Letter of Credit and Banking Operations

The shipment can physically continue; what stops is the payment. A discrepancy is the bank identifying a point in the documents that does not comply with the letter of credit conditions, and payment becomes dependent on the applicant accepting the discrepancy. At this stage there are two paths: correcting a rectifiable document within its time limit, or obtaining acceptance from the applicant. Since most discrepancies arise from document inconsistency, the real solution is the check made before presentation.

The condition is corrected before the shipment begins, through an amendment request via the applicant; correcting it after the shipment is much harder. Common examples are a loading date that cannot be met, a document that cannot be obtained, or wording that does not match transport practice. This is why the letter of credit wording is read from start to finish on the day it is opened; staying silent means accepting the condition.

The period is determined by the letter of credit wording. If the wording does not separately specify a period, international practice (UCP 600) applies 21 calendar days from the shipment date; however, presentation must in every case be made within the letter of credit's validity period. The wording may set a shorter period, in which case the wording is what binds. In practice, document preparation runs in parallel with the shipment and is not started only once the shipment is finished.

A presentation made after the expiry is not accepted as conforming, and payment falls outside the letter of credit's security; the receivable becomes a matter of bilateral relations with the buyer. To reduce this risk, when the transport document will be issued is clarified with the carrier while the shipment is being planned. If a delay is anticipated, an extension is requested from the applicant in good time — a request made after the expiry has passed is mostly too late.

No, a discrepancy is not an automatic rejection. The bank reports the discrepancy and asks the applicant; if the applicant accepts, payment is made. If it is not accepted, the documents remain at the disposal of the party presenting them, and collection reverts to a bilateral arrangement. In other words, a discrepancy makes payment uncertain, not impossible — and the negotiating leverage shifts to the buyer at that point.

Yes, because in these products the shipment schedule and the document schedule are tightly linked. For fresh produce the loading date depends on the harvest, and for marble it depends on block preparation and the vessel's sailing; if the dates and document conditions in the wording do not match this reality, a discrepancy is written in from the start. When the wording is read at the contract stage, an amendment request is still cheap — it is not, once the shipment has begun.