QUERY FROM ELIE
Claiming confirmation fee from issuing bank
An issuing bank authorizing the advising / negotiating bank to add its confirmation on an L/C, refuses to honor the confirmation fee when requested by the advising bank upon notifying the L/C to the beneficiary. The L/C terms stipulate that confirmation fee is on applicant's account. The issuing bank’s reason for not honoring the beneficiary's bank (advising bank) claiming was that it is too expensive.
What is the rule in such a case?
—————————————–
MR. OLD MAN’S COMMENT
Confirmation Fee
Dear Elie,
The following quoted from UCP 600 Article 37 would help answer your question:
Article 37 (a): “A bank utilizing the services of another bank for the purpose of giving effect to the instructions of the applicant does so for the account and at the risk of the applicant”.
Article 37 (c): “A bank instructing another bank to perform services is liable for any commissions, fees, costs or expenses (“charges”) incurred by that bank in connection with its instructions.
If a credit states that charges are for the account of the beneficiary and charges cannot be collected or deducted from proceeds, the issuing bank remains liable for payment of charges”.
In view of the above stipulations, the issuing bank is obligated to pay the confirming bank for its confirmation fee and entitled to the applicant’s reimbursement.
Best regards,
Nguyen Huu Duc …
