![]() Invoice amount changes (a fee will be charged upon the discrepancy of the changes).Bill of Lading detail changes (vessel information, shipper, consignee, description, quantity, packaging).Amendment ChargesĪ fee imposed upon the seller if the details of the Letter of Credit have to be corrected to reflect the actual shipment. Advising ChargesĪ fee that the beneficiary bank charges for accepting the applicant’s bank offer for a letter of credit. Exporters have to pay an amount of processing fee to the bank.Īlthough the description of the charges may vary, in summary, the charges that the sellers are liable for can be broken down to 4 types of charges: – 1. We have to debunk the notion that exporters do not need to bear any charges when an LC is involved as we can see above. Min SGD 80ĭBS Bank – Singapore (Exporter/Seller) Advising Doc LC / Amendment / Pre- Advice (Telex/SWIFT)Īs we can see from the examples above, the beneficiary bank or the seller’s bank will charge fees that are lower than the issuing bank (buyer’s bank) on average. Min SGD 80 Amount – 1/8% per month on the difference between the increased amount and the original amount. Min SGD 80Įxtension – 1/8% per month on the outstanding balance. Negotiation (Document Handling Commission)ĭBS Bank – Singapore (Importer/Buyer) LC Issuanceġ/8% per month, Min 2 months, but not less than SGD 80ġ/8% of invoice value per month, from expiry date of LC to due date. Standard LC Charges on Each reinstatementīNP Paribas – Bahrain (Seller/Exporter) LC Advisory Fee Secondary Beneficiary Bank (Beneficiary/Buyer’s Bank)Įxamples of Fees Charged by Financing Banks BNP Paribas – Bahrain (Buyer/Importer) Import Documentary Credit FeeĠ.125% invoice value per month (min 3 months) Or min 30 BHDĠ.125% invoice value per month (min 3 months) Or min 25 BHD.Beneficiary Bank (Beneficiary/Seller’s Bank).Confirming Bank (Applicant/Buyer’s Bank).The Issuing Bank (Applicant/Buyer’s Bank).The UCP guidelines only outline the charges liable between: – The UCP 600 deems that the bank charges to its clients are of commercial interest and is entirely up to the banks. However, upon inspection on both the UCP 600 and the ISP98, there are no apparent structures that inform the bank on how the sellers and buyers should be charged. It has to be said that not all countries refer to the UCP 600 guidelines, the International Standby Practices 1998 (ISP98) also provides a structure for the letter of credit issue for standby letters of credit. In this article, we will refer to the UCP 600 guidelines to ascertain who is recommended to pay the letter of credit charges and compare it with what is practiced by major trade financing institutions.Īs a brief introduction, the Uniform Customs and Practice for Document Credit (UCP 600) is a guideline for how a letter of credit is drafted and executed, it is the bible that banks or trade financing facilities refer to. There are other ancillary costs that both the buyer and the seller have to consider. ![]() The amount charged is dependent upon the risk assessment of the underwriting of the payment guarantee. A percentage of the invoice value underwritten in charged, which is from 0.1% to 2.0% of the commercial invoice value per month. In most cases, the letter of credit charges is paid by both the applicant and the beneficiary of the LC. (2) The amount that was underwritten by the bank and (3) the pre-existing agreement between the buyer and the seller. ![]() ![]() There are three underlying factors involved in determining a letter of credit charge and who is responsible for those fees. So, who exactly pays for the Letter of Credit charges? Either way, this additional payment assurance by the bank comes at the cost to both the buyer and seller. Either your seller is seeking for payment assurance, or that your country has regulations requiring the use of a letter of credit. If you raised the question of who pays for the letter of credit charges, chances are you are in deep consideration of using a letter of credit. ![]()
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