LC Document Discrepancies– Know What It Is & How To Deal With It

DWAIPAYAN REGMI

The discrepancy in LC can be explained as an error or defect. Error or defect that has been figured out at the time of checking documents in Letter of Credit documents are explained as discrepancies in Letter of Credit documents. So, if the conditions are not met in the documents are do not comply with the LC clause they can be explained as discrepancies in LC documents. Banks do deduct a certain amount if discrepant documents are observed around.


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Following are the major LC Discrepancies that are found in LC documents.

1. Late Shipment

If the goods are shipped after the shipment date which is mentioned in LC, it will be considered discrepant. So, be it a bill of lading or as per delivery challan – they will be late shipment if the date exceeds the mentioned date.


2. Late Presentation

If the documents are not presented within the prescribed time as mentioned in the LC clause by the beneficiary to the beneficiary bank, then the document can be discrepant. Generally, 21 days of presentation time is given for document presentation.


3. LC Expired

If the beneficiary’s bank receives the document after the LC expiry date, that will be a discrepancy as well. Normally banks don’t accept such documents, but if the applicant is okay with the expired date – that won’t be an issue. The expiry date of LC is considered taking into consideration the beneficiary banks covering.


4. Absence of Documents

If any documents are missing concerning the LC clause, that can be termed discrepancy. For example, if the Insurance document is mentioned in the LC clause, but is absent in the document list – it can be termed discrepant. Even if the beneficiary submits two originals instead of asked three originals, it can be explained discrepant document.


5. Incomplete Bill of Lading

As explained in UCP 600, the bill of lading must indicate the name of the carrier and should be signed by either the carrier or named agent on behalf of the carrier or the master or the named agent on behalf of the master. If banks don’t face the carrier’s name on the face of BL, they can term it as discrepant.


6. Incorrect Details about Goods or Services

The details about goods in Commercial Invoice should be liable to the LC clause, or the proforma invoice. There can be a nominal downfall over the price, or quantity but the unit price should be the same. Even minor spelling errors on the name of goods can result in discrepancies.


7. Endorsement

Generally, Bill of Exchange or Transport documents should be endorsed in the name of LC Issuing Bank. If the insurance clause is not demanding direct in favor of the LC issuing bank, the insurance documents should be endorsed too – else the issuing bank has the right to quote discrepancy for these set of documents.


8. Dates in Documents

Insurance should be done before the shipment date, else that can be termed discrepancies. Any other documents that have been asked should not be before the LC opening date, else that would be part of discrepancies as well. Dates will be carefully examined by LC issuing bank.


9. Non Compliance to LC Clause

If LC clauses and documents presented contradict, they can be part of discrepancies as well. For example: if it has been mentioned that all documents should bear LC Number, LC Date, and Harmonic Code – it means all the documents that have been asked for should have them. Else, they will be part of the discrepancy.


Dealing with Discrepant Documents

LC issuing banks, who receive the documents, should inform the beneficiary banks within five days about the discrepancy of the documents that are being found through SWIFT message. They have this right to quote discrepancy before information to the applicant as well. Once informed, banks will convey the applicant about the discrepancy documents and if applicants are willing to accept the discrepancies – they can go for the release of documents.

It has to be understood that discrepant documents do not lead to cancellation of LC, applicant will have the right to reject the documents if they are not ready to accept the discrepancies and return the documents without making any payment thereby.


(Mr. Dwaipayan Regmi is a banker.)

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