Packing List Discrepancies

packing list discrepancies

Packing list is a commercial document, in broad perspective.

It is a detailed listing of the contents of the shipment and acts as a supporting document of both commercial invoice and bill of lading.

The packing list (abbreviated as P/L) gives great deal of information regarding the incoming cargo without mentioning the value of the goods.

Gross weight, net weight, packing type, container number, seal number, number of packages, description of goods are the key points of an ordinary packing list.

It is required for customs clearance and most of the times accompanying the commercial invoice.

A packing list is expected to be issued by the exporter.

Packing list is one of the key documents in a typical commercial letter of credit. It is requested under almost all of the letters of credit.

On this page you can find most common discrepancies related to a packing list.

Packing List Discrepancies

Important Definitions Regarding the Packing List under Latest Letter of Credit Rules:

  • According to letter of credit rules the content of the document is much more important than the title of the document. As an example, a requirement for a “Packing List” will be satisfied by a document containing packing details whether it is titled “Packing List”, “Packing Note”, “Packing and Weight List”, etc., or bears even no title.
  • A packing list is to be issued by the entity stated in the credit. When a credit does not indicate the name of an issuer, any entity may issue a packing list.
  • Banks only examine total values, including, but not limited to, total quantities, total weights, total measurements or total packages, to ensure that the applicable total does not conflict with a total shown in the credit and on any other stipulated document.
  • When a credit contains a non‐documentary condition, compliance with such condition need not be evidenced on any stipulated document. However, data contained in a stipulated document are not to be in conflict with the non‐documentary condition. For example, when a credit indicates “packing in plastic cases” without indicating that such data is to appear on any stipulated document, a statement on the packing list indicating a different type of packing is considered to be a conflict of data.

Container Number not in Accordance with the Bill of Lading Discrepancy

container number discepancy

Container number is a unique reference number assigned to a freight container so that the container can be traced and tracked by the government authorities, carriers, shippers and freight forwarders throughout its journey.

Determining the correct container number which belongs to a specific shipment is very important to the custom authorities and other governmental institutions.

As a result a container number will be mentioned on several documents including commercial invoice, consular invoice, bill of lading, packing list, health certificate and other shipping documents.(1)

In a commercial letter of credit transaction the container number indicated on the packing list and bill of lading must not conflict with each other.

The mention of a wrong container number on the packing list, which is inconsistent with the container number indicated on the bill of lading, is a reason for a valid discrepancy and rejection of the presentation.

According to the latest version of letter of credit rules a data in a document must not conflict with, data in that document, any other stipulated document or the credit.

As a result every container number indicated on each document must be identical to one another.

If the issuing bank finds out that the container number indicated on the packing list and bill of lading do not match, then the issuing bank will raise a discrepancy, which is known as packing list and bill of lading show different container number discrepancy.

Discrepancy Example: Container Number on the Packing List is not in Accordance with the Container Number on the Bill Of Lading

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: 20 mtons of Pure Polyester Powder Coating. Delivery Terms: CIF Port Metro Vancouver, Canada Incoterms 2010.

Field 46A: Documents Required:

  • Signed commercial invoice in triplicate issued by the beneficiary
  • Certificate of origin issued by a local chamber of commerce or any official trade organization confirming that goods are new brand and first hand and originated in China plus 3 copies.
  • Packing list in triplicate indicating quantity and gross weight, net weight, vessel name and container number.
  • Full set clean on board port-to-port marine bill of lading marked freight prepaid issued or endorsed to the issuing bank’s order in 3 originals and 3 non-negotiable copies.

The beneficiary presented a Packing List as shown on the below picture.

Packing List

packing list container number discrepancy

Discrepancy : Packing list states “Container Number: MSCU 120870-8”. On the other hand bill of lading states “Container Number: CMAC 400300-6”. Packing list and bill of lading are indicating different container numbers.

Reason for Discrepancy: The mention of wrong container number on the packing list which is inconsistent with the container number indicated on the bill of lading is a reason for discrepancy and rejection of the presentation.

Sources:

  1. What is a container number? | www.advancedontrade.com

Packing List and Certificate of Origin Show Different Net Weight or Gross Weight Discrepancy

packing list discrepancy example related to gross weight

Packing list and certificate of origin are two important trade documents.

The packing list is a detailed listing of the contents of the shipment and acts as a supporting document.

