Revolving letter of credit
Back to the Trade Finance Guide
Ossiano Guides · Instrument library
One letter of credit that refills after each use, so it can pay for a run of repeat shipments.
Terms like this have a quick explainer. Tap or hover on them.
01 · In plain words
One LC covers many shipments because its amount is restored after each use
A is a bank's promise to pay the exporter when the exporter hands in documents that match its terms. A , or revolving LC, is an LC that fills back up after it is used (ICC Academy). This repeats until the LC expires or reaches its total limit.
Without this feature, the buyer normally needs an , a formal change to the LC, to add value once the LC has been partly or fully used (ICC Academy). With a revolving LC, the amount renews automatically. Nobody has to reissue the whole LC (Czech Banking Association).
The amount can be restored in two ways (ICC Academy):
- By time. The amount comes back each period, for example each month.
- By value. The amount comes back each time a shipment is made.
If the amount comes back each period, the LC is one of two types. Under a revolving LC, money you do not use in one month carries forward to the next. Under a revolving LC, each month stands alone (ICC Academy).
Who is involved
The parties are the same as for any LC.
- The importer, called the , asks its bank for the revolving LC.
- The exporter, called the , ships the goods and gets paid.
- The importer's bank, the , makes the promise to pay.
- The passes the LC on to the exporter. A may check documents and pay.
- Sometimes a adds its own promise. See Confirmed letter of credit.
02 · How it works
Seven steps, and the middle steps repeat for every shipment
Figure 1 · Interactive
A revolving letter of credit, step by step
Steps 3 to 6 repeat until the LC expires or reaches its total limit.
Source: ICC Academy, Types of documentary credit, October 2024 on revolving by time or value and on cumulative and non-cumulative LCs. Steps 2 to 4 follow the general LC flow; see Letter of credit (sight).
03 · What it means for you
The exporter can ship again without waiting for a new LC, and the importer saves paperwork on repeat orders
Figure 2 · Interactive
What a revolving LC means for each side
Choose your side of the trade.
04 · Worked example
On a $100,000 monthly revolving LC, the cumulative version pays out $250,000 over three months and the non-cumulative version $200,000
This example uses round, made-up numbers. The LC restores $100,000 each month for three months. The exporter ships nothing in month 1, $150,000 of goods in month 2 and $100,000 in month 3. Under the cumulative LC, the unused $100,000 from month 1 carries forward, so all of month 2 is covered. Under the non-cumulative LC, month 1's amount does not carry forward, and only $100,000 of month 2's $150,000 is covered.
Figure 3 · Illustrative
Three months on a $100,000 monthly revolving LC
Illustrative inputs. The cumulative total is highlighted.
Made-up amounts, worked out by our checking script. Real LCs set their own amounts, periods and terms.
05 · When to use it
A revolving LC suits regular, repeat shipments of the same goods from the same supplier
Good fit when
- You buy the same kind of goods from the same supplier at regular intervals (ICC Academy).
- You want to avoid an amendment each time the LC amount is used (ICC Academy).
- Your shipments may slip from one month to the next. A cumulative LC carries the unused amount forward.
Another tool may suit better when
- You have a single shipment. A standard letter of credit covers one deal.
- Your shipments are irregular and the LC is non-cumulative. An unused month's amount does not carry forward, so ask for a cumulative LC.
- The buyer needs time to pay. Look at a usance LC, which pays at a set later date.
- You are unsure about the buyer's bank. Ask for a confirmed letter of credit.
06 · Rules and a real case
A revolving LC follows the ICC rules it names, and its revolving terms are written into the LC itself
When an LC says it follows , those ICC rules apply. They have been in force since July 1, 2007 (ICC). The revolving terms, such as the period, the amount and whether it is cumulative, are written into the LC's own wording. In July 2026, the ICC Banking Commission's 2026 to 2027 action plan focused on clarification, interpretation and education, rather than a revision of UCP 600 (ICC Digital Library).
An example from ICC Academy. On October 21, 2024, ICC Academy described a revolving LC issued on a cumulative basis. It allows a monthly drawing of USD 10,000 over three months. If nothing is drawn in month one, that amount rolls over to the next month (ICC Academy, Types of documentary credit).
Summary
A revolving LC refills after each use, so one LC can pay for a series of shipments
The importer's bank promises to pay on each set of matching documents, and the LC amount comes back by time or by value. For regular repeat orders, this saves opening or amending an LC each time. Check whether the LC is cumulative or non-cumulative, because that decides what happens to an amount you do not use.
Related guides: Letters of credit; The payment terms spectrum. Related cards: Letter of credit (sight); Letter of credit (usance); Confirmed letter of credit. Every term is in the Trade Finance Glossary.
Sources
- ICC Academy, Types of documentary credit: a comprehensive guide (Dave Meynell), October 21, 2024. Supports: definition, revolving by time or by value, cumulative and non-cumulative, amendments, when it fits, the USD 10,000 illustration
- Czech Banking Association, CBA glossary: Revolving letter of credit, undated. Supports: automatic renewal without renewing the whole LC
- International Chamber of Commerce, UCP 600, Uniform Customs and Practice for Documentary Credits, in force July 1, 2007. Supports: the rules an LC can follow
- ICC Digital Library, ICC Banking Commission 2026-27 Action Plan next steps, July 31, 2026. Supports: the focus on clarification and interpretation
The real economy moves through Ossiano.
