How to Handle Letter of Credit Discrepancies Before the Bank Rejects Your Documents

A documentary credit discrepancy is the trade finance equivalent of a medical diagnosis you did not expect. By the time it is identified — after the bank has examined the document set — the damage is already in motion: the vessel may have sailed, the cargo is at sea, and the payment you were counting on is on hold.

The most common discrepancies on India-GCC LCs

• Late shipment: the Bill of Lading date is after the latest shipment date specified in the LC. This is the most frequent and most avoidable discrepancy.
• Late presentation: documents presented to the negotiating bank after the presentation period — typically 21 days from BL date, or the LC expiry, whichever is earlier.
• Description of goods mismatch: the goods description on the commercial invoice does not match exactly the description in the LC. Banks notice every word.
• Port name inconsistency: 'JNPT' versus 'Nhava Sheva' is a discrepancy to a bank examiner if the LC specifies one and the BL shows the other.
• Missing endorsement: negotiable BLs must be endorsed correctly — a BL delivered without the required endorsement is a discrepancy even if every other field is correct.

Building a pre-presentation review process

Before any document set goes to the bank, run it through the same checklist an LC-trained bank examiner would apply. This takes 20 to 30 minutes per set if you have a clear checklist. It is the most valuable 30 minutes in a trade finance workflow. The party who identifies a discrepancy three days before presentation and resolves it with the buyer controls the outcome. The party who discovers it at the bank counter does not.

Key Takeaways

1. The five most common LC discrepancies: late shipment, late presentation, goods description mismatch, port name inconsistency, and missing endorsement.

2. A 20-30 minute pre-presentation review checklist finds most discrepancies before the bank does — and changes the outcome completely.

3. The party who identifies a discrepancy three days before presentation and resolves it with the buyer controls the outcome.

Tags:#LCDiscrepancies#TradeFinance