The certificate of origin verifies the country in which the goods to be exported were originally manufactured.

According to the letter of credit rules, the documents that reference to net weight or gross weight must not conflict with each other.

Along with a packing list and a certificate of origin, bill of lading, commercial invoice, weight list, inspection certificate, vessel certificate and insurance policy are the documents that are expected to contain a reference to the weight of the cargo.

According to the latest version of letter of credit rules a data in a document must not conflict with, data in that document, any other stipulated document or the credit.

As a result every gross weight and net weight values indicated on each document must be identical to one another.

If the issuing bank finds out that the gross weight or net weight indicated on the packing list and certificate of origin do not match, then the issuing bank will raise a discrepancy, which is known as packing list and certificate of origin show different net weight or gross weight discrepancy.

Discrepancy Example: Packing List and Certificate of Origin Show Different Net Weight or Gross Weight 

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: 500 pieces of Touch Screen LCD Monitors. Delivery Terms: FOB Port of Kaohsiung, Taiwan Incoterms 2010.

Field 46A: Documents Required:

  1. Signed commercial invoice in three originals and three copies indicating the L/C no. and contract no. 20140418.
  2. Certificate of origin in one original and one copy issued by chamber of commerce or any other competent authority.
  3. Packing list in three originals and three copies issued by beneficiary indicating quantity and gross and net weights.
  4. Full set 3/3 of clean on board ocean bills of lading marked “freight payable at destination” made out to order and blank endorsed notifying applicant with its full name and address.

The beneficiary presented a Packing List as shown on the below picture.

Packing List
packing list discrepancy gross weight not matching

Discrepancy: The packing list states that “Net weight: 10.000 KGS” and “Gross Weight: 12.000 KGS”. On the other hand, the certificate of origin states that “Net weight: 12.500 KGS” and “Gross Weight: 15.000 KGS”.

The packing list and the certificate of origin show both different net weight and gross weight.

Reason for Discrepancy: According to the latest version of letter of credit rules a 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.

Description of Goods is in Conflict with Other Documents Discrepancy

Description of Goods is in Conflict with Other Documents Discrepancy

The packing list is a trade document, which shows the contents of the shipment in detail and acts as a supporting document of the commercial invoice.

The packing list may provide a means of quickly identifying merchandise required for customs inspection, give a means of determining accurate weights and measurements, and give a means for inspectors to unpack quickly to check a piece count of the contents. (1)

A packing list should state description of goods in line with letter of credit and other documents presented under the same L/C.

It should be stressed that only commercial invoice must contain exact description of goods stated in the letter of credit.

Other documents including the packing list may indicate a description of goods in general terms but not in conflict with the goods description in the letter of credit.

If the issuing bank finds out that the packing list is showing different description of goods than any other document presented, then the issuing bank raises a discrepancy, which is known as description of goods on the packing list is in conflict with other documents.

Discrepancy Example: Description of Goods is in Conflict with Other Documents

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: 2500 Kgs Mild Dutch Cheese with 25% less salt content. Delivery Terms: FOB Amsterdam Port, Holland Incoterms 2010.

Field 46A: Documents Required:

  • Hand signed commercial invoice in three originals all duly stamped indicating description of goods as per proforma invoice no COMINV12345 dated 05.06.2014.
  • Certificate of origin ‘EUR.1’ in one original and one copy issued by competent authority showing Netherlands origin of the goods.
  • Packing list in three folds evidencing the content of each package of the shipped goods.
  • Full set clean on board bill of lading, issued to the order of applicant (with full address), marked freight collect, notify applicant (with full address – phone ++3122190700) (Bill of lading showing additional freight charges is not acceptable).
  • The beneficiary presented a Packing List as shown on the below picture.

Packing List

packing list description of goods discrepancy

Discrepancy: The letter of credit requires shipment of “Mild Dutch Cheese with 25% less salt content”, but the packing list describes the goods as “Light White French Cheese, Desalted”, the description is representing a change in nature, classification or category of the goods.

Reason for Discrepancy: Description of goods on the packing list should be shown in general terms but not in conflict with that stated in the letter of credit or another document.

Sources:

  1. Transportation Best Practices Manual, Canadian Manufacturers and Exporters Newfoundland and Labrador Division, prepared by PF Collins International Trade Services, 2003, Page:22

Discrepancies

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.