ICC Digital Library Forum

Dear Sirs,
We would like to apply to you and hope that you have at your disposal any data regarding the methods preferred by banks when collecting commissions for opening Letters of Credit, namely:
- the commission is charged once for the full period of the L/C's validity when opening Letter of Credit,
- or It's charged by the periods which may be equal to several months, or their parts at the beginning of each period (usually for three month).
In case the commission is calculated by the periods and charged for the L/C which is valid for several periods, and the settlements under this L/C were terminated before the date of L/C's expiry (i.e. the L/C was officially closed before the expiration of L/C's validity) whether a Client can apply to the bank with the request to refund the amount of commission taking into account the real period of validity, or the banks effect recalculation and refund of the excess of the amount of commission without special request of the Client, or the commission charged is not to be refunded/recalculated.
In case the commission is calculated by periods and the amount of the L/C was fully used before the date of expiry whether It's possible to charge commission for all the subsequent periods taking into account the date of L/C's expiry.
Is there a possibility in banking practice to effect recalculation of the amount of commission if the period of L/C's validity was decreased?
Your reply would be highly appreciated.
Yours faithfully,

AN ISSUE NOT COVERED BY THE UCP

This is a typical example that for certain banking practices, which are more market oriented, the UCP would not cover, and in fact it is also not practical for the UCP to cover. This sort of market oriented practices are more suited to be monitored by the local banking associations.

MARKET WILL DECIDE FEES STRUCTURE

Having said that, it is also up to an individual bank to determine its own fees structure as in a free market, where the WTO is heading, each bank has its own freedom to do so to match its own marketing strategy and positioning.

POWER APPLICANTS CAN MAKE RULES FOR BANKS TO COMPLY

In fact, this sort of fees structure is also shaped by the market. When one bank tries to do something to the benefit of the applicant, other banks may follow in order to compete. There is no hard and fast rule here. If the applicant is powerful enough, the applicant can even make rules for the banks to comply.

From our knowledge, the DC opening fees are "negotiable" if your account is big enough.

In the transporft sector, the powerful global conclomerates, such as EXXON, can even have their own charter parties and their own bills of lading.

http://www.tolee.com

[edited 12/17/01 9:20:42 PM]

Generally banks charge the applicants on the basis of 3 months or any part thereof. These charges may be taken well in advance or by installment (for every period) depending on the bank’s internal policy and the relationship with the applicant.

Generally, the bank have the right not to refund these charges even if the L/C has not been utilized and expired or cancelled before its expiry date, however for every rule there is an exception. A prudent bank has to consider the profitability of the applicant’s account, volume of transactions, the structure of his credit facilities. Therefore the recalculation or refund of the L/C charges is purely a credit decision.

From my banking experience I have encountered many cases where we were more than delighted to refund those charges if the applicant requested so, of course we had our reasons and our own calculation.