There is no definition for Revolving credit in UCP 600. On the basis of the market practices above information is provided.

This is available in our product 'instantLC+' You may logon to our website: www.paramshree.com & download this  
software and thereafter, send me a mail to sairam@paramshree.com. I will send you the serial number & temporary activation code with which you would be able to see all comments about various types of credit and all other clarifications with regard to Letter of Credit. This is being provided to you as a matter of good  will from my company and you don't have to pay anything towards this service.

Regards,

Sairam  

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Sat, 08/28/2010 - 09:51
#2
cvrkswami
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Joined: 08/07/2010
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revolving LC

The triggering is only on receipt of advice from the issuing banker that the LC amount can be reinstated.  

CVRK

An exbanker, into education now! ( can undertake select syndication) 

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Fri, 08/27/2010 - 10:06
#3
pan
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Joined: 09/13/2007
Posts:
Problems with revolving l/c

Hi Friend,

A bank issuing b/o of an applicant a revolving l/c, must consider the amount of the credit facility it wants to risk.

If the bank issues an l/c for USD 1.000.000,00 revolving 3 times, it risks the applicant.

-for USD 3.000.000,00 if the l/c works directly,

-for  USD 1.000.000,00 if the second installment will be authorized by amendment.

This is a big difference!

Hoping to have been useful and waiting for other comments

Ciao

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