Discrepancy fees - TradeFinance.training

Discrepancy fees were first introduced in order to cover the additional work enforced upon a bank in the event of documents being discrepant. Home Aboutus Contact Register Blog LatestArticles ArticlesbyMonth September2022August2022July2022June2022May2022April2022March2022February2022January2022December2021November2021October2021September2021August2021July2021June2021May2021April2021March2021February2021January2021December2020November2020October2020September2020August2020July2020June2020May2020April2020March2020February2020January2020December2019November2019October2019September2019August2019July2019June2019May2019April2019March2019February2019January2019December2018November2018October2018September2018August2018July2018June2018May2018April2018March2018February2018January2018December2017November2017October2017September2017August2017July2017June2017May2017April2017March2017February2017January2017December2016November2016October2016September2016August2016July2016June2016May2016April2016March2016February2016January2016December2015November2015October2015 Discrepancyfees 11/04/2017 Itisoften commentedthatanumberofbanksnowviewdiscrepancyfeesasanessential elementoftheirrevenuestream. Discrepancy feeswerefirstintroducedinordertocovertheadditionalworkenforcedupon abankintheeventofdocumentsbeingdiscrepant.Bearinginmindthat discrepancyratesfortheinitialpresentationofdocumentshavealwaysbeenon thehighside,thiswasdefinitelyjustified. Ina previousblogpublishedinOctober2015,wehighlightedthatindocumentary creditoperations,theadvisingofdiscrepanciesindocumentswasprobablythe mostcontentiousissuethatabankwillfacewithitsclientsoranotherbank. Global statisticsdifferbutitisestimatedthatthepercentageofdocumentsrefused onfirstpresentationrangesbetween60-75%.Thisdoesnotnecessarilymean thatabeneficiarywillnotreceivepayment;butitdoesmeanthat,atthevery least,therewillbeadelayinreceivingsettlementorfinancingandan increaseinbankfees. Some practitionerswouldliketoseetheabolitionofsuchfeesortheineligibility ofthefeesifthediscrepanciesaresubsequentlyaccepted.Theproblemwith thisapproachisthatitisamatterofpracticeforeachindividualbankand UCPcannotmandatehowthebankingindustryhandlesthisissue. Themost appropriateresponsewouldbetoconcentrateoneducationalaspectsandtofind waystoactuallyreducethediscrepancyrate.Ourtrainingmodulesareonesuch approach. Whilstwe acknowledgethatdiscrepancyratesareamatterforconcern,arevisionofUCP isunlikelytoreducethepercentagerate:thishascertainlybeenprovedwith thetransitionfromUCP400to500to600. Themajority ofproblemsarecausedby: Poordraftingofthecredit; Lackofunderstandingofdocumentarycredit workflowsandtheprinciplesofUCP600; Lackofattentiontodetailandmanagementof theproduction,shipmentanddocumentcollationprocesses; Excessiveandunnecessarydatabeingaddedto documents; RestrictedaccesstoISBP745. 50%ofthe problemsapplytothepresenteddocuments:itisajustifiableassumptionthat agreaterunderstandingofISBP745wouldhelpalleviatetheseproblemsand greatlyreducethispercentage.Asregardstheremaining50%,itisdifficult toseehowarevisionofUCPwouldmakemuchofamaterialdifferenceasmany ofthesecausesareoutsidethescopeofcorrectionbythebeneficiary. Accessto, andtransparencyof,existingpracticeisthekey.Thiswillensure understanding,simplicityandefficiencyleadingtoareductionindiscrepancy ratesandassociatedfees. www.tradefinance.training Backtorecentarticles X