Glossary / Discrepancy in a Letter of Credit
Discrepancy in a Letter of Credit — explained
A discrepancy in a letter of credit is the bank's finding that the documents presented do not fully comply with the terms of the credit or the UCP 600 rules, and its notice of that non-conformity to the relevant party; a discrepancy does not automatically mean payment will be refused — it makes payment conditional on the applicant's acceptance.
The discrepancy is raised by the bank examining the presented documents (usually the nominated/confirming bank to which the documents were presented, or the issuing bank). Under UCP 600, the bank must examine the documents and notify any discrepancy within a maximum of five banking days from the date of presentation; this period runs independently of the credit's expiry date. Discrepancies can arise from different causes such as inconsistencies in dates, amounts, signatures, or the bill of lading or insurance document; not every discrepancy carries the same weight.
A discrepancy is the bank's formal notice of a difference it finds when examining the documents against the standard set out in UCP 600. The bank does not pass judgement here — it only identifies the issue; the outcome (acceptance or refusal) depends on the decision of the party that opened the credit (the applicant).
The non-conformities that most often cause a discrepancy are: inconsistencies in dates, amounts or quantities between documents; missing or incorrect signatures; a bill of lading or insurance document that does not match the terms of the credit; presentation made after the period specified in the credit (late presentation). Late presentation alone is a ground for discrepancy — even if the content of the document is entirely correct, it becomes discrepant once the deadline has passed.
When You Encounter It
A discrepancy comes up at the presentation stage, when the documents prepared after shipment (the invoice, bill of lading, insurance policy, etc.) are submitted to the bank. The bank examines the documents within the five-banking-day period set out in UCP 600 Article 14; during this period payment is pending — neither refused nor approved yet.
If a discrepancy is identified, the bank notifies the relevant party (usually through the presenting party's bank). If the bank wants to refuse the documents outright, it must send a separate, formal refusal notice under UCP 600 Article 16 — the discrepancy notice and this refusal notice are not the same step.
Often Confused With
| Comparison | Difference |
|---|---|
| Discrepancy in a Letter of Credit vs Refusal Notice | A discrepancy is the stage at which the bank notifies that it has found a non-conformity in the documents. A refusal notice, on the other hand, is the separate, formal notice the bank sends under UCP 600 Article 16 if it decides to refuse the documents outright. A discrepancy is a finding; a refusal notice is the bank's formal decision made on the basis of that finding. |
Frequently Asked Questions
What is a discrepancy in a letter of credit?+
It is the bank's finding and notice that the documents presented do not fully comply with the terms of the letter of credit or the UCP 600 rules. A discrepancy does not mean payment has been definitively refused.
Who raises a discrepancy?+
It is raised by the bank examining the presented documents — usually the nominated bank to which the documents were presented, the confirming bank if there is one, or the issuing bank directly. The decision is based on the bank's document examination.
Is late presentation also a ground for discrepancy?+
Yes. Even if the content of the documents is entirely correct, presenting them after the deadline set out in the credit is, on its own, a ground for discrepancy; it is one of the standard non-conformity types defined in UCP 600.
What does a letter of credit discrepancy notice mean?+
It is the bank's formal notice to the relevant party (usually through the presenting party's bank) of a non-conformity found in the presented documents. This notice is not a refusal decision — it is an announcement of the finding.
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Related Terms
Where This Term Comes Up in Our Work
Discrepancy in a Letter of Credit is one of the documents we track in our letter of credit and banking operations service.
Letter of Credit and Banking OperationsChecking letter of credit conditions and preparing documents.Source
ICC Academy (International Chamber of Commerce) — UCP 600 Guide — Official ICC source covering the UCP 600 rules on the document examination period (Article 14) and discrepant documents/refusal notice (Article 16).
Last updated: August 15, 2026