payment of charges under L/C

DmitriyDorofeev · Post by **DmitriyDorofeev** » Fri Jun 08, 2001 1:00 am

Exemple:
Issuing bank "X" opened the L/C and advised it to beneficiary via advising and negotiating bank "Y".L/C terms provided payment of bank's "Y" charges and commissions for beneficiari's account. The beneficiary presented all documents to bank "Y" and received payment, but refused to pay lather bank commission and charges.Bank "Y" claimed its commission and charges from bank "X" in accordance with art. 18 of UCP 500, but bank "X"refused to pay as L/C in question had been utilized by beneficiary.
Question:
Which party (beneficiary or applicant)is to pay bank's "Y" commissions and charges in this case (when L/C has been fully utilised by beneficiary)?

mohd_kkilany · Post by **mohd_kkilany** » Fri Jun 08, 2001 1:00 am

i think bank y could look back to bank x to obtain his commissions as long as l/c was not utilized according to ucp article you mentioned,but incase of utilization its bank's y responsibilty to comply with all credit terms and conditions including banking charges out side applicant's country(if l/c stipulated that in the first place),this issue can be easily solved through the two banks banking relation departments if they are correspondents to each other.

larryBacon · Post by **larryBacon** » Fri Jun 08, 2001 1:00 am

In this case, bank Y has not complied with the instructions from bank X to collect its charges. Bank X would be ultimately liable under Article 18c ii, but only if charges could not be collected. I suggest that payment in full by bank Y showed a failure to collect such charges. Bank Y, as advising bank should have included a statement in its letter advising the credit, that the relevant charges would be deducted before payment of the L/C.
It is unclear if this happened.

Laurence A. J. Bacon

AbdulkaderBazara · Post by **AbdulkaderBazara** » Sun Jun 10, 2001 1:00 am

On page 53 of ICC Pub. No. 511 (UCP 500 & 400 compared)a good explanation is provided. The liability of the instructing party is considered as secondary. The explanation then defines secondary liability as follows:

A secondary liability in this provision means that if the Advising, Paying, or Negotiating Bank cannot deduct or collect the charges from the Beneficiary due to the non-utilisation of the Credit, then the instructing party must ultimately pay those charges.

T.O.Lee · Post by **T.O.Lee** » Wed Jun 13, 2001 1:00 am

If Bank Y can produce documentary evidence on its attempt to collect those charges from the Beneficiary but fails, then it has the right to claim from Bank X.

Otherwise Bank Y has no right to claim against the issuing bank X because it has not followed, or attempted to follow the instructions in the LC about collection of the charges from the Beneficiary.

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