Charges for a Letter of Credit: What Importers Actually Pay in 2026

Charges for a letter of credit are not a flat percentage of your order value. They are billed against how long the credit stays open — per month, per quarter, or per six months, depending on which bank issues it — and every published tariff sets a minimum charge that quietly becomes the whole cost on a small order.

That distinction is missing from almost every page that answers this question. The figures you will find quoted — 0.75% to 1.5% of transaction value, or 65 to 120 basis points annualised — describe a market average, not a calculation. They cannot tell you what your bank will debit, because your bank does not price the way those figures assume.

This guide works from three bank tariff schedules that are published in full and that anyone can download: Bank of China Singapore, Hang Seng Bank in Hong Kong, and HBL’s Maldives operation. Between them they charge on three different bases, in three different currencies, with three different floors. Running one USD 60,000 order through all three produces bills that differ by a factor of four — from the same order, on the same terms, with nothing changed except the tariff line.

On this page

• Why L/C charges are quoted wrong almost everywhere
• The three charging bases banks actually use
• The minimum charge is the real price of a small credit
• Every fee line on a single import credit
• Worked example: costing a USD 60,000 Yiwu consolidated order
• The charges nobody quotes you up front
• Who pays which charges, and what UCP 600 actually says
• What to ask your bank, what we check, and where we stop
• Frequently asked questions

Why L/C charges are quoted wrong almost everywhere

Search this question and you get a percentage of transaction value. One widely-read guide puts the buyer’s cost at “anywhere between 0.75% and 1.5% of the transaction’s value, depending on the locations of the issuing banks.” A trade-finance advisory quotes issuance at “65 to 120 bp annualized.” Neither names a bank. Neither cites a tariff schedule. Neither mentions a minimum.

Those numbers are not fabricated — they are roughly where real bills land for mid-sized credits. The problem is that they describe an outcome without the mechanism, so you cannot use them to predict your own cost. Change the validity from 90 days to 150 days and the real bill moves; the quoted range does not. Shrink the order to USD 8,000 and the real bill barely moves at all, because the floor has taken over; the quoted range says your cost fell proportionally.

Read an actual published schedule and the mechanism is explicit. Bank of China Singapore’s trade finance tariff, effective 1 September 2021, states the import LC issuance commission as: 1/8% per month or part thereof. Min 2 months, but not less than S$80. Three separate pricing rules sit in that one line — a monthly accrual rate, a rounding rule that charges a full month for any part of one, and a two-month minimum that applies regardless of how briefly the credit exists.

None of that survives compression into “roughly 1% of value.” And the gap matters most to the buyer least able to absorb it: an importer consolidating a mixed container out of Yiwu, where order values are often modest and validity often runs long because goods are being collected from several suppliers before a single shipment moves.

The three charging bases banks actually use

The single most useful thing to know about L/C pricing is which of three clocks your bank runs. Each of the schedules below is published by the bank itself and downloadable in full.

Importing from Yiwu and unsure which clock your bank runs? Send us the tariff line on WhatsApp and we will read it back to you.

Read the three columns together and the units refuse to reconcile. Bank of China Singapore’s headline number, 1/8%, looks like one eighth of Hang Seng’s 0.25% — until you notice one is monthly and the other covers six months. Annualised, Bank of China Singapore’s rate is 1.5% and Hang Seng’s is 0.5%. HBL’s 0.50% per quarter annualises to 2.0%. The bank with the smallest-looking number is the most expensive of the three per unit of time.

This is why a blended “typical” percentage is not a conservative simplification but an arithmetic error. Averaging 1/8% per month, 0.25% per six months and 0.50% per quarter requires converting all three to a common period first — and the moment you do that, the answer depends entirely on how long your credit runs, which is the variable the average was supposed to eliminate.

Note also the phrase or part thereof in the Bank of China Singapore line. A credit open for 61 days is charged three months, not two point zero three. Validity is billed in whole blocks, always rounded up, which means the day you set the expiry date you are choosing a price step, not a sliding scale.

The minimum charge is the real price of a small credit

Every schedule checked sets a floor, and the floor is not a rounding detail. It is the dominant term for exactly the order sizes a mixed-container importer deals in.

Take HBL’s line: 0.50% per quarter, minimum USD 150, plus a USD 50 SWIFT charge. The percentage only exceeds the floor once the credit passes USD 30,000 for a single quarter — below that value, you pay USD 150 whether your credit is for USD 25,000 or USD 5,000.

Run an USD 8,000 credit through it. One quarter at 0.50% is USD 40. The floor overrides that to USD 150, and the SWIFT charge adds USD 50. Total: USD 200 — 2.50% of order value, against the 1.08% the same tariff produces on a USD 60,000 credit held for two quarters.

