Letter of Credit Discrepancies

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

Certificate of Origin Discrepancies

Ozgur Eker (CDCS) Certificate of Origin Discrepancies, Letter of Credit Discrepancies , ,
certificate of origin discrepancies

Certificate of Origin can be regarded as an official document. The certificate of origin could be issued on paper or electronic form.

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

Although the certificate of origin could be issued by an exporter without requiring any additional certification, in most cases, the customs office in the importing country requires a certificate of origin to be issued either by

  • the chamber of commerce (Ordinary Certificates of Origin) or
  • custom authorities (Preferential Certificates of Origin).

Letter of credit rules allow presentation of all types of certificates of origin.

On this page, you can find most common certificate of origin discrepancies under letter of credit transactions.

Certificate of Origin Discrepancies

Important Definitions Regarding the Certificate of Origin

  • According to UCP 600, latest letter of credit rules, and international standard banking practices a certificate of origin should be issued by the entity specified in the letter of credit.
  • When a letter of credit does not state the name of an issuer of the certificate of origin, any institution could issue a certificate of origin.
  • When a credit requires the presentation of a certificate of origin, this will be satisfied by the presentation of a signed document that appears to relate to the invoiced goods and certifies their origin.
  • When a letter of credit demands the presentation of a specific form of certificate of origin such as a EUR1, ATR or GSP Form A, only a document in that specific form is to be presented. For example if credit calls for a EUR1, beneficiary can not present an ordinary certificate of origin issued by the chamber of commerce.
  • Consignee information, when shown, is not to conflict with the consignee information in the transport document. However, when a credit requires a transport document to be issued “to order”, “to the order of shipper”, “to order of issuing bank”, “to order of nominated bank (or negotiating bank)” or “consigned to issuing bank”, a certificate of origin may show the consignee as any entity named in the credit except the beneficiary.
  • When a credit has been transferred, the first beneficiary may be stated to be the consignee.

Origin of Goods Inconsistent with the Letter of Credit Discrepancy

Ozgur Eker (CDCS) Certificate of Origin Discrepancies, Letter of Credit Discrepancies , , ,
certificate of origin inconsistent certificate of origin discrepancy

A certificate of origin should certify the origin of the goods.

When a letter of credit indicates the origin of the goods and requesting presentation of a certificate of origin, any reference to the origin of goods on the certificate of origin or another document, is not to conflict with the stated origin.

For example, when a letter of credit indicates “origin of the goods: Japan”, a certificate of origin or a statement on any stipulated document indicating a different origin of the goods is to be considered a conflict of data, discrepancy.

As per letter of credit rules and international standard banking practices a certificate of origin must certify the origin of the goods as indicated in the letter of credit.

If the issuing bank determines that the certificate of origin is not reflecting correct origin of goods, then the issuing bank raises a discrepancy, which is known as origin of goods inconsistent with the letter of credit.

Discrepancy Example: Origin of Goods Inconsistent with 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:

Aluminum Round Bars 15000 kgs. Delivery Terms: FOB Port of Jebel Ali, Dubai, UAE Incoterms 2010.

Field 46A: Documents Required:

  • Duplicates of signed and stamped commercial invoices issued by the beneficiary stating this letter of credit number.
  • Certificate of Origin in 1 original and 2 copies issued by any chamber of commerce stating that goods are of United Arab Emirates origin.
  • Full set of original bill of lading clean shipped on board established to the order of issuing bank notify applicant marked freight collect.

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

Certificate of Origin

certificate of origin example of wrong country of origin discrepancy

Discrepancy: Certificate of origin should have shown that the goods are of United Arab Emirates origin, but the certificate of origin shows that the goods are Turkish origin, which is a clear discrepancy.

Reason for Discrepancy: A certificate of origin should certify the origin of the goods as indicated in the letter of credit.

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.

Certificate of Origin not Issued by the Chamber of Commerce Discrepancy

Ozgur Eker (CDCS) Certificate of Origin Discrepancies, Letter of Credit Discrepancies , , ,
certificate of origin not issued by chamber of commerce discrepancy

The certificate of origin verifies the country in which the goods to be exported
were originally manufactured.(1)

The issuing body of the certificate of origin could be the government authority or a body empowered by the government.

