Commercial Invoice Discrepancies

Top 5 Discrepancies in a Commercial Invoice

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Top 5 Discrepancies in a Commercial Invoice

Commercial invoice is one of the key documents in a letter of credit transaction.

Almost all documentary credits, either commercial or standby, requesting a commercial invoice from the beneficiaries.

On this article I would like to highlight 5 most common commercial invoice mistakes.

Description Of Goods On The Commercial Invoice Does Not Correspond With The Letter of Credit:

This is one of the most frequently seen discrepancies on commercial invoices.

According to the latest letters of credit rules the description of the goods, services or performance in a commercial invoice must correspond with that appearing in the credit.

As a result beneficiaries must be very careful when completing the description of goods on commercial invoices.

Example of a Description of Goods Discrepancy:
Letter of credit:
45A: Description of Goods &/or Services
Crushing plant. As per proforma invoice no. :P-111-7 R02 dated 03/07/2012 CFR, Bahrain.

Commercial Invoice
Second Hand Crushing Plant. As per proforma invoice No.: P-111-7 R02 dated 03/07/2012 CFR, Bahrain.

Reason for Discrepancy: Description in the commercial invoice would represent a change in nature, classification or category of the goods.

Commercial Invoice Does Not Show Trade Terms (Incoterms):

When importers and exporters mutually agreed on international trade terms (Incoterms) by stipulating them in a letter of credit, they are bound by these international trade terms as a material part of the contract.

This means that if letter of credit stipulates international trade term under the description of goods section, exporters have to mention this trade term on the commercial invoice as indicated in the credit.

Example of a Trade Term Discrepancy:
Letter of Credit:
45A: Description of Goods &/or Services
420 pcs. of black tires size 275/70R225TL148/145J (152e) MC85 model 2011 as per pro. Inv. No. 011 dated 9/6/2011 FOB: Rotterdam Port – Netherlands Incoterms 2010

Commercial Invoice
420 pcs. of black tires size 275/70R225TL148/145J (152e) MC85 model 2011 as per pro. Inv. No. 011 dated 9/6/2011 FOB: Rotterdam Port – Netherlands Incoterms 2000

Reason for Discrepancy: Incoterms not mentioned correctly. Letter of credit stipulates FOB: Rotterdam Port – Netherlands Incoterms 2010 whereas commercial invoice indicates the trade term as FOB: Rotterdam Port – Netherlands Incoterms 2000.

Commercial Invoice Indicates Goods Which Are Not Mentioned In The Letter Of Credit:

An invoice is not to indicate goods, services or performance not called for in the credit.

This applies even when the invoice includes additional quantities of goods, services or performance as required by the credit or samples and advertising material and are stated to be free of charge.

Example of a Commercial Invoice Indicates Goods Which are not Mentioned in the Letter of Credit Discrepancy:
Letter of Credit:
45A: Description of Goods &/or Services
Power Transformer offload 1 Unit Onan 3phs Cu/cu Dyn11 50hz

Commercial Invoice
Power Transformer offload 1 Unit Onan 3phs Cu/cu Dyn11 50hz
Transformer Spare Parts (Free of Charge)

Reason for Discrepancy: Transformer Spare Parts are not called in the letter of credit. Mentioning these goods on the commercial invoice even if free of charge creates a discrepancy.

Proforma Invoice Presented Instead of a Commercial Invoice:

When a credit requires presentation of an “invoice” without further description, this will be satisfied by the presentation of any type of invoice (commercial invoice, customs invoice, tax invoice, final invoice, consular invoice, etc.).

However, an invoice is not to be identified as “provisional”, “pro‐forma” or the like.

Exporters should not present a proforma invoice instead of a commercial invoice.

Quantity of Goods Not Consistent With Other Documents:

Any total quantity of goods and their weights or measurements shown on the invoice is not to conflict with the same data appearing on other documents.

 

What Happens If a Letter of Credit Calls For a Wrong Incoterms?

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letter of credit calls for a wrong Incoterms

Daily practice shows us that Incoterms are not used in a correct way as per ICC rules.

