Documentary Credit Fees and Charges


A generic LC application form, either paper or online, will include a field that is intended to provide an indication of who is responsible for the payment of each bank's charges, i.e., the applicant or beneficiary. 


The normal structure is that the applicant will cover the costs of the issuing bank and the beneficiary will bear the cost of all charges incurred outside the country of the issuing bank.


However, a decision as to who pays charges (or what charges) is for agreement between the applicant and beneficiary in their initial sale contract, proforma invoice or purchase order.


Main UCP considerations


Sub-article 37 (c) states that when a bank instructs another bank to perform a service, and where charges are stated to be for account of the beneficiary, such bank is responsible for the charges incurred by that other bank if such charges cannot be collected from the beneficiary or be deducted from the proceeds of any presentation.


A documentary credit should not indicate that the advising to a beneficiary is subject to the prior collection of the advising bank or second advising bank's charges.


Sub-article 38 (c) states that all charges in respect of a transfer of a transferable documentary credit must be paid by the first beneficiary.


Back to recent articles