SWIFT Charges and the Correspondent Bank: Why Your Chinese Supplier Receives Less Than You Sent

You agree a price with your Chinese supplier, your bank sends the wire, and a week later the supplier emails to say the amount that landed is short. Nobody has cheated anyone. The gap is bank charges taken along the way — by your bank, by one or more correspondent banks that relay the payment, and sometimes by the supplier’s bank for receiving it. If you do not plan for this, the shortfall becomes an argument, a top-up payment, or a delayed shipment. Here is how the money actually moves and where it leaks.

Why a wire passes through banks you never chose

Your bank in Bangladesh almost certainly has no direct account relationship with your supplier’s small commercial bank in, say, Ningbo or Foshan. To move US dollars between them, the payment travels along a chain of correspondent banks — banks that do hold accounts with each other, usually including a large US dollar clearing bank in New York. Each institution in that chain handles the message and the settlement, and each is entitled to charge for it. The SWIFT network carries the instructions; it does not move the cash, and it is not what charges you — the banks are.

The three charge options: OUR, SHA, BEN

Every international wire is sent under one of three charge codes, and this single choice decides who absorbs the fees:

• OUR — you (the sender) pay all charges, including the correspondent bank fees. The supplier receives the full invoice amount. Your bank charges you more upfront, and correspondent deductions may still be billed back to you afterward.
• SHA (shared) — you pay your own bank’s charges; the correspondent and beneficiary bank charges are deducted from the payment. The supplier receives the invoice amount minus whatever the intermediary banks took. This is the default on most wires and the usual cause of a short receipt.
• BEN — the beneficiary pays all charges; every fee in the chain comes out of the transfer. The supplier receives the least.

If your supplier’s contract says “all bank charges outside China are for the buyer’s account”, they are asking you to send OUR. If you send SHA to save on your side, expect a shortfall claim.

Where the deductions actually happen

On a SHA payment, the intermediary bank in the US dollar clearing chain typically deducts a flat fee before passing the payment on. If the payment is relayed through more than one correspondent — which happens when the routing is indirect — each can take a cut. Then the beneficiary bank in China may charge an inward remittance handling fee, and it will convert the dollars to yuan at its own rate if the supplier’s account is held in local currency. The supplier sees the final yuan figure and compares it, mentally, to the dollar invoice at the rate they expected — so an unfavourable conversion feels like a shortfall even when the dollar deductions were small.

The cost you cannot see: the exchange spread

The wire fees are visible and irritating. The bigger number is usually the foreign-exchange spread — the margin between the rate your AD bank gives you to buy dollars and the interbank rate. On a large payment this spread can exceed all the flat fees combined. It is quoted as “the rate”, not as a charge, which is why importers underestimate it. Comparing banks on their dollar selling rate for the day, not just their wire fee, is where real money is saved.

How to stop the shortfall becoming a dispute

• Agree the charge code in the contract. Write down whether payments are sent OUR, SHA or BEN, so there is no argument later.
• If the supplier requires full receipt, send OUR and price that into your landed cost. It is cleaner than repeated top-ups.
• Ask your bank for the all-in cost before sending — its own charge, its estimate of correspondent deductions, and the dollar rate it will apply.
• Add a small buffer on SHA payments if the relationship is new, then reconcile the exact deduction on the bank advice afterward.
• Keep the SWIFT confirmation (the MT103). It shows the amount sent and the charge code, and it is your evidence if the supplier disputes what left your account.
• Consolidate payments. Flat fees are per transaction, so three small wires cost more in fixed charges than one combined payment.

Letter of credit vs telegraphic transfer

Under a letter of credit the charge allocation is written into the LC itself — typically the applicant’s bank charges are for the applicant and charges outside the issuing country are for the beneficiary, but this is negotiable and should be checked clause by clause. Under a telegraphic transfer it is the OUR/SHA/BEN choice on the payment instruction. Either way, the principle is the same: decide who pays the intermediary banks before the money moves, not after.

Where DE International fits

When we handle sourcing and payments coordination, we make sure the supplier contract states the charge allocation clearly and that the proforma invoice, the LC terms and the payment instruction all agree. We cannot tell you what your bank’s correspondent will deduct or what rate your branch will give you on the day — those are your bank’s numbers — but we can make sure a predictable, agreed cost does not turn into a stalled shipment. Ask us to review a supplier’s payment terms before you sign.

Read our related guides on how telegraphic transfers work, paying suppliers with Wise, the USD-BDT exchange rate and deposit and balance payment splits. See our services, contact us, or explore our sourcing service and shop.