LC confirmation charges

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Rasesh (Querist)

07 August 2009 We are purchasing some RM from Turkey Based firm. We are willing to issue an LC. The party wants the LC to be confirmed by the Bank i.e. wants an Confirmed LC.

Please guide me on the charges that would be levied for a confirmed LC by the Bank as a percentage of the LC value.

CA CS CIMA Prakash Somani

CA CS CIMA Prakash Somani (Expert)

07 August 2009 I never heard of confirmed or non confirmed LC ???

CA CS CIMA Prakash Somani

CA CS CIMA Prakash Somani (Expert)

07 August 2009 Please let me know too abt it !!

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

02 August 2024 When issuing a Confirmed Letter of Credit (LC), several charges will apply, including those for the confirmation of the LC. The charges for confirming an LC typically include the following:

### **Charges for a Confirmed LC:**

1. **Confirmation Charges:**
- **Percentage of LC Value:** Confirmation charges are usually a percentage of the LC amount. This percentage can vary depending on the bank, the country of the issuing and confirming banks, and the risk profile of the transaction.
- **Typical Range:** The confirmation charges can range from 0.10% to 1.00% of the LC amount per annum. For example, if the LC amount is $100,000 and the confirmation charge is 0.50%, the charge would be $500.

2. **Issuance Charges:**
- **Percentage or Flat Fee:** Banks often charge a fee for issuing the LC, which could be a flat fee or a percentage of the LC amount. This fee varies by bank and is typically charged separately from the confirmation charges.

3. **Advising Charges:**
- **Fee for Advising the LC:** The bank that advises the LC to the beneficiary may also charge a fee. This is usually a nominal fee compared to the confirmation charges.

4. **Amendment Charges:**
- **Charges for Amending the LC:** If any amendments are required to the LC after its issuance, banks may charge for processing these amendments.

5. **Documentary Charges:**
- **Charges for Handling Documents:** Banks might charge fees for handling and processing the documents presented under the LC.

### **Example Calculation:**

- **LC Amount:** $100,000
- **Confirmation Charge Rate:** 0.50%

**Confirmation Charges:**
\[ \text{Confirmation Charges} = \text{LC Amount} \times \text{Confirmation Charge Rate} \]
\[ \text{Confirmation Charges} = \$100,000 \times 0.50\% = \$500 \]

### **Steps to Determine Exact Charges:**

1. **Consult Your Bank:** Contact your bank to get a detailed breakdown of all applicable charges for issuing and confirming the LC. They can provide the exact rates and fees.

2. **Review Terms:** Ensure you understand the terms of the confirmation charges, including how they are calculated (e.g., annual percentage) and when they are due.

3. **Compare Banks:** If possible, compare the fees and services of different banks to get the best terms for your LC.

### **Summary:**

- **Confirmation charges** typically range from 0.10% to 1.00% of the LC amount per annum.
- **Other fees** include issuance charges, advising charges, amendment charges, and documentary charges.

Always get a detailed quotation from your bank to understand the full cost of a confirmed LC, including all associated fees and charges.

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