RESTRICTED NEGOTIABLE LC VERSUS FREELY NEGOTIABLE LC

Restricted Negotiable Letter of Credit
In a restricted negotiable letter of credit, the authorization from the issuing bank to pay the beneficiary is restricted to a specific nominated bank. The sample letter of credit is a restricted negotiable credit, that is, the authorization from The Sun Bank to pay the UVW Exports is restricted to a specific nominated bank, which is The Moon Bank.

Freely Negotiable Letter of Credit
In a freely negotiable letter of credit, the authorization from the issuing bank to pay the beneficiary is not restricted to a specific bank, any bank can be a nominated bank as long as the bank is willing to pay, to accept draft(s), to incur a deferred payment undertaking, or to negotiate the L/C. The words "this credit is not restricted to any bank for negotiation" or "this credit may be negotiated at any bank", or similar words, may be indicated on the L/C.

Revolving Letter of Credit
When a letter of credit (L/C) is specifically designated "revolving letter of credit", the amount involved when utilized is reinstated, that is, the amount becomes available again without issuing another L/C and usually under the same terms and conditions.

The revolving L/C may be used in shipments of a wide range of goods to a buyer within a period of time (several months to one year usually).