Revocable and Irrevocable letters of credit

Understanding the Difference between a Revocable Letter of Credit and an Irrevocable Letter of Credit

1. Revocation

As the name suggests the primary difference between a revocable letter of credit and an irrevocable letter of credit is the ability to revoke. A Revocable letter of credit can be edited or annulled without prior notice to the receiver/ sellers.

On the other hand, an irrevocable letter of credit cannot be amended in any way or be cancelled unless explicitly agreed upon by all the parties involved in the agreement. The buyer, the issuing bank, and the seller need to explicitly decide the terms of revocation and agree upon them; no party has the authority to change any terms of the irrevocable letter of credit once it is issued.

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