Letter of Credit Discrepancy

A letter of credit discrepancy is a failure of presented documents to comply with the credit's terms, applicable UCP 600 rules or international standard banking practice, because documentary credits deal in documents, not the underlying goods. A shipment can be sound while the presentation is discrepant, and conversely documents can comply even though a buyer later disputes the goods.

UCP 600 provides a framework where incorporated into the credit, setting time and procedures for bank examination and notices of refusal. An exporter should read the credit before shipping, checking the beneficiary and applicant names, amount, latest shipment date, expiry, presentation period, required documents and exact conditions.

If a term is impossible or inconsistent with the sales contract, ask for an amendment before goods move, since relying on a promise that the buyer will "sort it out later" creates avoidable payment risk. A bank's review is not a full commercial investigation, so the exporter should understand which bank is issuing, advising, confirming or nominated, and what undertaking each has actually given.

Common issues include a late shipment, late document presentation, missing signature, inconsistent quantity, a document from the wrong issuer, a transport document that does not show the required loading status or destination, or an invoice description that conflicts with the credit. The relevant standard is not that every document has identical wording, as the bank examines whether data conflict under the rules and credit.

A document checklist should assign owners before shipment, with sales confirming commercial terms, logistics checking transport data, finance checking credit conditions and the bank or a specialist reviewing the draft set. Avoid having one person copy an old template without comparing it to the current credit, since a pre-check can catch errors but the formal presentation still must comply when made.

Discrepancy rates can show process quality: if 12 of 40 presentations are found discrepant, the observed rate is 30%. Classify each by cause and severity rather than only reporting a percentage, because a minor recurring invoice mismatch may need a template fix while a late presentation may need a different calendar and courier process.

A waiver is not guaranteed, and the issuing bank's handling remains important. The buyer may be willing to accept goods but unable to resolve the paperwork quickly, so cash can be delayed while storage or debt costs continue, and the exporter should not book expected payment as collected merely because a waiver was requested.

Timing is especially unforgiving, so record the credit's expiry, latest shipment date and presentation deadline separately, check holidays and the place where documents must be presented, and remember that an on-board bill of lading may be issued after a vessel departs, leaving less time than expected for the remaining documents. A letter of credit should match the Incoterms rule and logistics route: if the credit demands an on-board marine bill of lading while the sale uses a handover at an inland terminal, the exporter may need the carrier's cooperation, and a freight forwarder's receipt should not be assumed to satisfy a credit calling for a different instrument.

If documents are refused, preserve the bank's notice, identify every stated discrepancy and review whether a timely correction and re-presentation is possible before expiry, using specialist trade-finance advice for a material shipment or disputed refusal. A discrepancy is a documentary failure with a potentially large cash effect, so respond through the formal bank process rather than assuming the buyer's informal reassurance guarantees payment.