Letter of credit discrepancies and how to avoid them
Many LC presentations are rejected the first time, and most rejections come from a handful of avoidable mistakes. Here they are, with a checklist to use before you ship.
The deadlines that catch people out
- Latest shipment date: the on-board date on the bill of lading must not be later than this.
- Presentation period: documents must reach the bank within 21 calendar days after shipment, unless the LC says otherwise, and always before expiry (UCP 600 article 14(c)).
- Expiry date and place: the LC expires at a named place. Presenting at your bank in India when the LC expires at the issuing bank abroad leaves you less time.
- Bank examination: banks have up to five banking days after presentation to check documents (article 14(b)).
Ten common discrepancies
- Late shipment: on-board date after the latest shipment date.
- Late presentation: documents presented after 21 days or after expiry.
- Goods description on the invoice doesn't match the LC: the commercial invoice must describe the goods as the LC does (article 18(c)). Other documents can use general terms that don't conflict.
- Amounts or quantities out of tolerance: overdrawing the LC, or quantities outside allowed tolerances.
- Bill of lading problems: no "on board" notation, a "claused" (unclean) B/L, wrong consignee or notify party, or missing originals.
- Insurance issues: cover dated after shipment, below the required amount (often at least 110% of CIF or CIP value, article 28), or wrong risks covered.
- Partial shipment or transhipment when the LC prohibits it.
- Inconsistent data between documents: weights, marks, package counts or port names that conflict.
- Missing documents or signatures: a certificate of origin, inspection certificate or signed invoice the LC asked for.
- Wrong beneficiary or applicant details: names that differ from the LC.
Before you ship: a checklist
- Can you ship by the latest shipment date, with time to spare?
- Is the presentation period realistic for getting the bill of lading and certificates?
- Does the goods description exactly match what you will invoice?
- Are the port of loading, port of discharge and Incoterm what you agreed?
- Can you obtain every document the LC lists, from the issuers it names?
- Are partial shipments and transhipment allowed if you need them?
- Who pays the bank charges, and is the LC confirmed if the issuing bank or country is risky?
- Anything unusual? Ask the buyer to amend the LC before you ship, not after.
Corridor Terminal's LC checker flags risky clauses like short presentation periods, documents you can't control and unworkable dates as soon as you paste the LC terms.
Common questions
What is a discrepancy in a letter of credit?
A discrepancy is any difference between the documents you present and the terms of the letter of credit or the rules in UCP 600. A discrepant presentation lets the bank refuse to pay unless the buyer accepts the discrepancy.
How long does a bank have to examine LC documents?
Under UCP 600 a bank has a maximum of five banking days after the day of presentation to decide whether the documents comply.
What is the deadline to present documents under an LC?
If the LC requires a transport document, present the documents within 21 calendar days after the shipment date (unless the LC states another period), and in any case no later than the LC's expiry date.
What happens if documents are discrepant?
The bank may refuse the documents or ask the buyer to accept the discrepancies. Payment is delayed, you usually pay a discrepancy fee, and the buyer gains leverage to renegotiate.
Check your next LC in seconds
Paste the LC terms and Corridor Terminal highlights the clauses most likely to cause a discrepancy.
Open the LC checkerFirst shipment guideArticle references are to UCP 600 (ICC Uniform Customs and Practice for Documentary Credits). Your LC's own terms take priority where they differ.