Exporters and importers frequently use wrong incoterms in their sales contracts.

These kinds of mistakes would be very evident, especially when the parties decide to use a trade term with an unsuitable mode of transport.

On today’s post I try to explain the consequences of using a wrong incoterms under a letter of credit transaction.

Understanding the Incoterms:

Incoterms are the short form of International Commercial Terms and they are published by Commercial Law and Practice Commission of ICC.

Latest version of Incoterms rules are called Incoterms 2010 which has been in force since 01.01.2011.

According to Incoterms 2010 rules

  • FAS FREE ALONGSIDE SHIP (… named port of shipment),
  • FOB FREE ON BOARD (… named port of shipment),
  • CFR COST AND FREIGHT (… named port of destination) and
  • CIF COST, INSURANCE AND FREIGHT (… named port of destination) can only be used in a port-to-port sea transportation.

Remaining 7 seven Incoterms,

  • EXW EX WORKS (… named place),
  • FCA FREE CARRIER (… named place),
  • CPT CARRIAGE PAID TO (… named place of destination),
  • CIP CARRIAGE AND INSURANCE PAID TO (… named place of destination),
  • DAT DELIVERED AT TERMINAL,
  • DAP DELIVERED AT PLACE and
  • DDP DELIVERED DUTY PAID (… named place of destination) can be used in all modes of transport including port-to-port sea transportation.
incoterms 2010 classification
Incoterms 2010 Classification

But what happens if a letter of credit calls for a wrong incoterms such as FOB Singapore Changi Airport Incoterms 2010 or CIF Tokyo Airport Incoterms 2010?

According to ICC Banking Commission the exporter must fulfill the conditions stated in the letter of credit.

Even if a wrong Incoterms has been used in the letter of credit, the exporter should use this wrong trade term without making any corrections, otherwise issuing banks will refuse his presentation and he may be having difficulties to receive his payment under L/C.

Example 1:

Letter of Credit:

45A: Description of Goods &/or Services
CRUSHING PLANT. AS PER PROFORMA INVOICE NO.:P-111-7 R02 DATED 03/07/2012 FOB Singapore Changi Airport Incoterms 2010

Commercial Invoice :
CRUSHING PLANT. AS PER PROFORMA INVOICE NO.:P-111-7 R02 DATED 03/07/2012 FCA Singapore Changi Airport Incoterms 2010

Reason for Discrepancy: Trade terms stated in the commercial invoice is not consistent with the letter of credit.

Example 2:

Letter of Credit:

45A: Description of Goods &/or Services
6480CARTONS PREMIUM BRAND A10 CANNED PINEAPPLE CHUNKS IN NATURAL JUICE CIF NEWYORK PORT USA INCOTERMS 2000

Commercial Invoice:
6480CARTONS PREMIUM BRAND A10 CANNED PINEAPPLE CHUNKS IN NATURAL JUICE DAT NEWYORK PORT USA INCOTERMS 2010

Reason for Discrepancy: Trade terms stated in the commercial invoice is not consistent with the letter of credit.

Commercial Invoice Discrepancies

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commercial invoice discrepancies

On this page, you can find most common discrepancy examples related to the commercial invoice.

Invoice is a commercial document. A commercial invoice is a required document for the export and import clearance process. It is sometimes used for foreign exchange purposes.

In the buyer’s country, it is the document that is used by their custom officials to assess import duties and taxes. (Source: Export Information and Documentation: A Guide for New Exporters Page: 18)

A commercial invoice should be issued by the beneficiary of the letter of credit, according to the letter of credit rules and standard banking practices.

UCP 600 Article 18 explains specific requirements for commercial invoices.

Commercial invoice is one of the main documents in letters of credit transactions, for that reason almost all letters of credit request presentation of a commercial invoice.

