MT700 Field 71A and Its Relationship with UCP 600

Introduction

Field 71A in the SWIFT MT700 message specifies which party bears bank charges in a documentary credit transaction. The field uses three codes — OUR, BEN, and SHA — to allocate charges between the applicant and the beneficiary. While this allocation appears to be a straightforward financial arrangement, it creates documentary obligations that interact with UCP 600's examination framework. The beneficiary's reimbursement amount, the invoice presentation, and the discrepancy analysis are all influenced by the charge allocation in field 71A.

This guide examines how field 71A operates within the UCP 600 compliance architecture, identifies the failure modes that arise from charge allocation misinterpretation, and establishes a deterministic method for integrating field 71A into the document preparation process.

Failure Mode Analysis

Failure Mode 1: Field 71A BEN Without Invoice Disclosure

When field 71A specifies BEN, the beneficiary bears all bank charges. The beneficiary's bank deducts charges before remitting the reimbursement. If the commercial invoice does not show the deduction, the examining bank may flag the discrepancy as a mismatch between the credit amount and the reimbursement amount.

Failure Mode 2: Field 71A OUR But Bank Deducts Charges

When field 71A specifies OUR, the applicant bears all bank charges. The beneficiary should receive the full credit amount. If the beneficiary's bank deducts charges despite the OUR designation, the beneficiary receives less than the credit amount. The discrepancy is in the bank's processing, but the beneficiary bears the commercial impact.

Failure Mode 3: SHA Allocation Ambiguity

When field 71A specifies SHA, charges are shared between the applicant and the beneficiary. However, the exact split — which charges are borne by which party — is not defined in field 71A. Different banks interpret SHA differently. The beneficiary may assume the applicant bears issuing bank charges, but the issuing bank may deduct its charges from the reimbursement.

Failure Mode 4: Credit Text Override of Field 71A

Some credits contain a charge clause in the credit text that overrides field 71A. For example, field 71A reads SHA but the credit text states "all charges outside India are for beneficiary's account." The conflict creates confusion about the applicable charge allocation.

Failure Mode 5: Field 71A Does Not Address Confirmation Charges

If the credit is confirmed, the confirming bank charges are a separate charge category. Field 71A does not explicitly address confirmation charges. The beneficiary may assume field 71A covers confirmation charges, but the confirming bank's charge policy may differ.

Deterministic Resolution Architecture

Step 1: Identify Field 71A and Its Code

Extract field 71A from the SWIFT MT700 message. Record the code (OUR, BEN, or SHA). This code is the starting point for all charge-related compliance analysis.

Step 2: Map All Charges in the Transaction

Identify every charge associated with the credit: issuing bank charges, advising bank charges, nominated bank charges, confirming bank charges, and any other bank charges. For each charge, determine the charging bank and the amount (or estimate).

Step 3: Apply Field 71A Allocation to Each Charge

Using the field 71A code, allocate each charge to the appropriate party. Under OUR, all charges are borne by the applicant. Under BEN, all charges are borne by the beneficiary. Under SHA, charges are shared according to banking practice (each party bears its own bank's charges).

Step 4: Determine Invoice Implications

If field 71A specifies BEN, determine whether the credit requires the invoice to show the charge deduction. If the credit does not require invoice disclosure of charges, present the full credit amount on the invoice. If the credit requires disclosure, show the deduction on the invoice.

Step 5: Verify Reimbursement Calculation

Calculate the expected reimbursement amount based on field 71A. Under OUR, the beneficiary receives the full credit amount. Under BEN, the beneficiary receives the credit amount minus all bank charges. Under SHA, the beneficiary receives the credit amount minus the beneficiary's share of charges.

Step 6: Address Credit Text Conflicts

If the credit text contains a charge clause that differs from field 71A, resolve the conflict before document preparation. Contact the issuing bank through the advising bank to clarify the applicable charge allocation.

Step 7: Confirm Confirmation Charge Arrangements

If the credit is confirmed, confirm the confirming bank's charge policy and how it interacts with field 71A. The confirming bank's charges may be additional to the charges addressed by field 71A.

Step 8: Document the Charge Compliance Analysis

Record the field 71A analysis, the charge mapping, the reimbursement calculation, and the invoice verification. This documentation provides an audit trail for charge-related compliance.

Conclusion

Field 71A allocates bank charges in a documentary credit transaction. The allocation — OUR, BEN, or SHA — affects the beneficiary's reimbursement amount, the invoice presentation, and the discrepancy analysis. UCP 600's examination framework (Articles 14(b) and 37(c)) evaluates the presentation against field 71A's allocation. Misinterpretation of the allocation produces discrepancies that trigger Article 16 refusal.

The resolution architecture integrates field 71A into the document preparation process by mapping charges, applying the allocation, verifying the reimbursement calculation, and documenting the analysis. This systematic approach eliminates charge-related discrepancies that arise from field 71A misinterpretation.

FAQ

Q1: What does OUR mean in field 71A?
OUR means the applicant bears all bank charges. The beneficiary should receive the full credit amount without deduction. The issuing bank charges are borne by the applicant, and the beneficiary's bank charges are also borne by the applicant.

Q2: What does BEN mean in field 71A?
BEN means the beneficiary bears all bank charges. The beneficiary's bank deducts its charges, and the issuing bank deducts its charges, all from the beneficiary's reimbursement. The beneficiary receives less than the credit amount.

Q3: What does SHA mean in field 71A?
SHA means charges are shared between the applicant and the beneficiary. Each party typically bears the charges of its own bank. The exact split varies by banking practice and may differ between banks.

Q4: Must the invoice show charges when field 71A specifies BEN?
Not necessarily. Article 37(c) states that the invoice need not show charges or deductions unless the credit requires it. If the credit does not require invoice disclosure of charges, the beneficiary presents the full credit amount.

Q5: Can field 71A be changed after credit issuance?
Field 71A can be changed only through a formal credit amendment issued by the issuing bank and advised through the advising bank. Informal or verbal changes to the charge allocation are not binding.

Q6: How do confirmation charges interact with field 71A?
Field 71A addresses bank charges in general but does not explicitly address confirmation charges. The confirming bank's charges may be additional to the charges addressed by field 71A. The beneficiary should confirm the confirming bank's charge policy.

Source Notes

Context only: The source dossier for this guide referenced ICC publications on SWIFT MT700 field structures and documentary credit charge allocation. No text from those sources has been reproduced. This guide was composed from first principles using the UCP 600 text, ISBP 745, SWIFT MT700 field specifications, and the author's independent analysis of charge allocation in documentary credit transactions.