Issuing Bank (Bank A)
Advising Bank (Bank B)
Bank A issued L/C with field 78 stating 'All charges of banks other than Bank A are for the beneficiary's account'
When the L/C is paid, an amount for acceptance/payment message (swift cost) is deducted from the payment by Bank A.
Our view would be that as issuing bank, Bank A are obliged to communicate acceptance/payment and since the applicant is to cover charges of the issuing bank, then the applicant should therefore pay this charge.
We would be interested to hear comments on the above.
Charges deducted by issuing bank on payment of L/C
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GeraldineDaly
- Posts: 8
- Joined: Fri Apr 05, 2019 5:13 pm
Charges deducted by issuing bank on payment of L/C
Based on the facts you have outlined, I personally (without responsibility/liability) would agree with your view that the charge should not have been deducted from the proceeds. However I would imagine the amount of the charge is small and that the cost of contesting it would be substantially greater.
Charges deducted by issuing bank on payment of L/C
Welcome to the Discussion Forum Geraldine.
There is an official ICC Opinion that addresses a matter very similar to your post - ref: R380.
The following is taken from the Conclusion/Analysis of Opinion R380:
“The remittance of funds in this type of transaction is merely the discharging of that bank's liability. If a fee is due, then this should be paid by the applicant.
If the issuing bank wishes to make a deduction from the proceeds in respect of this fee, then the credit should clearly indicate the amount or percentage of charges that will be deducted. It will then be for the beneficiary to decide whether it will perform under the credit with such a charge for its account.”
To see the full text (and context)of this opinion search using “R380”.
There is an official ICC Opinion that addresses a matter very similar to your post - ref: R380.
The following is taken from the Conclusion/Analysis of Opinion R380:
“The remittance of funds in this type of transaction is merely the discharging of that bank's liability. If a fee is due, then this should be paid by the applicant.
If the issuing bank wishes to make a deduction from the proceeds in respect of this fee, then the credit should clearly indicate the amount or percentage of charges that will be deducted. It will then be for the beneficiary to decide whether it will perform under the credit with such a charge for its account.”
To see the full text (and context)of this opinion search using “R380”.
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Charges deducted by issuing bank on payment of L/C
At the risk of dominating this Topic with Irish contributions (Jeremy excepted) I would like to ask Geraldine if the issuing bank was asked to explain its deduction of charges which seems clearly at odds with the L/C clause.
Some issuing banks deduct such charges as a matter of course, i.e. this is their standard modus operandi, but may have failed to check whether a clause such as this exists in this particular L/C to alter their m.o. I say this wearing my naive hat !
If I change my hat, I would use the Irish expression "chancers" to describe the actions of some banks whereby they deduct charges to which they are not entitled. If nobody objects to it, they have made an extra profit. If somebody does object, they simply pay, as they are not at any loss. The individual amounts are usually so small that not many object and so the practice continues.
This reminds me of a case I read about some years ago in the early days of computerisation where an ingenious programmer in the U.S. wrote a hidden program which deducted a small fraction of a cent from every transaction processed and allocated it to his account. Very soon he was a (fraudulent) millionaire. If memory serves, he was only caught because his lifestyle became too extravagant for his supposed salary !
Laurence
Some issuing banks deduct such charges as a matter of course, i.e. this is their standard modus operandi, but may have failed to check whether a clause such as this exists in this particular L/C to alter their m.o. I say this wearing my naive hat !
If I change my hat, I would use the Irish expression "chancers" to describe the actions of some banks whereby they deduct charges to which they are not entitled. If nobody objects to it, they have made an extra profit. If somebody does object, they simply pay, as they are not at any loss. The individual amounts are usually so small that not many object and so the practice continues.
This reminds me of a case I read about some years ago in the early days of computerisation where an ingenious programmer in the U.S. wrote a hidden program which deducted a small fraction of a cent from every transaction processed and allocated it to his account. Very soon he was a (fraudulent) millionaire. If memory serves, he was only caught because his lifestyle became too extravagant for his supposed salary !
Laurence
Charges deducted by issuing bank on payment of L/C
Laurence,
To dilute the Irish tint in this topic about unreasonable banking charges made by the issuing bank here, may we join in from Canada with a story we heard from a banking officer.
INTERNATIONAL SUVIVAL BANKING PRACTICE
He was a frequent attendee of our workshops. He told us that he knew some charges, such as the acceptance/payment advice charges by the issuing bank here, should not be for account of the beneficiary. So he brought this up with his manager who explained to him "Well, of course I also understand these charges should not be borne by the beneficiary. But you have to think of our awkward situation. The rents are increasing; yours and my salaries are increasing every year. But because we have strong competition in the market place, we cannot increase our fees. So you tell me what to do to make ends meet? For the time being charge the beneficiary as usual. If he is a smart guy and complains, then we would be glad to waive it. You don’t have to get my authority if I am out of office. This is the way we seek survival in this banking business. Don't worry, be happy!"
May we call this an international “survival” banking practice that is practiced by certain banks across the continents?
GO TO THE KITCHEN TO FIND OUT THE FACTS
That is something one can never learn form the books. As a responsible consultant, we have to go to the kitchen of the bank, the carrier, the freight forwarder, the insurer, the surveyor and also the traders to find out the facts. Otherwise we can never answer queries from the floor such as why a freight-prepaid bill of lading bears the odd stamp “Freight to be arranged”.
http://www.tolee.com
[edited 1/9/02 5:53:09 PM]
To dilute the Irish tint in this topic about unreasonable banking charges made by the issuing bank here, may we join in from Canada with a story we heard from a banking officer.
INTERNATIONAL SUVIVAL BANKING PRACTICE
He was a frequent attendee of our workshops. He told us that he knew some charges, such as the acceptance/payment advice charges by the issuing bank here, should not be for account of the beneficiary. So he brought this up with his manager who explained to him "Well, of course I also understand these charges should not be borne by the beneficiary. But you have to think of our awkward situation. The rents are increasing; yours and my salaries are increasing every year. But because we have strong competition in the market place, we cannot increase our fees. So you tell me what to do to make ends meet? For the time being charge the beneficiary as usual. If he is a smart guy and complains, then we would be glad to waive it. You don’t have to get my authority if I am out of office. This is the way we seek survival in this banking business. Don't worry, be happy!"
May we call this an international “survival” banking practice that is practiced by certain banks across the continents?
GO TO THE KITCHEN TO FIND OUT THE FACTS
That is something one can never learn form the books. As a responsible consultant, we have to go to the kitchen of the bank, the carrier, the freight forwarder, the insurer, the surveyor and also the traders to find out the facts. Otherwise we can never answer queries from the floor such as why a freight-prepaid bill of lading bears the odd stamp “Freight to be arranged”.
http://www.tolee.com
[edited 1/9/02 5:53:09 PM]