L/C discrepancies: why banks reject documents.
A letter of credit pays against documents, not goods. One mismatch and it doesn't pay.
In short. Why banks reject documents under an L/C — late shipment, expired credit, inconsistent descriptions, missing signatures, wrong consignee — what a discrepancy costs, and a pre-presentation checklist.
The common ones
- Late shipment — on-board date after the L/C's latest shipment date.
- Late presentation — documents presented after the presentation period (often 21 days from shipment) or after expiry.
- Inconsistent goods description between invoice, B/L and packing list, or not matching the L/C wording.
- Wrong or misspelt consignee, notify party or applicant name.
- Invoice amount exceeding the credit, or currency mismatch.
- Partial shipment or transhipment when the credit prohibits them.
- Missing or unsigned documents (certificate of origin not stamped, insurance not endorsed).
- Insurance coverage below the required percentage (often 110% of CIF).
- B/L not marked “clean on board”, or freight terms inconsistent with the incoterm.
- Quantity tolerance exceeded.
- Documents in the wrong language when the credit specifies one.
- Corrections not authenticated on the document.
What a discrepancy costs
A discrepancy fee per presentation, days of delay while the buyer decides whether to waive, and — if the buyer refuses — goods at a foreign port with no payment. The supplier bears most of this, which is why suppliers with immaculate documents prefer L/Cs and everyone else prefers T/T.
Pre-presentation checklist
- Read the credit on receipt, not at shipment; ask for an amendment early if any term can't be met.
- Draft every document from the L/C wording, copying descriptions exactly.
- Check the on-board date against the latest shipment date before the vessel sails.
- Count originals and copies per document against the credit.
- Present early — a rejected set can sometimes be corrected inside the period.
For L/C orders Pacifica shows the L/C number, issuing bank, expiry and latest shipment date on the order, warns as those dates approach, and holds the document set so both sides can check it against the credit before presentation.
Questions
Can the buyer accept discrepant documents?
Yes — the buyer can waive discrepancies and instruct the bank to pay, usually for a fee. The supplier is then at the buyer's discretion.
What is the presentation period?
The time after shipment within which documents must reach the bank, commonly 21 days unless the credit says otherwise, and never after the credit's expiry.
Is a typo really a discrepancy?
It can be. Banks examine documents on their face; a misspelt name can be treated as a mismatch. Copy the credit's wording exactly.
Related
See it on your own orders.
Launch your workspace in 30 seconds. First month free.