Commercial Invoice Discrepancies

Important Definitions Regarding the Commercial Invoice Under Latest Letter of Credit Rules:

  • According to UCP 600, latest letter of credit rules, a commercial invoice need not to be signed, but almost all custom authorities require manually signed commercial invoice. As a result, make sure that commercial invoice is signed and stamped properly.
  • When a credit demands presentation of an “invoice” without further description, this will be satisfied by the presentation of any type of invoice (commercial invoice, customs invoice, tax invoice, final invoice, consular invoice, etc.) except invoices titled with “provisional”, “pro‐forma” or the like.
  • An invoice should be issued by the beneficiary. In a transferable letter of credit, the second beneficiary could issue the commercial invoice.
  • The invoice should show exact description of the goods, services or performance shown in the letter of credit. The description of goods, services or performance on an invoice is to reflect what has actually been shipped, delivered or provided.
  • A commercial invoice should indicate the value of the goods shipped or delivered and the unit prices, when stated in the credit.
  • Invoice should be issued in the same currency as that shown in the letter of credit.

Short Shipment Discrepancy

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commercial invoice short shipment discrepancy

Partial shipment can be defined as shipping the goods not whole at once, but in smaller consignment(s).

Partial Shipment Examples: Let us assume that letter of credit requires shipment of 10 buses.

If the shipper dispatches;

  • 8 buses under 1 shipment, makes a partial shipment
  • 4 buses under 1st shipment and 5 buses under 2nd shipment, makes a partial shipment
  • 5 buses under 1st shipment and 5 buses under 2nd shipment, makes a partial shipment.

Letter of credit rules allow partial shipments and partial drawings, which means that an exporter could make partial shipments under a letter of credit as long as the credit terms do not dictate the contrary.

In order to understand, whether or not partial shipments are allowed under a documentary credit, you need to look at “Field 43P: Partial Shipments” within the swift message body.

  • Field 43P: Partial Shipments: “Allowed” means that partial shipments are permitted
  • Field 43P: Partial Shipments: “Not Allowed” means that partial shipments are not permitted.

If a letter of credit prohibits partial shipments, the beneficiary must ship the goods in full quantity under a single shipment. (Please be noted that there are some tolerances exist in the letter of credit rules. Refer UCP 600 Article 30-c).

Contrary acts will be punished by banks either with partial shipments effected or short shipment effected discrepancies.

Discrepancy Example: Short Shipment Discrepancy Under a Letter of Credit:

A letter of credit has been issued in SWIFT format, subject to UCP 600, with the following details:

Letter of Credit Conditions

Field 50: Applicant : Auto Paint Importer Co. Ltd. 1800 Arnold Industrial Place 94520 CA USA

Field 43P: Partial Shipments: Not Allowed

Field 43T: Transhipment: Allowed

Field 45A: Description of Goods and or Services: Supply of 100% Acrylic Premium Quality Latex (Water Based) paints packed in 55 Gallon Drums. Price : 300 USD / drums Quantity: 80 Drums. As per Proforma Invoice No 100 dated 10.02.2014. Delivery Terms: CIF Long Beach Seaport California Incoterms 2010.

Field 46A: Documents Required: 3 original signed commercial invoices and 3 copies.

The beneficiary presented a commercial invoice as shown on the below picture.

Commercial Invoice

short shipment discrepancy letter of credit

Discrepancy: Short shipment effected. Letter of credit prohibits partial shipments. As a result, the beneficiary should have shipped 80 drums of paints in 24.000,00 USD full amount, but instead the beneficiary shipped 70 drums of paints corresponding to 21.000,00 USD, which is a partial letter of credit amount.

Reason for Discrepancy: Letter of credit prohibits partial shipments. Beneficiary should have shipped the goods in full quantity as called for in the credit under a single shipment.

Commercial Invoice Not Issued by the Beneficiary Discrepancy

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commercial invoice discrepancy issuer of the document

A commercial invoice is a trade document, which is generally prepared during the shipment stage.

A commercial invoice is a required document for the export and import clearance process. It is sometimes used for foreign exchange purposes.

In the buyer’s country, it is the document that is used by their custom officials to assess import duties and taxes. (Source: Export Information and Documentation: A Guide for New Exporters Page: 18)

A commercial invoice should be issued by the beneficiary of the letter of credit, according to the letter of credit rules and standard banking practices.

A commercial invoice must appear to have been issued by the beneficiary or, in the case of a transferred credit, the second beneficiary.

