{"id":370,"date":"2018-01-23T13:26:58","date_gmt":"2018-01-23T18:26:58","guid":{"rendered":"http:\/\/www.letterofcredit.biz\/?p=370"},"modified":"2025-02-19T12:29:59","modified_gmt":"2025-02-19T17:29:59","slug":"letter-of-credit-fees","status":"publish","type":"post","link":"https:\/\/www.letterofcredit.biz\/index.php\/2018\/01\/23\/letter-of-credit-fees\/","title":{"rendered":"Letter of Credit Fees"},"content":{"rendered":"\n<div class=\"wp-block-group is-nowrap is-layout-flex wp-container-core-group-is-layout-ad2f72ca wp-block-group-is-layout-flex\">\n<p class=\"has-black-color has-text-color has-link-color wp-elements-214286024665c1a9d58d251a986feace\" style=\"font-style:normal;font-weight:600\">Updated on:<\/p>\n\n\n<div style=\"font-style:normal;font-weight:600;\" class=\"wp-block-post-date__modified-date has-link-color wp-elements-38778e6897e08243aa86755516555323 wp-block-post-date has-text-color has-black-color\"><time datetime=\"2025-02-19T12:29:59-05:00\">19 February 2025<\/time><\/div><\/div>\n\n\n\n<p>Letters of credit have certain advantages as an international payment method.<\/p>\n\n\n\n<p>If you have enough knowledge and expertise on letters of credit field, then you can use them wisely to get paid where no other payment method works.<\/p>\n\n\n\n<p>No matter how many advantages letters of credit have, they have one big disadvantage.<\/p>\n\n\n\n<p>They are expensive.<\/p>\n\n\n\n<p>As a result, you should understand your costs, before finalizing a letter of credit deal.<\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-80d5f57b52d1496b66ca329703d1c60a\" style=\"color:#0643c6\">Why Letters of Credit are Expensive Comparing to Other Payment Methods?<\/h2>\n\n\n\n<p>Banks play a key role in letters of credit transactions.<\/p>\n\n\n\n<p>This is the main reason, why letters of credit are expensive comparing to other payment methods.<\/p>\n\n\n\n<p>Issuing banks open letters of credit for the account of applicants and in favor of the beneficiaries.<\/p>\n\n\n\n<p>Issuing banks have to bear certain amount of risks, when they open letters of credit. They also let the applicants are benefited from their credit worthiness.<\/p>\n\n\n\n<p>As a commercial institution, issuing banks provide these services only for one reason. To earn more money, to make more profit.<\/p>\n\n\n\n<p>Similarly, confirming banks collect fees from the letter of credit parties for the same reason.<\/p>\n\n\n\n<p>When confirming a letter of credit, confirming banks may have to bear substantial amount of non-payment risk.<\/p>\n\n\n\n<p>As a result, confirmation fees can sometimes be climbing to high values.<\/p>\n\n\n\n<p>As I have indicated on my previous posts, in a typical letter of credit transaction an&nbsp;advising bank, a nominated bank, a reimbursing bank&nbsp;may exist in addition to that an issuing bank and a confirming bank.<\/p>\n\n\n\n<p>Every additional bank means additional fees and additional costs for either applicants or beneficiaries.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure data-wp-context=\"{&quot;imageId&quot;:&quot;69da6748d98fb&quot;}\" data-wp-interactive=\"core\/image\" data-wp-key=\"69da6748d98fb\" class=\"aligncenter size-full wp-lightbox-container\"><img data-dominant-color=\"efefef\" data-has-transparency=\"false\" style=\"--dominant-color: #efefef;\" decoding=\"async\" width=\"959\" height=\"479\" data-wp-class--hide=\"state.isContentHidden\" data-wp-class--show=\"state.isContentVisible\" data-wp-init=\"callbacks.setButtonStyles\" data-wp-on--click=\"actions.showLightbox\" data-wp-on--load=\"callbacks.setButtonStyles\" data-wp-on-window--resize=\"callbacks.setButtonStyles\" sizes=\"(max-width: 959px) 100vw, 959px\" src=\"https:\/\/www.letterofcredit.biz\/wp-content\/uploads\/letter-of-credit-charges-allocation.webp\" alt=\"Who Should Pay Bank Charges in a Letter of Credit Transaction?