Description of Goods Discrepancy

Top 5 Discrepancies in a Commercial Invoice

Ozgur Eker (CDCS) Commercial Invoice Discrepancies, Letter of Credit Discrepancies , ,
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.

 

Description of Goods on the Multimodal Bill of Lading is Inconsistent Discrepancy

Ozgur Eker (CDCS) Letter of Credit Discrepancies, Multimodal Bill of Lading Discrepancies , , ,
Description of Goods on the Multimodal Bill of Lading is Inconsistent Discrepancy in Letters of Credit

According to the letter of credit rules, the commercial invoice must contain a description of goods, which corresponds to that indicated in the credit.

Other documents may or may not contain a description of goods.

If a document other than the commercial invoice, such as a bill of lading, packing list, certificate of origin, multimodal bill of lading etc., bears a description of goods, this should be in general terms but not inconsistent with that shown in the credit.

What everyone needs to know about the description of goods on a multimodal bill of lading is that the description of goods on a multimodal bill of lading can be indicated in general terms as long as it is not inconsistent with other documents and the letter of credit itself.

If the issuing bank finds out that the description of goods on the multimodal bill of lading is inconsistent with the letter of credit terms, then the issuing bank will issue a discrepancy, which is known as inconsistent description of goods.

Letter of Credit Discrepancy Example: Description of Goods is Inconsistent on the Multimodal 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 45-A: Description of Goods: Cocoa Powder (PCPN)

Field 46A: Documents Required: Full set of multimodal or combined transport document however named consigned to the order of Belfius Bank SA, notify applicant showing freight prepaid.

The beneficiary presented a multimodal bill of lading with the following data:

Multimodal Bill of Lading

Description of Goods: Second Quality Cocoa Powder

Discrepancy: Multimodal bill of lading shows a description of goods inconsistent with the letter of credit and other documents.

Letter of Credit Discrepancy Example: Description of Goods is Inconsistent on the Multimodal Bill of Lading

Reason for Discrepancy: Description of goods on the multimodal transport document may be shown in general terms not in conflict with that stated in the credit.

Description of Goods is in Conflict with Other Documents Discrepancy

Ozgur Eker (CDCS) Letter of Credit Discrepancies, Packing List Discrepancies , , , ,
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

Description of Goods Differs from the Letter of Credit Discrepancy

Ozgur Eker (CDCS) Certificate of Origin Discrepancies, Letter of Credit Discrepancies , , , ,
certificate of origin shows different description of goods

As per letter of credit rules and international standard banking practices a certificate of origin should not specify description of goods different than what is stated in the letter of credit.

A certificate of origin is to appear to relate to the invoiced goods, for example, by:

  • a goods description that corresponds to that in the credit or a description shown in general terms not in conflict with the goods description in the credit; or
  • referring to a goods description appearing in another stipulated document or in a document that is attached to, and forming an integral part of, the certificate of origin.

If the issuing bank finds out that the certificate of origin is showing different description of goods, the the issuing bank raises a discrepancy, which is known as description of goods on the certificate of origin differs from the letter of credit.

Discrepancy Example: Description of Goods Differs from the 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:

  • Leather Office Chairs 250 pcs. Delivery Terms: FOB Istanbul Port, Turkey Incoterms 2010.

Field 46A: Documents Required:

  • Original commercial invoice and five copies all duly signed in the name of applicant showing all the details of the goods and the prices as per proforma invoice no LY12141516 stating this letter of credit number.
  • Certificate of Origin in one original and two copies issued in the name of the applicant stating that the goods being exported are of Turkish Origin. This certificate of origin must be issued and authenticated by the chamber of commerce or union of industry in Turkey.
  • Full set of shipping company clean shipped on board marine bill of lading made out to the order of issuing bank notify applicant marked freight payable at destination.

The beneficiary presented a Certificate of Origin as shown on the below picture.

Certificate of Origin

certificate of origin sample

Discrepancy: The letter of credit requires shipment of “Leather Office Chairs”, but the certificate of origin describes the goods as “Imitation Leather Office Chairs”, which means that the description is representing a change in nature, classification or category of the goods.

Reason for Discrepancy: Description of goods on the certificate of origin should be shown in general terms but not in conflict with that stated in the letter of credit.

Commercial Invoice Shows Merchandise Not Called For Discrepancy

Ozgur Eker (CDCS) Commercial Invoice Discrepancies, Letter of Credit Discrepancies , , ,
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.

Description of Goods Discrepancy

Ozgur Eker (CDCS) Commercial Invoice Discrepancies, Letter of Credit Discrepancies , , , ,
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.