A letter of credit (Documentary Credit) can be
irrevocable or revocable. The Letter of Credit usually shows weather it is
an
irrevocable or revocable letter of credit. In the absence of such indications, the Letter of Credit deemed to be irrevocable. Now what is an Irrevocable Letter of Credit?An irrevocable Letter of Credit can not be amended or cancelled without the consent of the issuing bank, if any, and the
beneficiary. The payment is guaranteed by the bank if the credit terms and conditions are fully met by the beneficiary. The world irrevocable documentary or irrevocable credit may be indicated in the Letter of Credit.In some cases, an irrevocable Letter of Credit received by the beneficiary may become invalid without the amendment or cancelled of such Letter of Credit, for example, when the trade between importing and exporting countries is suspended such as in a trade sanction, or when the issuing bank has ceased operation.There have been cases of an irrevocable Letter of Credit being amended without the consent of the beneficiary in the OEM agreements. The beneficiary affected were export-manufacturers from the developing country. The importers were able to convince and instruct issuing bank to amend the latest date of shipment in the Letter of Credit, changing to adate earlier than the agreed upon date, at which time the beneficiary would not be able to ship the OEM products. The importers used sneak tactics that aimed to cause the beneficiary to default in the delivery. The intension of the importers was to cancel the orders from the existing OEM suppliers and buy from other suppliers in another developing country where the prices had become cheaper.In the event of an amendment like the above-mentioned case, the beneficiary must give notification of rejection of amendment to the bank that advice the amendment at once.Irrevocable and without recourse letter of CreditThe irrevocable letter of credit received from an advising bank may be indicated as “irrevocable and without resource documentary credit”. The words “Without resource” mean that the advising bank will not be able to recover the money paid to the beneficiary in case the issue bank does not pay the advising bank.