THE DISCREPANCY FEE DILEMMA: WHEN $50 BECOMES A BATTLE

 QUESTION

 Dear Mr. Old Man,

We presented documents under an LC that were in full compliance, but the issuing bank still raised one or two discrepancies and deducted a discrepancy fee from the proceeds.

We dispute the discrepancies and have asked the issuing bank to refund the fee that was wrongly deducted. However, the bank either insists the discrepancies are valid or simply ignores our request.

What course of action would you recommend?

Thank you and best regards,

DTT

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ANSWER

Hi DTT,

This scenario is all too familiar. Presenting banks often send follow-up messages requesting a refund of discrepancy fees that were wrongly deducted. But once the issuing bank has taken the fee from the proceeds, they typically either stand by their position (claiming the discrepancies are valid) or just go quiet.

Some banks even seem to treat discrepancy fees as a convenient source of income (sad but true).

So what can you do? If your bank is persistent, you can keep “bombarding” them with messages demanding the refund and warning that your customer may reject LCs issued by that bank in the future unless the fee is returned. That kind of pressure sometimes works—but most presenting banks follow the “three strikes” rule and send a maximum of three chaser messages.

For future deals, the beneficiary might want to request LCs to be issued by a more cooperative bank to avoid this kind of unfair treatment.

Unfortunately, the discrepancy fee is usually too small to justify any legal action. It’s a nuisance, not a lawsuit.

Best regards,

Mr. Old Man