Five Letter of Credit cost mistakes that quietly erode margin

Letters of Credit look tidy on paper and expensive in practice. The advertised issuance fee is rarely the number that shows up on the final statement.

1. Confirmation on top of issuance

If your buyer's bank sits in a country your bank does not comfortably take risk on, your bank will add a confirmation fee - usually 0.5% to 2% per quarter of the LC tenor. Price it in when you quote.

2. Discrepancy fees

A single wrong date on the bill of lading can cost USD 75-150 per discrepancy, per presentation. Build a documents checklist before shipment and reconcile it against the LC text line by line.

3. Reimbursement clauses

"Reimbursing bank" charges are almost always at the beneficiary's account unless the LC says otherwise. On a USD 250k drawing that can be USD 200-400 you never quoted for.

4. Amendments

Every amendment costs money on both sides. If the buyer keeps asking for tweaks, agree upfront that amendment charges are for the applicant's account.

5. Currency conversion

If the LC is in USD but you invoice in EUR, the negotiating bank will convert at their board rate. Ask for the FX spread in writing before you accept the LC.

Run every LC through our LC Cost Calculator before you sign the sales contract, not after.