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Lc Discrepancies

Lc Discrepancies

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Published by: Rifat Khan on Jan 06, 2012
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Minimizing Discrepancies on Your Export Letter of Credit

Roland Satchell VP CDCS Jerry Glock VP CDCS

April 2010
Strictly Private and Confidential

Topics Discrepancy—Defined Document examination – Standard – UCP 600 Article 14 – Timeline—Article 16d Complying presentation—Article 15 UCP600 Rules relating to discrepancies – Article 16 Most common discrepancies How to avoid discrepancies Available options to presenter when documents are deemed discrepant 1 .

Discrepancies Discrepancy—Defined – Documents are considered discrepant when they do not meet the terms and condition of the credit and are not in accordance with examination standards Standard for document examination – Against the Letter of Credit and any amendments issued – Against UCP – Against standard banking practice—ISBP ICC Pub 681 – Against each other—The consistency rule 2 .

A nominated bank acting on its nomination. if stated. the description of the goods . In documents other than the commercial invoice. If a credit requires presentation of a document other than a transport document. This period is not curtailed or otherwise affected by the occurrence on or after the date of presentation of any expiry date or last date of presentation C. but must not conflict with. whether or not the documents appear on their face to constitute a complying presentation B. following the day of presentation to determine if a presentation is complying. need not to be identical to. 21. A presentation including one or more original transport documents subject to articles 19. Data in a document.services or performance. without stipulating by whom the documents to be issued or its data content. if any and the issuing bank shall each have a maximum of five banking days. may be in general terms not conflicting with their description in the credit F. the document itself and international standard banking practice. if any and the issuing bank must examine a presentation to determine. insurance document or commercial invoice. banks will accept the document as presented if its contents appear to fulfill the function of the required document and otherwise complies with sub-article 14(d) 3 . 23. data in that document. 22. confirming bank. on the basis of the documents alone. any other stipulated document or the credit E. A nominated bank acting on its nomination. confirming bank. but in any event not later then the expiry date of this credit D. when read in context with the credit. 20. 24 or 25 must be made by or on behalf of the beneficiary not later than 21 calendar days after the date of shipments described in these rules.UCP Article 14 A.

A document presented but not required by the credit will be disregarded and may be returned to the presenter H. 21. telephone. When the address of the beneficiary and the applicant appear in any stipulated document they need not be the same as those stated in the creditor in any other stipulated document. A document may be dated prior to issuance date of the credit. 23 or 24 of these rules 4 . they must be stated as in the credit K. A transport document may be issued by any party other then the carrier. 20. 20. but must not be dated later than its date of presentation J. but must be within the same country as the respective addresses mentioned in the credit. 22. 22. 21. master or charterer provided that the transport document meets the requirement of articles 19. 23. owner. 24 or 25. The shipper or consignor of the goods on any document to need not be the beneficiary of the credit L. Contact details (telefax. when the address and contact details of the applicant appear as part of the consignee or notify party details on a transport document subject to articles 19. However. If a credit contains a condition without stipulating the document to indicate compliance with the conditions. email and the like) stated as part of the beneficiary and the applicant’s address will be disregarded. banks will deem such condition as not stated and will disregard it I.Article 14 (Cont’d) G.

it must honor or negotiate and forward the documents to the issuing bank C. When a nominated bank determines that a presentation is complying and honors or negotiates. When a confirming bank determines that a presentation is complying. it must forward the documents to the confirming bank or issuing bank 5 . it must honor B.Article 15 Complying Presentation A. When an issuing bank determines that a presentation is complying.

Waiver and Notice A. it may in its sole judgment approach the applicant for a waiver of the discrepancies. a confirming bank. a confirming bank. it may refuse to honor or negotiate B. or the issuing bank determines that a presentation does not comply. When a nominated bank acting on its nomination. extend the period mentioned in sub-article 14 (b) C. When an issuing bank determines that a presentation does not comply. This does not. however. or the issuing bank decides to refuse to honor or negotiate. if any.UCP Article 16 Discrepant Documents. if any. When a nominated bank acting on its nomination. it must give a single notice to that effect to the presenter 6 .

or b. That the bank is returning the documents. Each discrepancy in respect of which the bank refuses to honor or negotiate. That the bank is refusing to honor or negotiate. or c. and ii. That the bank is acting in accordance with instructions previously received from the presenter 7 . a. That the issuing bank is holding the documents until it receives a waiver from the applicant and agrees to accept it. and iii.Article 16 (Cont’d) The notice must state i. or receives further instructions from the presenter prior to agreeing to accept a waiver. or d. That the bank is holding the documents pending further instructions from the presenter.

