How much does it cost to open a letter of credit?
It is really hard to predict opening cost of an lc. Beacuse factors that affecting total cost of a letter of credit change one l/c to another. 

 





























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How letter of credit charges are shared between applicant and beneficiary
It is really hard to predict opening cost of an lc. Because factors that affecting total cost of a letter of credit change one application to another. In addition total cost is shared between applicant and beneficiary differently from one letter of credit to another as well.  

  • According to Letter of Credit Rules : All charges including opening cost, advising cost and confirmation cost should be covered by the applicant.
  • In Reality : 
Charges covered by applicant : issuing bank charges should be covered by applicant.
Charges covered by beneficiary : advising bank charges, confirming bank charges, reimbursement bank charges and discrepancy charges are covered    beneficiaries.




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  • Letter of credit opening cost change case per case as cost affecting factors are changing. What are the cost affecting factors of opening a letter of credit ?

  • Issuing bank charges  : Issuing a letter of credit is a commercial act and bank open locs in order to make profit. 
  • Letter of credit amount : Banks demand lc issuance charges in percentage. Higher lc amount higher charges.
  • How letter of credit amount will be backed : Risky lc may cost higher to the applicant. Full lc amount will be backed by a cash deposit at the issuing bank could lower the lc charges.
  • How letter of credit charges are shared between applicant and beneficiary : See below box for more information.
  • Payment Term : The longer payment due more fees you may have to pay.
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