That is the counter-intuitive shape worth internalising: effective cost as a percentage of order value falls as the credit grows, then flattens. Small buyers pay proportionally the most, and they are the ones most likely to have budgeted from a “0.75% to 1.5% of value” figure that has no floor in it at all.

The break-even values are easy to compute and worth doing once for your own bank. Divide the floor by the rate for one chargeable period:

• HBL: USD 150 ÷ 0.50% = USD 30,000 per quarter of validity.
• Hang Seng: HK$500 ÷ 0.25% = HK$200,000 of credit value. The floor is set in Hong Kong dollars, so compare it against your credit converted at your bank’s rate on the day — this article quotes every figure in the currency its own schedule uses and converts nothing.
• Bank of China Singapore: S$80 ÷ 0.25% (two months at 1/8%) = S$32,000.

There is a second floor effect that catches people out. The minimum applies per chargeable event, not per credit. Amend the credit twice and extend it once and you can trip three separate minimums on one transaction, none of which appears in a percentage-of-value estimate.

Every fee line on a single import credit

Opening commission is one line on an invoice that usually carries five or six. The table below lists what each of the three schedules actually publishes, in the currency each schedule uses. No figure here has been converted between currencies — comparing them as if they were one currency is the single easiest way to get this wrong.

The most important column in that table is the one full of words instead of numbers. Discrepancy pricing at Bank of China Singapore is internal. Confirmation at HBL is whatever the confirming bank charges. These are not omissions in the schedules — they are the banks declining to commit to a price in advance, which means any article quoting you “discrepancy fees of $50 to $200” is quoting something no published tariff supports.

Where a discrepancy fee is published, it is worth knowing precisely, because it is charged per presentation and documents are frequently rejected on the first attempt. Hang Seng publishes HK$700. That is a fixed cost of getting the paperwork wrong once, entirely independent of order value — and on a small credit it can exceed the opening commission.

Usance commission stacks on top of issuance, it does not replace it. Notice that the usance line is additive, not alternative. A 90-day usance credit at Hang Seng accrues deferred payment commission at 0.0625% per month on top of the 0.25% issuance charge. Buyers who negotiate deferred payment terms to protect cash flow often do not price the commission that the deferral itself attracts.

Worked example: costing a USD 60,000 Yiwu consolidated order

Here is the model. Every input is stated and every multiplication is shown, so you can substitute your own bank’s tariff line and rerun it. This is a calculation from published schedules, not an invoice from an order we handled — treat it as a method, and validate the output against your own bank before you commit.

The inputs. A sight import credit for USD 60,000, covering a consolidated container of mixed goods from several Yiwu suppliers. Validity 120 days — deliberately long, because goods are being collected from multiple factories before one shipment moves. Documents presented once, clean, within the presentation window. No amendments.

The first step is not arithmetic, it is counting billing blocks. 120 days is four months, one-and-a-bit quarters, and comfortably inside a single six-month window. Because every schedule rounds up to a whole block, that “and-a-bit” is what costs money.

Same order, same 120 days, four times the cost at one bank versus another — 0.25% against 1.00% on the commission line, before a single additional charge. Nothing about the goods, the supplier or the risk changed. Only the tariff.

Now add the second HBL line most buyers miss. That schedule charges a retirement commission of 1% of the bill amount, minimum USD 50, when documents are taken up. On USD 60,000 that is a further USD 600 — meaning the full HBL cost of this clean, unamended, single-presentation credit reaches USD 1,250, or 2.08% of order value. The opening commission everyone quotes was less than half the bill.

One more sensitivity worth running before you set the expiry date. Extend validity from 120 days to 150 days and Bank of China Singapore moves from four months to five: 0.625%, or USD 375 instead of USD 300. At HBL, 150 days is still two quarters, so nothing changes — until day 182, when a third quarter starts and the commission jumps to 1.50%. The cost of validity is a staircase, and the expensive step is always the one just past your expiry date.

The credit itself is only part of what you are spending on this container, of course. The freight, consolidation and duty side sits alongside it — if you are combining cartons from several Yiwu suppliers into one shipment, our consolidation and DDP shipping service covers the LCL and FCL side of that same order. For the mechanics of the instrument itself rather than its price, our guide to how a letter of credit works covers the document flow and the parties, and the bill of lading guide covers the transport document the presentation turns on.

The charges nobody quotes you up front

The lines above are the ones a bank will read out if you ask. These are the ones that appear afterwards.

Validity overrun is billed retroactively. HBL’s schedule states it plainly: “For expired L/C the opening/negotiated commission will be charged for the expired period at the time of retirement of L/C.” If your credit expires before documents are retired, the commission does not stop accruing when the credit lapses — the bank bills the extra period when it settles. The schedule adds that usance commission at 0.12% per month is also recovered after expiry until the due date, while noting there is no double counting between the two.