A commercial invoice must appear to have been made out in the name of the applicant.

If the beneficiary of a letter of credit presents a commercial invoice, which has been issued by an entity other than the beneficiary, the issuing bank raises a discrepancy, which is known as invoice not issued by the beneficiary.

Discrepancy Example: Commercial Invoice Not Issued by the Beneficiary

A letter of credit has been issued in SWIFT format, subject to UCP 600, with the following details:

Letter of Credit Conditions

Field 59: Beneficiary – Name & Address: Himmel Konig Sondermaschinen GmbH Auguste-Kessler-Str. 10 72100 Aalen Germany

Field 45A: Description of Goods and or Services: Supply of 1 pcs erosion and tool grinding machine as per Proforma Invoice No 120 dated 12.03.2014. Delivery Terms: CFR Apapa Seaport Lagos Incoterms 2010.

Field 46A: Documents Required: 2 original signed commercial invoices and 3 copies.

Field 47A: Additional Conditions: Third party documents are acceptable which means that all documents, excluding drafts and invoices, may be issued by a party other than the beneficiary.

The beneficiary presented a commercial invoice as shown on the below picture.

Commercial Invoicecommercial invoice beneficiary discrepancy

Discrepancy: Invoice should have issued by “Himmel Konig Sondermaschinen GmbH”, but it is actually issued by “Maschinen Handels GmbH” .

The additional condition, which is included in field 47-A, would have no effect on determination of the discrepancy, because the draft and the commercial invoice have been excluded from the scope of this clause.

Reason for Discrepancy: Commercial invoice not issued by the beneficiary. A commercial invoice must appear to have been issued by the beneficiary or, in the case of a transferred credit, the second beneficiary.

Commercial Invoice Shows Merchandise Not Called For Discrepancy

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commercial invoice disrepancy

A commercial invoice should not indicate goods, services or performance not called for in the credit.

As per letter of credit rules and international standard banking practices, an invoice is not to indicate goods, services or performance not called for in the credit.

This letter of credit rule applies, even when the invoice shows additional quantities of goods as required by the credit or samples are declared to be shipped free of charge.

If the beneficiary of a letter of credit presents a commercial invoice, which contains goods not indicated in the letter of credit, the issuing bank raises a discrepancy, which is known as commercial invoice shows merchandise not called for in the letter of credit.

Discrepancy Example: Commercial Invoice Shows Merchandise Not Called For

A letter of credit has been issued in SWIFT format, subject to UCP latest version, with the following details:

Letter of Credit Conditions

Field 45A: Description of Goods and or Services: Shirts – long sleeve – 980 pieces, shirts – short sleeve – 1510 pieces, long pants – 980 pieces, shorts – 250 pieces. As stated on order sheet 4750 revised – dated 10th January 2014. Delivery Terms: CPT Barcelona Spain Incoterms 2010.

Field 46A: Documents Required: Signed commercial invoices in two originals showing letter of credit number and certifying that the merchandise is as per purchase order.

The beneficiary presented a commercial invoice as shown on the below picture.

Commercial Invoicecommercial invoice discrepancy example

Discrepancy: Commercial invoice shows merchandise not called for in the letter of credit. If you look at the last column of the description of goods part, you will see that “10 Pcs of Shirts – long sleeve (Free of Charge)” is not called for in the letter of credit.

Even if they have been shipped “Free of Charge“, it is against letter of credit terms.

Reason for Discrepancy: An invoice is not to indicate goods, services or performance not called for in the credit.

This applies even when the invoice includes additional quantities of goods, services or performance as required by the credit or samples and advertising material and are stated to be free of charge.

Proforma Invoice Presented Instead of a Commercial Invoice Discrepancy

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proforma invoice discrepancy

A proforma invoice is a commercial document, usually prepared during the negotiation stage of the order.

A proforma invoice is a quote in an invoice format that may be required by the buyer to apply for an import license, contract for pre-shipment inspection, open a letter of credit or arrange for transfer of currency. (Source:Export Information and Documentation: A Guide for New Exporters Page: 16)

A commercial invoice is also a commercial document, but unlike the proforma invoice, it generally prepared during the shipment stage.

