Calculation Of Confirmation Charges

[dinesh2476]

Dear Experts,

This is regarding confirmation charges,
We, usually book confirmation charges from the date of confirmation till expiry date. For the said case, beneficiary has presented the documents well before the expiry date of LC. Since we booked the charges till expiry date,we collected the full confirmation charges at the time of proceeds to him. Now, beneficiary claiming that there has been difference in confirmation charges collected. reason '' we cannot charge confirmation till expiry as we are not taking any risk till expiry and the confirmation should have calculated till the payments date(I.E it should be confirmation date till payment date and not confirmation date till expiry date)

If we should calculate confirmation charge till payment date then who will bear the rest of the charges booked in the system.

Kindly provide your update on this.

Thanks & Regards
Dinesh Kumar

[dinesh2476]

Dear Experts,

All opinions are welcome.

Thanks &Regards
Dinesh

[picant]

Hi Pal,

IMHO, it depends on your Bank's policy. If, as you said, charges or commissions represent a risk, it would be correct to refund your customer for the unused period. But sometime it happens that the confirming bank insures the risk with an Export Governamental Agency and it is not possible to obtain such refund.So if your Bank did it by itsself you may decide to agree with your customer request.
Other comments appreciated
Ciao

[mskhan42]

Hi,
Theoritically, till payment date but again depends on bank's policy
and your customer must be aware about this in order to avoid such
situation.
Regards,
muhammad Saqib khan

[tituisrt]

Hello,
Calculation of confirmation charge depends on your bank Policy.
In my Bank Schedule of charges indicate that the confirmation charges should be curtail for quarter basis.
It does not depend on whether u paid to beneficiary before expiry/quarter end.
Once confirmation charge is curtailed it will not return to beneficiary.
thanks

[nraajesh]

Hello,

We have to consider this in two ways.... one in theory and another is banking practice of calculation.

Theoretically, if a bank confirms the LC, the confirmation is valid till the expiry of the LC. I hope you all agree to this. So ideally the confirmation commission covers till the expiry of the LC.

Now comes the second part... the calculation...well it depends on the policy of the bank... It may decide to calculate on a quarterly basis or on annual basis and count the number of days. Also the bank may take one more step ahead to calculate until payment date (for a sight LC) or until maturity ( under the name of acceptance/deferred payment commission).

Hope I made my point clear. Feel free to comment on the same.

Cheers!!
Rajesh

[DarkKnight]

hello all,

Confirmation charges are calculated on the basis of tenor of payment; Sight or Acceptance.

Sight: Depending on your bank policy, Confirmation charges are calculated from the LC issue date or the date LC was actually confirmed until the expiry date of the credit.

Acceptance: Example 90 days...Again depending on your bank policy, confirmation charges are calculated from the LC issue date or the date LC was actually confirmed until the period of 90 days from the latest shipment date. This ensures that the risk is covered till the maturity date of the bill(s).

Hope this answers your query.

[candylau]

Dear Experts,

In the case when confirmation fee is charged from LC confirmation date until the maturity date of the bill (in deferred payment LC), then how about when the bill is discrepant? When bill is presented with discrepancies, the confirming bank has no payment responsibility anymore, in this case, confirming bank still charge the confirmation fee based on the bill amount until the maturity date of the bill?

Thank you in advance for your reply.

Best regards,
Candy