\" class=\"wp-image-8068 not-transparent\" srcset=\"https:\/\/www.letterofcredit.biz\/wp-content\/uploads\/letter-of-credit-charges-allocation.webp 959w, https:\/\/www.letterofcredit.biz\/wp-content\/uploads\/letter-of-credit-charges-allocation-300x150.webp 300w, https:\/\/www.letterofcredit.biz\/wp-content\/uploads\/letter-of-credit-charges-allocation-768x384.webp 768w\" \/><button\n\t\t\tclass=\"lightbox-trigger\"\n\t\t\ttype=\"button\"\n\t\t\taria-haspopup=\"dialog\"\n\t\t\taria-label=\"Enlarge\"\n\t\t\tdata-wp-init=\"callbacks.initTriggerButton\"\n\t\t\tdata-wp-on--click=\"actions.showLightbox\"\n\t\t\tdata-wp-style--right=\"state.imageButtonRight\"\n\t\t\tdata-wp-style--top=\"state.imageButtonTop\"\n\t\t>\n\t\t\t<svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"12\" height=\"12\" fill=\"none\" viewBox=\"0 0 12 12\">\n\t\t\t\t<path fill=\"#fff\" d=\"M2 0a2 2 0 0 0-2 2v2h1.5V2a.5.5 0 0 1 .5-.5h2V0H2Zm2 10.5H2a.5.5 0 0 1-.5-.5V8H0v2a2 2 0 0 0 2 2h2v-1.5ZM8 12v-1.5h2a.5.5 0 0 0 .5-.5V8H12v2a2 2 0 0 1-2 2H8Zm2-12a2 2 0 0 1 2 2v2h-1.5V2a.5.5 0 0 0-.5-.5H8V0h2Z\" \/>\n\t\t\t<\/svg>\n\t\t<\/button><\/figure>\n<\/div>\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-934cdc9d99e03d9679a916a1ac8351e9\" style=\"color:#0643c6\">Who Should Pay Bank Charges in a Letter of Credit Transaction?<\/h2>\n\n\n\n<p>This question can be answered either by looking at the rules or by looking at the real-life situations, because what rules say is not what is really happening on practice.<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>UCP 600&#8217;s article related to charges of letters of credit is article 37 c: &#8220;A bank instructing another bank to perform services is liable for any commissions, fees, costs or expenses (&#8220;charges&#8221;) incurred by that bank in connection with its instructions. If a credit states that charges are for the account of the beneficiary and charges cannot be collected or deducted from proceeds, the issuing bank remains liable for payment of charges.&#8221;<\/li>\n\n\n\n<li>In real life situations, the applicant pay only the issuing bank&#8217;s charges and remaining bank charges will be paid by the beneficiary unless the beneficiary is in a very strong position against the applicant. One must&nbsp;look at field &#8220;71B: Charges&#8221; in a letter of credit text, which is issued in swift format, to understand how bank charges are allocated to the letter of credit parties.<\/li>\n<\/ol>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-6b26119f31f64ea910ea5e45f2fb0fb1\"><strong>Examples:<\/strong><\/p>\n\n\n\n<p>Issuing bank charges will be paid by the applicant and all other charges will be paid by the beneficiary:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>&#8220;ALL BANKING CHARGES OUTSIDE BRAZIL ARE FOR BENEFICIARY&#8217;S ACCOUNT.&#8221; This letter of credit issued by a Brazilian bank.<\/li>\n\n\n\n<li>&#8220;OTHER THAN THE ISSUING BANKS ARE FOR THE ACCOUNT OF THE BENEFICIARY. ISSUING BANK\u2019S CHARGES ARE FOR THE ACCOUNT OF THE APPLICANT.&#8221;<\/li>\n<\/ul>\n\n\n<div class=\"wp-block-image\">\n<figure data-wp-context=\"{&quot;imageId&quot;:&quot;69da6748da623&quot;}\" data-wp-interactive=\"core\/image\" data-wp-key=\"69da6748da623\" class=\"aligncenter size-full wp-lightbox-container\"><img data-dominant-color=\"c9d3dc\" data-has-transparency=\"false\" style=\"--dominant-color: #c9d3dc;\" decoding=\"async\" width=\"774\" height=\"455\" data-wp-class--hide=\"state.isContentHidden\" data-wp-class--show=\"state.isContentVisible\" data-wp-init=\"callbacks.setButtonStyles\" data-wp-on--click=\"actions.showLightbox\" data-wp-on--load=\"callbacks.setButtonStyles\" data-wp-on-window--resize=\"callbacks.setButtonStyles\" sizes=\"(max-width: 774px) 100vw, 774px\" src=\"https:\/\/www.letterofcredit.biz\/wp-content\/uploads\/letter-of-credit-fees.webp\" alt=\"Letter of Credit Fees table\" class=\"wp-image-8065 not-transparent\" srcset=\"https:\/\/www.letterofcredit.biz\/wp-content\/uploads\/letter-of-credit-fees.webp 774w, https:\/\/www.letterofcredit.biz\/wp-content\/uploads\/letter-of-credit-fees-300x176.webp 300w, https:\/\/www.letterofcredit.biz\/wp-content\/uploads\/letter-of-credit-fees-768x451.webp 768w\" \/><button\n\t\t\tclass=\"lightbox-trigger\"\n\t\t\ttype=\"button\"\n\t\t\taria-haspopup=\"dialog\"\n\t\t\taria-label=\"Enlarge\"\n\t\t\tdata-wp-init=\"callbacks.initTriggerButton\"\n\t\t\tdata-wp-on--click=\"actions.showLightbox\"\n\t\t\tdata-wp-style--right=\"state.imageButtonRight\"\n\t\t\tdata-wp-style--top=\"state.imageButtonTop\"\n\t\t>\n\t\t\t<svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"12\" height=\"12\" fill=\"none\" viewBox=\"0 0 12 12\">\n\t\t\t\t<path fill=\"#fff\" d=\"M2 0a2 2 0 0 0-2 2v2h1.5V2a.5.5 0 0 1 .5-.5h2V0H2Zm2 10.5H2a.5.5 0 0 1-.5-.5V8H0v2a2 2 0 0 0 2 2h2v-1.5ZM8 12v-1.5h2a.5.5 0 0 0 .5-.5V8H12v2a2 2 0 0 1-2 2H8Zm2-12a2 2 0 0 1 2 2v2h-1.5V2a.5.5 0 0 0-.5-.5H8V0h2Z\" \/>\n\t\t\t<\/svg>\n\t\t<\/button><\/figure>\n<\/div>\n\n\n<h2 class=\"wp-block-heading has-text-color has-link-color wp-elements-d79c3fae2b0650e4a6b8bc2a20a9cb50\" style=\"color:#0643c6\">What are the Major Types of Letters of Credit Fees?