L/C Discrepancy

A discrepancy in a letter of credit refers to an inconsistency between the documents submitted by the beneficiary (usually the exporter) and the terms of the letter of credit, the International Chamber of Commerce's Uniform Customs and Practice for Documentary Credits (UCP600), or standard banking practices, which may lead the issuing bank to refuse payment. Common discrepancies include: missing document types, late shipment, amount exceeding the credit, incorrect bill of lading endorsement, insufficient insurance, mismatched shipping marks, etc. Usage scenario: After the exporter submits documents, the negotiating bank or issuing bank reviews them and finds discrepancies, then notifies the beneficiary and may require amendments or a letter of indemnity. Precautions: Once a discrepancy is accepted by the issuing bank, the applicant may use it to bargain down the price or refuse payment; the beneficiary should self-check before submission or request the customer to amend the letter of credit. Difference from 'soft clause': A soft clause is a term in the letter of credit that gives the issuing bank or applicant the unilateral right to release payment liability, while a discrepancy is an objective inconsistency after document submission. Difference from 'refusal to pay': A discrepancy is a common cause of refusal, but refusal can also arise from other reasons (e.g., fraud). In practice, exporters may attempt negotiation under indemnity or request the issuing bank to cable discrepancies, but the risk is high.