Discrepancy refers to a situation in letter of credit (L/C) settlement where the documents submitted by the beneficiary are inconsistent with the terms of the L/C, or inconsistent among themselves, potentially leading the issuing bank to refuse payment. Common discrepancies include: shipment date later than stipulated, incorrect consignee on the bill of lading, insufficient insurance coverage, invoice description inconsistent with the L/C, missing required signatures or endorsements, etc. Usage scenarios are concentrated in the document presentation and negotiation stage under an L/C. Points to note: once a discrepancy is raised by the issuing bank, the beneficiary will face risks of refusal of payment, price reduction, or even cargo detention; in practice, one should strictly review the L/C, prepare documents in advance, and allow sufficient time for document corrections. Unlike a "defect," a discrepancy specifically refers to a documentary inconsistency on the face of the documents under an L/C and does not involve the actual quality of the goods; unlike "refusal of payment," a discrepancy is the reason for refusal rather than the result. Banks handling discrepancies generally follow the principle of "compliance between documents and the L/C, and compliance among documents," and have the right to charge discrepancy fees.
📝 Examples
1. The bill of lading submitted by the beneficiary shows a shipment date of March 10, 2025, while the letter of credit stipulates that the latest shipment date is February 28, 2025. The issuing bank therefore raised a discrepancy and refused payment. (This illustrates that a shipment date discrepancy leads to refusal of payment.)
2. Upon examining the documents, the negotiating bank found that the insured amount on the insurance policy was 100% of the invoice value, whereas the letter of credit required at least 110%. It therefore notified the beneficiary of the discrepancy and required the insurance policy to be amended before resubmitting the documents. (This illustrates that insufficient insurance coverage constitutes a discrepancy.)
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