About this calculator
A letter of credit (L/C) is an issuing bank's promise to pay the exporter provided the documents presented comply with the credit. The mechanism, governed by the ICC's UCP 600, reduces the seller's risk of not being paid and the buyer's risk of goods not being shipped. The price is a set of bank charges on both sides, often forgotten when a price is quoted.
On the importer's (applicant's) side, the issuing bank charges an issuance commission as a percentage of the L/C amount per period (usually per quarter or 90 days, with a minimum), an amendment fee each time terms change, SWIFT charges and, for usance (deferred) credits, an acceptance commission per annum over the tenor. On the exporter's (beneficiary's) side, the advising bank charges an advising fee, a confirming bank charges a confirmation commission per period if the credit is confirmed, the negotiating bank charges a negotiation commission, and each set of non-complying documents attracts a discrepancy fee from the issuing bank, usually deducted from the payment.
This calculator splits the costs by the party that customarily bears them, counts the periods from the validity, applies minimum charges and shows the total and its share of the L/C amount. The real split follows field 71D (Charges) of the credit and each bank's tariff; if it says all charges outside the issuing country are for the beneficiary, adjust accordingly. Use the result to decide whether an L/C, documents against payment or advance transfer makes more sense for your deal.
Worked example
An L/C for USD 100,000, valid 120 days (90-day periods → 2 periods), 90-day usance, confirmed:
- Importer: issuance 0.15% × 2 = USD 300, 1 amendment USD 50, SWIFT USD 60, acceptance 100,000 × 1.5% × 90/360 = USD 375 → USD 785
- Exporter: advising USD 75, confirmation 0.2% × 2 = USD 400, negotiation 0.125% = USD 125, 1 discrepancy USD 75 → USD 675
- Total USD 1,460, or 1.46% of the L/C amount
On a small USD 5,000 credit, 0.15% issuance is only USD 7.50, so the USD 50 minimum applies.
How to use it
Enter amount and validity
Enter the L/C amount, currency, validity in days and the length of one commission period (usually 90 days).
Enter the importer's costs
Enter the issuance commission per period and its minimum, the number of amendments, SWIFT charges, and the tenor and acceptance commission for usance.
Enter the exporter's costs
Enter the advising fee, the confirmation commission if confirmed, the negotiation commission and the expected number of discrepancies.
Compare the totals
See the costs per party, the total and the share of the L/C amount, to include in your price or negotiate field 71D.