Quick answer
Most LC cost overruns happen because fees are not priced into the deal or not allocated correctly between buyer/seller and issuing/advising/confirming banks.
The fix is simple: list the fee types, decide who pays each one, and store it as a deal rule before issuing the LC.
Common LC charge types (what you’ll see in practice)
You may encounter some mix of:
- Issuance/opening charges (issuing bank)
- Advising charges (advising bank)
- Confirmation charges (if confirmed)
- Amendment fees (every amendment can cost)
- Document examination / negotiation / handling fees
- Discrepancy fees (when presentation is discrepant)
- Swift/courier fees and “misc” bank charges
Exact names vary by bank and country, but the pattern is stable: every extra step (confirmation, amendments, discrepancies) increases cost.
Charge allocation: decide “who pays” in writing
Two practical rules:
- Put the charge allocation into the commercial deal terms (not in chat).
- Treat the LC as part of your margin model: store expected fees and reconcile actuals after settlement.
Checklist: prevent LC charges from eating margin
- Before you issue the LC, list expected fees and assign an owner to confirm with the bank.
- Minimize amendments by validating the LC draft against your real documents.
- Run a pre-check to avoid discrepancy fees.
- Store actual bank charges against the deal (not at month-end).
Where bank charges usually get missed
- Amendment fees after “small wording changes”
- Confirmation cost when risk changes mid-deal
- Discrepancy fees triggered by document mismatch
How Tijara helps
Tijara keeps LC versions, document sets, deadlines, and costs tied to the same deal, so bank charges become auditable and predictable—not surprise leakage.