The notice required in sub-article 16 (c) must be given by telecommunication or. if that is not possible. If an issuing bank or a confirming bank fails to act in accordance with the provisions of this article. A nominated bank acting on its nomination. it shall then be entitled to claim a refund.Article 16 (Cont’d) D. When an issuing bank refuses to honor or a confirming bank refuses to honor or negotiate and has given notice to that effect in accordance with this article. by other expeditious means no later than the close of the fifth banking day following the day of presentation E. after providing notice required by sub-article 16 (c) (iii) (a) or (b). return the documents to the presenter at any time F. it shall be precluded from claiming that the documents do not constitute a complying presentation G. with interest. if any. a confirming bank. of any reimbursement made 8 . or the issuing bank may.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Category—Description Discrepancy on Invoice Discrepancy on Bill of lading Incomplete Presentation Discrepancy on—AWB Discrepancy on Insurance document Discrepancy on Drafts Discrepancy due to Late presentation Discrepancy on—FCR Discrepancy on Packing List Discrepancy on Cert of origin Partial Shipment Attempted But Not Permitted Discrepancy due to Late Shipment Discrepancy on Beneficiary Certificate Discrepancy due to L/C Expiry Discrepancy related to CCVO Discrepancy due to Overdrawn LCs Discrepancy on beneficiary Name Discrepancy on Analysis Certificate Discrepancies due to language used on the documents Discrepancy on Phytosanitary Certificate Discrepancy due to Incorrect L/C no Discrepancy on Weight Certificate Discrepancy on Inspection Certificate Discrepancy on—Cargo Receipt Discrepancy due to over shipment 9 . No.Discrepancies—Most Common Types Sr.

The “Agent” for the carrier or carrier itself – Bill of Lading not endorsed – Omits to indicate how many originals were issued Place of receipt different from port of loading – 44A. This provision also applies whenever loading on board the vessel is indicated by pre-printed wording on the bill of lading 10 . Place of Taking in Charge/Dispatch from …/Place of Receipt – 44E. Example: Bill of lading is signed. but they are not identifying the person who signed it.Most Common Discrepancies Invoice: Description of goods – Tend to restate per L/C regardless of quantity being shipped – INCO Terms not per requirements of the L/C. even if they have been loaded on the vessel named in the bill of lading. Port of Discharge/Airport of Destination – 44B. Place of Final Destination/For Transportation to …/Place of Delivery Per UCP500 (not specifically stated in UCP600. but the understanding carries over) – If the bill of lading indicates a place of receipt or taking in charge different from the port of loading. Port of Loading/Airport of Departure – 44F. the on board notation must also include the port of loading stipulated in the Credit and the name of the vessel on which the goods have been loaded. Indicates additional amounts not covered under Inco term stated within L/C Bill of Lading – Signing capacity/identity of the carrier/agent: Bills of Lading omits to identify the capacity of the signer.

Example: This could include bills of lading where only 2/3 were presented and the L/C requires a full set which is all originals that have been issued as stated on the bill of lading itself Late Presentation—Letter of Credit stipulates that documents must be presented within 21 days of shipment date.10%) Letter of Credit reference number incorrect. This may also includes any allowances (5%. L/C requires that document indicate the reference number. Documents were presented after the 21 days Transport document not dated Letter of Credit overdrawn.Most Common Discrepancies (Cont’d) Incomplete Presentation—Certain documents required by the Letter of Credit are missing. the reference number is missing a number or is transposed Insurance document omits the name of the vessel or is dated after the shipment date Partial Shipment made whereas Letter of Credit prohibits it Weight on Bill of Lading and Commercial invoice are inconsistent 11 . In most cases. Documents presented for more than the amount Letter of Credit allows.

Documents are still to be presented within the stipulated period 3) Forward Documents to Issuing Bank: documents are sent to the issuing bank requesting their approval to honor 4) Contact Issuing Bank via SWIFT for Approval: a message is sent to the issuing bank requesting their approval to honor 12 . Documents are still to be presented within the stipulated period 2) Return Documents for Correction: bank will return some or all of the documents and allow for presentation of corrected documents.Options available to presenter 1) Hold Documents Awaiting Correction: bank will hold the documents and allow for presentation of corrected documents.

Q&A For any questions related to letters of credit such as payment status.csu@citi. please contact: Trade.com Tel:866-498-8670 Fax:813-649-8378 13 . discrepancies and for clarification of the terms of credit.

Highlights of Citi’s unique role in promoting sustainability include: (a) releasing in 2007 a Climate Change Position Statement.000 MWh of carbon neutral power for our operations over the last three years. and engage with stakeholders to advance shared learning and solutions.[TRADEMARK SIGNOFF: add the appropriate signoff for the relevant legal vehicle] © 2010 Citibank. renewable energy & mitigation .A. N. power clients to evaluate and address carbon risks in the financing of electric power projects. (d) purchasing more than 234. (f) producing equity research related to climate issues that helps to inform investors on risks and opportunities associated with the issue. and (g) engaging with a broad range of stakeholders on the issue of climate change to help advance understanding and solutions.S. reduce our own environmental footprint. (b) targeting $50 billion over 10 years to address global climate change: includes significant increases in investment and financing of renewable energy. clean technology. We work closely with our clients. the first US financial institution to do so. (c) committing to an absolute reduction in GHG emissions of all Citi owned and leased properties around the world by 10% by 2011. and other carbon-emission reduction activities. NGOs and other partners to finance solutions to climate change. All rights reserved. Citi and Citi and Arc Design are trademarks and service marks of Citigroup Inc. to mitigate those risks. peer financial institutions. efficiency. or its affiliates and are used and registered throughout the world. develop industry standards. where appropriate. Citi works with its clients in greenhouse gas intensive industries to evaluate emerging risks from climate change and. Citi believes that sustainability is good business practice. a framework for banks and their U. (e) establishing in 2008 the Carbon Principles.

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