AVOIDING DOCUMENT CHECKING TO CUT COSTS – IS IT A SMART MOVE?

Mr. Old Man’s Note:

For exporters using Letters of Credit (L/Cs), document checking fees are a recurring cost—and often a point of frustration. What happens when your own bank says your documents are complying, but the issuing bank still finds discrepancies? In this piece, I share a real question from an exporter and a practical response from yours truly. Sometimes saving a small fee upfront may end up costing you more than you expect.

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Here under is Steve’s question and Mr. Old Man’s answer:

QUESTION

Good day, Mr. Old Man,

We have an LC opened in our favour that allows partial shipments. Every time we present a set of documents, the issuing bank points out one or two discrepancies, even though our advising bank had assured us there were none.

In most cases, the buyer (applicant) accepts the discrepancies—sometimes the goods have already reached the port by then—and we eventually get paid, albeit after some delay.

We’ve realized that we’re paying document checking fees without much benefit, so we’ve asked our bank to skip this service going forward. However, they insist that document checking is mandatory under international LC rules.

Could I get your thoughts on this?

Thanks and best regards,

Steve

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 ANSWER

Hi Steve,

Under export L/Cs, some banks charge a document checking fee, while others—including mine—do not. Instead, most banks will charge a payment handling fee, usually ranging from 0.125% to 0.15% of the invoice value.

Now, if you truly want to avoid document checking fees, you can ask your bank to forward the documents “as received” to the issuing bank—without examining them. But frankly, I wouldn’t recommend it.

Saving a small fee might feel good now, but if even one set of documents gets rejected due to preventable discrepancies, the resulting delays or non-payment could cost you far more.

In short: trying to save on document checking fees is rarely worth the risk.

Best regards,

Mr. Old Man