Article 16 – Charges
a. “A reimbursing bank’s charges are for the account of the issuing bank.”
Explanation: This clause stipulates that when a reimbursing bank incurs charges while processing a reimbursement claim, these charges are to be covered by the issuing bank, not the reimbursing bank.
Example: Suppose Bank A (the issuing bank) authorizes Bank B (the reimbursing bank) to pay a reimbursement claim for a letter of credit. If Bank B incurs a fee for processing this claim, Bank A will be responsible for paying that fee, not Bank B.
b. “When honouring a reimbursement claim, a reimbursing bank is obligated to follow the instructions regarding any charges contained in the reimbursement authorization.”
Explanation: This clause requires the reimbursing bank to adhere to any specific instructions given by the issuing bank concerning charges when processing a reimbursement claim.
Example: If Bank A’s reimbursement authorization specifies that Bank B should deduct a particular fee from the reimbursement amount, Bank B must follow this instruction when it processes the claim.
c. “If a reimbursement authorization states that the reimbursing bank’s charges are for the account of the beneficiary, they shall be deducted from the amount due to a claiming bank when reimbursement is made. Where a reimbursing bank follows the instructions of the issuing bank regarding charges (including commissions, fees, costs or expenses) and these charges are not paid, or a reimbursement claim is never presented to the reimbursing bank under the reimbursement authorization, the issuing bank remains liable for such charges.”
Explanation: If the reimbursement authorization specifies that the reimbursing bank’s charges are to be borne by the beneficiary, these charges will be subtracted from the reimbursement amount due to the claiming bank. However, if the reimbursing bank incurs charges based on the issuing bank’s instructions and these charges are not paid, or if no claim is presented to the reimbursing bank, the issuing bank will still be liable for these charges.
Example: Suppose Bank A’s authorization directs Bank B to deduct its charges from the reimbursement amount due to the beneficiary. If Bank B follows this instruction, the charges are deducted from the payment made to the beneficiary. If Bank B’s charges remain unpaid or if no claim is made to Bank B, Bank A is responsible for covering those charges.
d. “All charges paid by the reimbursing bank will be in addition to the amount of the authorization, provided that the claiming bank indicates the amount of such charges.”
Explanation: This clause indicates that any additional charges incurred by the reimbursing bank will be added to the total amount authorized for reimbursement, provided the claiming bank specifies these charges.
Example: If Bank B pays $500 in charges to process the reimbursement, and the reimbursement authorization was for $10,000, Bank B can claim $10,500 from Bank A, assuming Bank A was informed about the $500 charge.
e. “If the issuing bank fails to provide the reimbursing bank with instructions regarding charges, all charges shall be for the account of the Issuing bank.”
Explanation: When the issuing bank does not provide specific instructions on how to handle charges, it is responsible for covering all such charges incurred by the reimbursing bank.
Example: If Bank A does not specify how to handle charges in its reimbursement authorization, any fees incurred by Bank B will be covered by Bank A.