negotiation charges collected by issuing bank

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firas
Posts: 37
Joined: Wed Jul 04, 2012 2:37 pm
First Name: firas
Last Name: albayati
Organization: investment bank
Filter: Two Plus Two =: 4
Location: Iraq

negotiation charges collected by issuing bank

Post by firas »

Dear expert,

I am really facing problem and your assistance is very much appreciated.

I received letter of credit from the issuing bank to be advised to our client” beneficiary “ without adding our confirmation and LC is available with issuing bank as stated in field 41A by payment at sight.

Field 71 D States that :
all banking charges of issuing bank on applicant account.
all banking charges of that advising bank on beneficiary account .


The beneficiary presented documents at our counter and requested us to send them to issuing bank for payment and our bank did that.

issuing bank checked the documents and found some discrepancies which already accepted by applicant and they transferred the beneficiary’s proceeds to their account with us but we astonished that they discounted huge amount as negotiation charges and informed us this charges to be paid by beneficiary .

our bank refused their action and we informed them that the field 71D is very clear and all charges of issuing bank to borne by applicant .

but they still said that this action its according to uniform customs and practices for documentary credit without mentioning any article covering its action.

my question is the issuing bank action is correct by deducted this charges

Thanks for your support

Regards
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picant
Posts: 1963
Joined: Wed Aug 20, 2008 1:49 pm

Re: negotiation charges collected by issuing bank

Post by picant »

Hi Pal,

from your description I understand that the credit is in full available at Issuing's bank counters, so you sent documents for collection as you are not nominated bank. So the issuing bank retain commissions for payment etc.
IMHO you are authorized to charge advising, collecting commissions plus postage, all other fees are for the benefit of issuing bank.
Other comments appreciated
Ciao
firas
Posts: 37
Joined: Wed Jul 04, 2012 2:37 pm
First Name: firas
Last Name: albayati
Organization: investment bank
Filter: Two Plus Two =: 4
Location: Iraq

Re: negotiation charges collected by issuing bank

Post by firas »

thanks picant for your reply

yes, the LC is fully available at issuing bank counter by sight payment , and our bank sent the documents under approval basis .

but my question, is the issuing bank in position to negotiate documents and collect commissions as negotiation charges , according to UCP 600 the issuing bank should honor the presentation at their counter. all their charges to paid by their client account as per LC terms in field 71D, your opinion will be much appreciated

thanks for your support

regards
User avatar
picant
Posts: 1963
Joined: Wed Aug 20, 2008 1:49 pm

Re: negotiation charges collected by issuing bank

Post by picant »

Hi Pal,

IMHO you presented document as collection, issuing bank made a payment hand retain commissions for payment at sight.
Commissions that are for the nominated bank making the payment at sight. Being the position of issuing bank, both issuing and honoring, it seems correct to charge the beneficiary for the honoring fees,( probably retained by your bank when crediting proceeds).
Frankly I dont know if payment commissions have to be cashed by the issuing bank in this case, but your bank has no title to claim them.You may debit collection charges, normally with a fixed top amount.
Other comments required.
Ciao
firas
Posts: 37
Joined: Wed Jul 04, 2012 2:37 pm
First Name: firas
Last Name: albayati
Organization: investment bank
Filter: Two Plus Two =: 4
Location: Iraq

Re: negotiation charges collected by issuing bank

Post by firas »

Thanks for your reply
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