A commercial invoice is a required document for the export and import clearance process. It is sometimes used for foreign exchange purposes.

In the buyer’s country, it is the document that is used by their custom officials to assess import duties and taxes. (Source:Export Information and Documentation: A Guide for New Exporters Page: 18)

The letter of credit rules and international standard banking practices do not allow presentation of a “provisional”, “proforma”, “performa” invoice instead of a commercial invoice.

If the beneficiary presents a proforma invoice instead of a commercial invoice, the issuing bank raise a discrepancy, which is known as “Proforma Invoice Presented Instead of a Commercial Invoice”.

Discrepancy Example: Proforma Invoice Presented Instead of a Commercial Invoice

A letter of credit has been issued in SWIFT format, subject to UCPURR latest version, with the following details:

Letter of Credit Conditions

Field 45A: Description of Goods and or Services: Electrical Equipment as per proforma invoice no 40000 of 2014/04/10 mention to be indicated on the definitive invoice.

Field 46A: Documents Required: Signed commercial invoice in six copies issued by beneficiary, original of which must be certified by the chamber of commerce and legalized by the consulate of Jordan, if available at beneficiary’s location, if not, legalization should be effected by any other Arab Consulate.

The beneficiary presented a proforma invoice as shown on the below picture.

Commercial Invoice

proforma invoice discrepancyDiscrepancy: Proforma invoice has been presented instead of a commercial invoice.

Reason for Discrepancy: Letter of credit rules prohibit presentation of a proforma invoice instead of a commercial invoice.

When a letter of credit requires presentation of an “invoice” without further description, this will be satisfied by the presentation of any type of invoice (commercial invoice, customs invoice, tax invoice, final invoice, consular invoice, etc.). However, an invoice is not to be identified as “provisional”, “proforma” or the like.

Description of Goods Discrepancy

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description of goods discrepancy commercial invoice

According to the letter of credit rules and international standard banking practices, the description of the goods, services or performance shown on the commercial invoice is to correspond with the description stated in the letter of credit.

Commercial invoice, which is the only document as defined in the UCP 600, that must show the full description of goods as quoted in field 45-A Description of Goods and or Services.

On other documents, the description of the goods, services or performance, if stated, may be in general terms not conflicting with their description in the credit.

If the commercial invoice states a description of goods and services not indicated in the letter of credit, banks raise a discrepancy which is known as description of goods on the commercial invoice is not as per L/C terms.

Discrepancy Example: Description of Goods on the Commercial Invoice is not as per L/C 

A letter of credit has been issued in SWIFT format, subject to UCPURR latest version, with the following details:

Letter of Credit Conditions

Field 45A: Description of Goods and or Services: Evening dress as per proforma invoice dtd 19.05.2014 for goods delivered CIF Stockholm Port, Sweden Incoterms 2010.

Field 46A: Documents Required: Signed commercial invoices in one original and three copies, certified by the chamber of commerce in the exporting country and bearing this clause: ”We certify that invoices are in all respects correct and true both with regard to the price and description of goods referred to therein and as per Proforma Invoice no.010 dated 09/05/2014 indicated in this credit and that the country of origin or manufacturer of the goods is Spain” and must be made out in the name of l/c applicant indicated in field 50.

The beneficiary presented a commercial invoice, which is indicated an inconsistent description of goods with the letter of credit.

Commercial Invoice

description of goods discrepancyDiscrepancy: Description of goods not per L/C terms on the commercial invoice. As per letter of credit terms, the commercial invoice should have shown “Evening dress” as a description of goods.

But the invoice shows “Used Evening Dress (30% Defected)” under Description of Goods column.

Reason for Discrepancy: The description of the goods, services or performance shown on the invoice is to correspond with the description shown in the letter of credit.

Incoterms Discrepancy

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incoterms discrepancy

The Incoterms are a standard set of trade terms used worldwide mostly in international trade. It is also possible to use them in domestic contracts of sale.

The rules define the obligations, costs and risks of sellers and buyers in connection with the delivery of goods.