An amendment that crosses a period boundary re-triggers the minimum. HBL charges amendments at 0.50% of the increased amount or period, and specifies that if the amendment crosses into the next quarter, a minimum of USD 150 plus SWIFT USD 20 applies. Extending a credit by two weeks can cost exactly as much as opening a small one, if those two weeks happen to straddle a quarter end.

Hang Seng works the same way by a different route: an amendment for an increase in amount, or an extension of validity beyond six months, is charged by reference to the issuance rate and its minimum, not as a flat admin fee. Only “other terms and conditions” get the flat HK$500.

• Overrun: commission billed retroactively for the expired period at retirement.
• Amendment across a boundary: full period minimum re-triggered, not a flat fee.
• Confirmation: “at actual” or “subject to arrangement” — unquotable in advance.
• Cancellation and withdrawal: charged even when no credit was issued.

Confirmation cannot be budgeted from any of these schedules. Bank of China Singapore says “subject to arrangement, min S$100.” Hang Seng notes confirmation charges “may vary country by country.” HBL passes through “actual confirming bank charges plus swift charges.” If your supplier demands a confirmed credit, that cost is genuinely unknown until a confirming bank quotes it against your issuing bank’s country risk — and the party asking for confirmation is rarely the party who ends up paying.

Abandoning a credit is not free. Cancellation runs S$80 at Bank of China Singapore, HK$600 per request at Hang Seng, and USD 30 plus SWIFT plus actual foreign bank charges at HBL. Hang Seng additionally charges HK$600 simply to check a withdrawn application — a cost incurred on a credit that was never even issued.

One further line specific to cross-currency trade: Bank of China Singapore charges a commission in lieu of exchange at 1/8% flat, minimum S$75, applicable “for all trade products where foreign currency trade transactions are settled without foreign currency exchange conversion.” Settle a USD credit from a USD account and you have avoided an FX spread but not necessarily a charge for the privilege.

Who pays which charges, and what UCP 600 actually says

The most common question after “how much” is “can I make the supplier pay it.” The answer is in the ICC’s Uniform Customs and Practice for Documentary Credits, UCP 600, which governs virtually every commercial letter of credit issued today. The US government’s export guidance at trade.gov reaches the same practical conclusion from the exporter’s side, and tells its readers to ask their bank how much the credit costs and who pays the fees before the importer ever applies — which is the same question this article answers from the buyer’s end.

Start with the default. Article 37(a): “A bank utilizing the services of another bank for the purpose of giving effect to the instructions of the applicant does so for the account and at the risk of the applicant.” The applicant is the buyer. Correspondent bank charges land on you unless something in the credit says otherwise.

You can shift them by instructing that charges outside your own country are for the beneficiary’s account — that is what field 71 of the SWIFT MT700 message is for. But the shift is not absolute. Article 37(c) provides: “A bank instructing another bank to perform services is liable for any commissions, fees, costs or expenses (‘charges’) incurred by that bank in connection with its instructions. If a credit states that charges are for the account of the beneficiary and charges cannot be collected or deducted from proceeds, the issuing bank remains liable for payment of charges.”

Read the second sentence carefully, because it is the one that matters commercially. If the beneficiary never draws — the shipment falls through, the credit expires unused, the documents are never presented — there are no proceeds to deduct from, and the charges revert. Your bank pays the correspondent, then debits you. A “charges for beneficiary account” clause protects you only in the scenario where the deal actually completes.

The same article closes a related loophole: a credit “should not stipulate that the advising to a beneficiary is conditional upon the receipt by the advising bank or second advising bank of its charges.” You cannot make the supplier’s notification hostage to their payment of the advising fee.

• Default position: correspondent charges are for the applicant’s account and at the applicant’s risk (Article 37(a)).
• You can shift them by specifying beneficiary-borne charges in field 71 of the MT700.
• The shift fails if there are no proceeds to deduct from — the issuing bank stays liable and debits you (Article 37(c)).
• You cannot make advising conditional on the beneficiary paying the advising fee.

Transfers follow a separate default. Article 38(c): “Unless otherwise agreed at the time of transfer, all charges (such as commissions, fees, costs or expenses) incurred in respect of a transfer must be paid by the first beneficiary.” This matters in Yiwu specifically, where the beneficiary named on your credit is frequently a trading company that then transfers all or part of the credit to the factory actually producing the goods.

The transfer commission falls on that trading company by default, and how much it is depends on whether the whole credit moves or only part of it. Hang Seng splits the line in two: a full transfer is HK$500 flat, while a partial transfer is 0.25% with a minimum of HK$800 (CBT-R20 04/2026). Bank of China Singapore charges 0.25% with a minimum of S$300 on transfer of an LC.

That split is the difference between a fixed fee and a percentage. Buying your whole order from one factory means a full transfer at a flat HK$500 that does not grow with order value; splitting it across several factories means each partial transfer is charged on a percentage with a floor nearly twice that. Either way it is a cost the trading company has priced into your unit price, whether or not it appears on your invoice.

