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Understand most common discrepancies in lc transactions to avoid them












On my previous article I have given the definition of discrepancy in a letter of credit transaction as well as its importance for all the lc parties. Again on the same article I have stressed out that %70 of all presentations found to be discrepant by banks. I argued that this is a huge and frustrating result which threatens workability of letters of credit instruments all over the world. After putting these emphasises I have described the reasons why banks find too much discrepancies on the documents. Finally I have offered some practical guidelines to avoid discrepancies in a letter of credit process. You can read my article by clicking this link.

On this page I will be talking about the 10 most frequently seen discrepancies in letters of credit transactions. 

Inconsistency in Documents :

UCP 600 states that "Data in a document, when read in context with the credit, the document itself and international standard banking practice, need not be identical to, but must not conflict with, data in that document, any other stipulated document or the credit." So if banks find inconsistency between documents they raise a discrepancy. 

Incorrect Data : 

Information any one of the document presented is not comply with the letter of credit terms and conditions.

Late Shipment : 

Goods shipped after the permitted shipment date or period. If date of the transport document such as bill of lading date falls a later date than the latest date of shipment than banks raise late shipment discrepancy.

Late Presentation : 

Documents presented later than 21 days after shipment or after the number of dates situpilated in the letter of credit.

If credit is silent on the latest date of presentation then you have to present your letter of credit documents within 21 days after "date of shipment". But please keep in mind that this period is shorten usually by the credit. So you need to read your credit text very carefully to determine your presentation period.

Letter of Credit Expired : 

Documents presented after letter of credit has expired. Normally banks should not accept any document that has been presented after the expiry date of the credit. But banks left the ultimate decision to the applicants on this regard and evaluate late presentation after the expiry date as a discrepancy.

Absence of Documents : 

Documents required by the letters credit is missing.  Missing document discrepancy could also cover insufficient number of original document presentation. For example UCP 600 demands presentation of all original insurance documents if insurance document states that it is issued more than one original. Let me expand my example to be more specific on the subject. If we can understand from the insurance document that it is issued in two originals than you have to present both originals of the insurance policy / insurance certificate. If you present only one original instead of two originals then banks raise this point as a discrepancy.

Carrier not defined on the bill of lading / bill of lading signed by Improper Authority :

The name of the carrier on the bill of lading is not defined and bill of lading is not signed by the master, the carrier or an agent on behalf of the carrier or master.

UCP 600 Article 20 indicates that : 
A bill of lading, however named, must appear to:
i. indicate the name of the carrier and be signed by:
the carrier or a named agent for or on behalf of the carrier, or
the master or a named agent for or on behalf of the master.
Any signature by the carrier, master or agent must be identified as that of the carrier, master or agent.
Any signature by an agent must indicate whether the agent has signed for or on behalf of the carrier or for or on behalf of the master.

If banks could not locate the name of the carrier on the face of the bill of lading then they mention this point as a discrepancy. 

Incorrect Description of Goods :
Description of goods indicated on the invoice and other trade documents differs from the description of goods stated on the credit.

Incorrect Endorsement / Absense of Endorsement :
Bill of lading, insurance policy or draft (bill of exchange) not endorsed by the beneficiary of the credit.

Partial shipment or transshipment effected despite L/C terms
We have to be very careful with the partial shipments and transhipment.Please read credit text and determine if credit allowed or not allowed partial shipments and transhipment.
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What are the 10 most frequently seen discrepancies in letters of credit presentations? 
We discuss 10 most frequently seen discrepancies in letters of credit presentations such as late shipment discrepancy, late presentation discrepancy, commercial invoice discrepancy etc.. on this page in detail. Also you can find how to make discrepancy free presentations under letters of credit. Tips and suggestions from real life examples.



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