When exporters and importers mutually agreed on the trade terms by stipulating them on a sales contract or proforma invoice, they are bound by these terms as a material part of the contract.

As a result, issuing banks often include these trade terms in to the letters of credit, generally under field 45-A: Description of Goods and Services.

Examples: FOB Shanghai Port, Incoterms 2010, FCA New York Container Terminal, Incoterms 2010 etc.

If the letter of credit incorporated a trade term, as mentioned above, the commercial invoice must indicate them precisely. Otherwise, banks raise a discrepancy, which is known as Incoterms not stated on the commercial invoice.

Sample Incoterms not Stated on the Commercial Invoice Discrepancy under a Letter of Credit:

A letter of credit has been issued in SWIFT format, subject to UCPURR latest version, with the following details:

Letter of Credit Conditions

Field 45A: Description of Goods and or Services: Kitchen cabinets as per applicant’s purchase order no. D12020 dtd 01.06.2014, Ex-works Montelabbate Italy, Incoterms 2010.

Field 46A: Documents Required: Manually signed commercial invoice in one original plus one duplicate, the original must be certified by chamber of commerce. The commercial invoice must show 100 pct. value of goods shipped, less pro-rata deduction of advance payment made as per clause no. 1.

The beneficiary presented a commercial invoice without stating the trade terms on it.

Commercial Invoice

commercial invoice discrepancy incoterms

Commercial invoice does not indicate trade term as required by the letter of credit. Presentation is discrepant. “Ex-works Montelabbate Italy, Incoterms 2010.” is missing on the invoice.

Discrepancy: Trade term not identified on the commercial invoice. As per letter of credit conditions commercial invoice should have shown “Ex-works Montelabbate Italy, Incoterms 2010.”

Reason for Discrepancy: When a trade term is stated as part of the goods description in the credit, an invoice is to indicate that trade term.

Discrepancies

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discrepancies

The issuing bank or the confirming bank must pay the credit amount to the beneficiary, when they determine that the presentation is complying.

The complying presentation means is that the presentation with zero discrepancies.

If, the issuing bank or the confirming finds at least one discrepancy, then the presentation becomes discrepant.

Under a discrepant presentation, the beneficiary can get the payment, only if the applicant accepts the discrepant documents.

On this post, I am going to explain discrepancies in letters of credit.

Firstly, I will make the definition. Secondly, I will disclose links for discrepancies for each document type. At later stages of the post, I will discuss how to deal with the letter of credit, in order to make discrepancy free presentations.

Definition: Discrepancy can be defined as an error or defect, according to the issuing bank, in the presented documents compared with the documentary credit, the UCP 600 rules or other documents that have been presented under the same letter of credit.

Transport Document Discrepancies

Commercial Document Discrepancies

Official Document Discrepancies

Insurance Document Discrepancies

  • Insurance Policy Discrepancies

Perhaps, discrepancy is one of the most complicated and “blurred” field in all letters of credit terminology.

The advising bank checks the documents and finds the presentation complying, then dispatches the documents to the issuing bank.

This time, the issuing bank checks the same documents and comes back with a swift message, mentioning couple of discrepancies.

How Could This Have Been Possible?

How could one bank finds multiple discrepancies in a set of documents, while the same documents are found to be complying by another bank.

Alleged Discrepancies and ICC Opinions:

Almost all of the ICC opinions issued so far are related to complaints about “alleged discrepancies”.

What we can see from the results of the ICC opinions is that ICC Banking Committee does not agree with banks in most cases.

Definition or Lack of Definition:

It is strange, but there is no definition of a discrepancy in the letter of credit rules.

Is it too simple to be forgotten? Or too complicated to define? What is the definition of a discrepancy according the UCP 600 rules?

Inconsistency in Application:

Discrepancies varies from country to country, bank to bank, even more; document checker to document checker.

Let me give you a real life example here.

Couple of years ago, I have presented documents to a confirming bank. The presentation has been made under a set of letters of credit, which contain 10-15 pcs of independent letters of credit.

All of these small amount independent letters of credit have the same text and having the same conditions.

