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To achieve their aims, these banks impose various conditions in their credits. Members of the ICC national committee in our country have seen many credits which include instructions to advising banks to collect their charges and commissions from the beneficiary before advising the credits, others issued in non-operative form pending the payment of commissions and charges by the beneficiary and further credits which expressly preclude UCP 500 sub-Article 18(c). There are also those issuing banks which, as well as precluding sub-Article 18(c), exclude also sub-Articles 18(d) and 19(d) and (e)….

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The practice outlined under Query above is one that the ICC Banking Commission neither supports nor would wish to see continue. This burden of collection of fees often results in additional administration, delays in providing advice of the credit and the associated risks with such delay and, as a result, incurs additional fees to the beneficiary that should not have arisen, these fees being totally attributed to the actions or requests of the issuing bank that fall outside the scope of normal letter of credit handling. An advising bank has the option to decline or refuse to handle transactions that incorporate such conditions.

However, the ICC has no authority to stop banks from incorporating a clause covering the collection of fees prior to the formal advising of the credit by virtue of Article 1 of UCP that states that the UCP Articles shall apply unless otherwise stipulated in the credit.

As stated under Analysis above, this issue generally surfaces where the credit is available with any bank. If the applicant requests such an issuance, the issuing bank should point out to it the potential for charges to be claimed back in the event the advising bank is not used as a negotiating, paying or accepting bank.

Sub-Article 18(d) has wider implications than just the question of collection of fees and extends to the whole handling of the credit by the respective advising, confirming and/or nominated banks. The exclusion of this clause should not form part of any credit.

Where an issuing bank excludes sub-Article 19(d), this is more of a bank-to-bank issue than a UCP one. This sub-Article establishes the basis as to who is responsible in the event of delay in reimbursement. Deletion of the Article has an impact on the ability of the confirming bank (to consider confirmation) or nominated bank (to act), and it is for that bank to seek comfort from the issuing bank before proceeding.

If an issuing bank excludes sub-Article 19(e) without replacement, the effect is the same as if the clause remained, i.e., the reimbursing bank's fees will be for account of the issuing bank.

Obviously, sub-Articles 19(d) and (e) only apply where the reimbursement is not subject to URR 525.