Hi,
My name is Monique Philippe a 'new' DCPRO member, and would like to ask all of you your opinion on the following :
"during a training on documentary credits I have been asked :
first is it normal that an issuing bank charges discrepancies fees to the orderer ?
and second is it normal that a negotating/confirming bank charges 75 euros per discrepancy and not per remittance ?"
I have to admit that during the 20 years I have spent in trade finance depts never seen that, so if anyone of you have a comment, please do.
Thank you
Monique
Discrepancies fees
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KimChristensen
- Posts: 404
- Joined: Fri Apr 05, 2019 5:21 pm
Discrepancies fees
Dear Monique
Welcome to the forum.
My personal views without responsibility / liability:
When it comes to “fees” – I think that you can expect more or less everything. I think that you can argue for the logic behind the discrepancy fee, but I think that it is wrong to charge per discrepancy – or another variation “a percentage of the amount”.
I have seen both – but I would not go as far as to call it “normal”. I would think that the “normal” is to have one fixed fee per presentation.
Best regards
Kim
Welcome to the forum.
My personal views without responsibility / liability:
When it comes to “fees” – I think that you can expect more or less everything. I think that you can argue for the logic behind the discrepancy fee, but I think that it is wrong to charge per discrepancy – or another variation “a percentage of the amount”.
I have seen both – but I would not go as far as to call it “normal”. I would think that the “normal” is to have one fixed fee per presentation.
Best regards
Kim
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VijayalakshmiK
- Posts: 9
- Joined: Fri Apr 05, 2019 5:28 pm
Discrepancies fees
Hi,
What is your view on the practice, where the issuing bank deducts discrepancy fees upon payment without providing a formal notice of refusal in accordance with art.14 of UCP500?
Are they allowed to do so, if the discrepancies are valid?
My view is that they should provide the presenting bank with a chance to refute the discrepancies.
What is your view on the practice, where the issuing bank deducts discrepancy fees upon payment without providing a formal notice of refusal in accordance with art.14 of UCP500?
Are they allowed to do so, if the discrepancies are valid?
My view is that they should provide the presenting bank with a chance to refute the discrepancies.
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Discrepancies fees
If the issuing bank (or any bank) regards documents presented as discrepant, they do not have authority to pay. They must obtain such authority, or return docs.
Laurence
Laurence
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KimChristensen
- Posts: 404
- Joined: Fri Apr 05, 2019 5:21 pm
Discrepancies fees
Dear Vijaya,
I think that this practice that you mention (to deduct the fee without a formal refusal) is rather logical from a practical point of view.
In such case the issuing bank has utilized article 14,c, and contacted the applicant for a waiver. This contact to the applicant is the “act” that initiates the discrepancy fee. I think that one purpose of article 14,c is to avoid refusals – and to support payments – which must be the core purpose of the L/C. So I may be wrong, but I see article 14, as a supporter of this practice.
The practice indicated by you (only to deduct fee after a formal refusal), would raise the number of refusals – and delay payments, and I do not think that is the “right” way to go. Discrepancy fee or no discrepancy fee.
Best regards
Kim
I think that this practice that you mention (to deduct the fee without a formal refusal) is rather logical from a practical point of view.
In such case the issuing bank has utilized article 14,c, and contacted the applicant for a waiver. This contact to the applicant is the “act” that initiates the discrepancy fee. I think that one purpose of article 14,c is to avoid refusals – and to support payments – which must be the core purpose of the L/C. So I may be wrong, but I see article 14, as a supporter of this practice.
The practice indicated by you (only to deduct fee after a formal refusal), would raise the number of refusals – and delay payments, and I do not think that is the “right” way to go. Discrepancy fee or no discrepancy fee.
Best regards
Kim
Discrepancies fees
hi,
Thank you all for your comments.
Does any of you have a comment on the first question which concerns fees deducted from the orderer of the LC instead of from the beneficiary (and maybe plus the beneficiary).
Judith please, I would like to have your point of view as the banks concerned are french banks.
Monique
Thank you all for your comments.
Does any of you have a comment on the first question which concerns fees deducted from the orderer of the LC instead of from the beneficiary (and maybe plus the beneficiary).
Judith please, I would like to have your point of view as the banks concerned are french banks.
Monique
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JudithAutié
- Posts: 195
- Joined: Fri Apr 05, 2019 5:20 pm
Discrepancies fees
Sorry for the delay in replying, but I was out on a (well deserved) holiday -- just back to the office today.
Discrepant documents are a pain for all concerned -- the beneficiary, who doesn't get paid, the negotiating/confirming bank, who has to decide what to do with the docs in agreement with the (unhappy) beneficiary, the issuing bank, who has to decide whether or not to contact the applicant, and bear the risk if it (the IB) decides unilaterally to accept the docs and the applicant contests, and finally the applicant, who (usually) wants the documents asap to get his hot little hands on the goods.
And when you factor in all the extra time and trouble to follow up on irregular documents, any discrepancy fee is little enough payment (says a frustrated banker trying to keep expenses as low as possible).
So who should pay the fee? Well, it usually falls to the beneficiary who gets the blame, even when its the dumb forwarder who messed up the transport document (about at least half the discrepancies are on the transport doc in our bank's experience).
However, you very often have an agreement "Issuing Bank charges for applicant, Confirming Bank charges for beneficiary". So you would think that the IB could never charge the Benef. But then the applicant says "hey it's not my fault - I won't pay"
All this to say "there isn't any fixed and firm practice" It all depends on the various agreements between the parties concerned.
You do, of course, know the rule in art. 18c : as a last resort, the applicant bears all charges.
regards
Judith
(As usual, without responsibility, engagement etc...)
Discrepant documents are a pain for all concerned -- the beneficiary, who doesn't get paid, the negotiating/confirming bank, who has to decide what to do with the docs in agreement with the (unhappy) beneficiary, the issuing bank, who has to decide whether or not to contact the applicant, and bear the risk if it (the IB) decides unilaterally to accept the docs and the applicant contests, and finally the applicant, who (usually) wants the documents asap to get his hot little hands on the goods.
And when you factor in all the extra time and trouble to follow up on irregular documents, any discrepancy fee is little enough payment (says a frustrated banker trying to keep expenses as low as possible).
So who should pay the fee? Well, it usually falls to the beneficiary who gets the blame, even when its the dumb forwarder who messed up the transport document (about at least half the discrepancies are on the transport doc in our bank's experience).
However, you very often have an agreement "Issuing Bank charges for applicant, Confirming Bank charges for beneficiary". So you would think that the IB could never charge the Benef. But then the applicant says "hey it's not my fault - I won't pay"
All this to say "there isn't any fixed and firm practice" It all depends on the various agreements between the parties concerned.
You do, of course, know the rule in art. 18c : as a last resort, the applicant bears all charges.
regards
Judith
(As usual, without responsibility, engagement etc...)