<\/h2>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>L\/C Issuance Fee:<\/strong> This is the amount demanded by the issuing bank to open a letter of credit.<\/li>\n\n\n\n<li><strong>Advising Fee:<\/strong> A type of letter of credit fee, which is demanded by the advising bank to advise the credit to the beneficiary.<\/li>\n\n\n\n<li><strong>Discrepancy Fee:<\/strong> The issuing bank discount a certain sum of money from the proceeds of the letter of credit, if the beneficiary has presented discrepant documents.<\/li>\n\n\n\n<li><strong>Confirmation Fee:<\/strong> This is the fee, that is taken by the confirming bank to adding its confirmation to the credit.<\/li>\n\n\n\n<li><strong>Amendment Fee:<\/strong> If the letter of credit is amended, the issuing bank and\/or the confirming bank may demand amendment fees.<\/li>\n\n\n\n<li><strong>Handling Fee:<\/strong>&nbsp;Handling fees are collected by banks for a variety of reasons, such as sending swift messages, holding documents, set of photocopy documents not presented etc.<\/li>\n\n\n\n<li><strong>Reimbursement Fee:<\/strong> Reimbursement bank&#8217;s fee to settle the credit amount between issuing bank and the confirming bank or the nominated bank.<\/li>\n<\/ol>\n\n\n\n<div class=\"wp-block-group alignfull has-text-color has-background\" style=\"color:#000000;background-color:#ffffff\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n<div style=\"height:64px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"has-text-align-center has-small-font-size\" style=\"line-height:.9\"><strong>\u00d6ZG\u00dcR EKER (CDCS)<\/strong><\/p>\n\n\n\n<p class=\"has-text-align-center\" style=\"font-size:32px\"><strong>Letter of Credit Consultancy Services<\/strong><\/p>\n\n\n\n<div class=\"wp-block-buttons is-horizontal is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-499968f5 wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button has-custom-width wp-block-button__width-50\"><a class=\"wp-block-button__link has-text-color has-background wp-element-button\" href=\"https:\/\/www.letterofcredit.biz\/index.php\/contact-us\/\" style=\"border-radius:50px;color:#ffffff;background-color:#000000\">Contact us<\/a><\/div>\n<\/div>\n\n\n\n<div style=\"height:64px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Understanding Letter of Credit (L\/C) fees is crucial for international trade. Learn about the different types of L\/C fees, including issuance, advising, discrepancy, confirmation, and more, to manage costs effectively.<\/p>\n","protected":false},"author":1,"featured_media":373,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[67,72,68,66,70,69,22,65],"tags":[75,78,77,76,79,74,73,80],"class_list":["post-370","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-advising-fee","category-amendment-fee","category-confirmation-fee","category-discrepancy-fee","category-handling-fee","category-issuance-fee","category-basics","category-letter-of-credit-fees","tag-advising-fee","tag-amendment-fee","tag-confirmation-fee","tag-discrepancy-fee","tag-handling-fee","tag-issuance-fee","tag-letter-of-credit-fees","tag-reimbursement-fee"],"_links":{"self":[{"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/posts\/370","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/comments?post=370"}],"version-history":[{"count":0,"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/posts\/370\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/media\/373"}],"wp:attachment":[{"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/media?parent=370"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/categories?post=370"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.letterofcredit.biz\/index.php\/wp-json\/wp\/v2\/tags?post=370"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}