Why the credit has to stay open longer than you expect. Two further articles explain why validity — and with it commission — runs as long as it does. Article 14(b) gives each bank “a maximum of five banking days following the day of presentation to determine if a presentation is complying.” Article 14(c) requires presentations including transport documents to be made “not later than 21 calendar days after the date of shipment… but in any event not later than the expiry date of the credit.” Those windows are why a credit covering a 30-day production run rarely has 30 days of validity.

It needs the production time, the shipping time, the 21-day presentation window and the five-day examination period stacked end to end — and each extra billing block that stack pushes you into is charged at the full period rate.

What to ask your bank, what we check, and where we stop

The published schedules above are not your bank’s schedule. Use them as a template for the questions that produce a number you can actually budget against. Every question below maps to a line that varied materially across the three tariffs examined.

1. “Send me the trade finance tariff schedule, not a verbal estimate.” All three banks here publish theirs as a downloadable document. If yours will not, ask for the specific import LC issuance line in writing.
2. “Is opening commission charged per month, per quarter, or per six months — and do you round up part periods?” This single answer changes the bill by up to 4x at the values modelled above.
3. “What is the minimum chargeable period?” Bank of China Singapore’s two-month minimum means a six-week credit and a two-month credit cost exactly the same.
4. “What is the floor, and does it apply per credit or per chargeable event?” Establish whether three amendments trip three minimums.
5. “If I extend validity, is that charged at the issuance rate or as a flat amendment fee?” Hang Seng and HBL both re-charge at the issuance rate past a boundary; a flat fee is the exception, not the rule.
6. “Is your discrepancy fee published, or priced internally?” If internal, ask for the figure in writing before you apply, not after documents are rejected.
7. “What happens if the credit expires before documents are retired?” Confirm whether commission is billed retroactively for the overrun period.
8. “Which charges are ‘at actual’ rather than fixed?” Confirmation and correspondent charges are the usual answer, and they are the ones you cannot forecast.

What to have ready before that conversation. A bank prices the credit from the shape of the underlying trade, so the questions above go faster if you can answer these first. The credit is configurable on a small number of axes, and the options available on each are the settings that move the commission: payment available at sight or at a usance tenor you nominate, a validity period you set in days, confirmed or unconfirmed, transferable or not. The tariffs quoted above price several of these as separate lines, so the configuration is the quote.

Where our own process touches this bill. The only charge line a sourcing company can move is the one driven by whether the documents are right the first time: Hang Seng’s HK$700 discrepancy fee is charged per presentation, and again on each re-presentation.

Our inspection terms are published on our quality control page: sampling follows ANSI/ASQ Z1.4 (ISO 2859-1), default tolerances are 0 critical, AQL 2.5 major, AQL 4.0 minor and adjustable on request, the report is a PDF with photos, video tests and measurement data within 24 hours, and standalone inspection is a flat $199 per man-day. That matters here because a credit naming a test report as a required document is a credit whose payment depends on what that report says.

The link to your L/C bill is leverage over timing. We hold the final 70% of payment to the factory and withhold it until failed goods are reworked; an inspector who only issues a report cannot compel a fix, and a factory that reworks slowly pushes you past a billing boundary — a whole extra month, quarter or six-month block of commission, plus an amendment charged at Hang Seng by reference to the issuance rate rather than as a flat fee.

Where we stop. We are a sourcing and consolidation company, not a bank or a licensed trade-finance adviser. We do not negotiate rates with your bank, we do not read your credit as a legal instrument — that is a question for your bank and your own counsel — and we do not publish a Yiwu container minimum or a compliance-document price, because both are set by the individual suppliers in your product mix rather than by us. What we can tell you is whether the documents your credit demands are ones your suppliers can actually produce, before the list is fixed and an addition costs an amendment fee.

Two things this article deliberately does not give you, because no source supports them. There is no single global percentage for what an L/C costs — the three schedules here charge on incompatible bases and any blended figure is an average of different units. And we have not quoted a rate for a mainland Chinese issuing bank, because mainland branch tariffs for import LC issuance are not published as downloadable schedules the way these three are. If your credit is issued in mainland China, the questions above are how you obtain the equivalent figures; guessing them would be worse than useless.

The bottom line on L/C charges

Budget from your bank’s tariff line and its charging basis, never from a percentage you found online. Set the expiry date deliberately, because validity is billed in whole blocks that round up. And check the floor against your order value before anything else — below roughly USD 30,000 of credit, on the schedules examined here, the minimum charge is the price, and the headline rate is decoration.

If you are sizing a documentary credit against a Yiwu consolidated order and want a second read on the arithmetic, we are happy to walk through it with your numbers.

Frequently asked questions