Description of goods, port of loading, port of discharge, additional conditions all were the same.

Just, the latest date of shipment and expiry date were changing form one lc to another.

First 3 presentations were found to be complying by the confirming bank. But on the 4th presentation, we received a swift message “MT 734 Advice of a Refusal” indicating a discrepancy on the certificate of origin.

Lessons learned.

Discrepancies can be changed from country to country, bank to bank, document checker to document checker and presentation to presentation.

and here are the results:

According to ICC Trade Finance Surveys, on average, %70 of letter of credit presentations are found to be discrepant on first presentation.

This is a very frustrating outcome, and has a huge negative impact on everyone in letter of credit business.

Why Banks Find too much Discrepancies on the Documents:

  • Letter of credit rules are often find to be very complicated and hard to understand by exporters and importers.
  • Most of the small and medium scale export and import companies do not have enough resources to hire a letter of credit specialist in their organizations.
  • Exporters and importers do not give enough respect to letter of credit rules and standard banking practices. Exporters and importers think that, they can handle letters of credit with ease on their way. However, the fact is different. Letters of credit have very strict rules to follow.
  • Exporters do not allocate enough time to understand the letter of credit text, before starting to production and shipment.
  • Some banks open overdetailed letters of credit. Sometimes we see that banks demand almost impossible conditions from the beneficiaries on their letters of credit texts.
  • Some banks issue foggy (not clear) letters of credit.
  • Some banks examine documents not as per UCP 600 and ISBP 745.

What can be Done to Prevent Discrepant Presentations:

Pre – Document Preparation Stage:

  • Keep Your Relationship with Your Customer Close: Please keep in mind that, whatever preventive steps you may take, it is highly likely that you will be facing a discrepancy on one of the documents, that you have submitted. So, it would be very wise for you to keep your relations close with your customer.
  • Learn the Rules: Before entering a letter of credit transaction, you need to learn the letter of credit rules very well. You should buy one original copy of current letter of credit rules book, UCP 600. Please follow this link to buy a UCP 600 online.
  • Learn the International International Standard Banking Practices: Before entering a letter of credit transaction, you also need to be familiarized with the International Standard Banking Practices. In order to do that, you should buy one original copy of current International Standard Banking Practices book. Please follow this link to learn more about International Standard Banking Practices.
  • Check the Credit: You must check the letter of credit as early as you can, before starting to the production. As one of the letter of credit expert indicated “you can not solve lc problems at the presentation stage.” The earlier you are starting to work on the letter of credit text, the better it would be.
  • Demand a Draft Letter of Credit: Demanding a letter of credit draft from your customer, before having the original letter of credit issued, would be a wise move. This will save you from additional letter of credit fees; such as amendment fees and amendment advising fees.Work on this letter of credit draft carefully.
  • Check Field 46-A: Check required documents field one by one. Make sure that, you can supply all the required documents, that has been requested under this field.
  • Check Field 47-A: Check additional conditions field one by one. Make sure that, conditions stated in this field are doable, and are not going to create any problems for you on the presentation stage.
  • Demand Amendment: If you find a condition or clause that you can not comply with, get in touch with your buyer to amend the letter of credit.
  • Demand Clarification: If you can not understand a condition or sentence on the letter of credit text, then you should get in touch with the issuing bank for clarification.

Document Preparation Stage:

  • Complete the documents as requested by the credit. Make sure that, you also take into account the letter of credit rules and international standard banking practices when preparing the documents.
  • Make sure that, signatures, authentication are made by requested persons or institutions.
  • Make sure that, you will be presented all required documents without any absence.
  • Make sure that, you presented correct number of originals and copies as requested by the credit.
  • Make sure that, the dates on the documents are in accordance with the dates mentioned on the credit. For example, you would not be making either a late shipment or a late presentation.
  • Make sure that, you will collect all requested documents by the credit as soon as you make the shipment. Once you collect all the documents, you need to make the presentation without losing any time.

After Presentation Stage :

Follow the situation of the documents day by day with the advising bank. Give necessary information to your buyer. And stay in alert mode, until you receive your payment.