Furthermore, the producer, manufacturer or exporter could also issue a certificate of origin by himself, either in self-issued certificate of origin or declaration of origin format.(2)

In regards to letter of credit rules, a certificate of origin is to be issued by the entity stated in the credit.

If the issuing bank determines that the certificate of origin is not issued as per letter of credit terms, then the issuing bank raises a discrepancy, which is known as certificate of origin is not issued by the entity as indicated in the letter of credit.

Discrepancy Example: Certificate of Origin not Issued by the Chamber of Commerce

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: Motor Vehicle Parts 3500 pieces. As stated on order sheet 101, dated 20th April 2014. Delivery Terms: DAT Port of Bangkok Incoterms 2010.

Field 46A: Documents Required:

  • Signed and stamped commercial invoices in three originals issued by the beneficiary stating this letter of credit number.
  • 1 Original Certificate of Origin issued by the chamber of commerce
  • Full set of original bill of lading shipped on board established to the order of Bangkok Bank Public Company Limited notify applicant company marked freight prepaid.

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

certificate of origin not issued by chamber of commerce discrepancy

Discrepancy: Certificate of Origin should have been issued by the chamber of commerce as per letter of credit terms, but the Combined Certificate of Origin and Value presented by the beneficiary has been issued by beneficiary’s himself.

Reason for Discrepancy: A certificate of origin must be issued by the organization specified in the letter of credit.

When a credit requires the presentation of a certificate of origin issued by a Chamber of Commerce, a certificate of origin would be acceptable which is issued by

  • Chamber of Commerce,
  • Chamber of Industry,
  • Association of Industry,
  • Economic Chamber,
  • Customs Authorities,
  • Department of Trade or the like…

But certificate of origin issued by the beneficiary instead of a chamber of commerce is not acceptable.

Certificate of Origin Presented Instead of a GSP Form A Discrepancy

Ozgur Eker (CDCS) Certificate of Origin Discrepancies, Letter of Credit Discrepancies , ,
certificate of origin discrepancy

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

The certificate of origin could be issued on paper or electronic form.

The issuing body of the certificate of origin could be the government authority or a body empowered by the government.

Furthermore, the producer, manufacturer or exporter could also issue a certificate of origin by himself, either in self-issued certificate of origin or declaration of origin format.

Certificates of origin can be classified under two main groups:

  • Ordinary Certificates of Origin
  • Preferential Certificates of Origin

When a credit requires the presentation of a specific form of certificate of origin such as a GSP Form A, only a document in that specific form is to be presented.

Examples of Preferential Certificates of Origin: (Specific Form of Certificates of Origin)

  • Certificate of Origin GSP Form A
  • CAFTA-DR Certificate of Origin
  • North American Free Trade Agreement (NAFTA) Certificate of Origin
  • EUR1 Form Movement Certificate
  • ATR Movement Certificate

As per letter of credit rules and international standard banking practices a certificate of origin must be presented as outlined in the letter of credit.

If a beneficiary of a letter of credit presents a certificate of origin, which is not prepared in that specific form, banks raise a discrepancy, which is known as certificate of origin not presented in a specific form; such as that an ordinary certificate of origin presented instead of a GSP Form A.

Discrepancy Example: Certificate of Origin Presented Instead of a GSP Form A:

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: Soccer uniforms 12500 pieces. As stated on order sheet 41, dated 10th March 2014. Delivery Terms: FOB Port of Chittagong 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.
  • Original GPS FORM A Certificate of Origin signed by the exporter, authorized by the appropriate customs authorities under their stamp and signature dated not later than the transport document date and free of any remark such as “Simplified procedure” or words similar effect.
  • Full set of original bill of lading clean on board established to the order of The Australia and New Zealand Banking Group Limited notify applicant marked freight collect.

The beneficiary presented a certificate of origin as shown on the below picture.

Certificate of Origin

certificate of origin discrepancy gsp form a

Discrepancy: The letter of credit clearly requests a special form of a certificate of origin, which is GSP Form A. The beneficiary should have presented a specific GSP Form A certificate origin, whereas ordinary certificate of origin has been presented, instead.

Reason for Discrepancy: When a credit requires the presentation of a specific form of certificate of origin such as a GSP Form A, only a document in that specific form is to be presented.

Commercial Invoice Discrepancies

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

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

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

Proforma Invoice Presented Instead of a Commercial Invoice Discrepancy

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