A discrepancy is a difference between a presented document and a letter of credit's own terms, or between two presented documents, and the standard rules for letters of credit let a bank refuse payment over even one, however small. Anyone preparing or checking documents needs to know the discrepancies that recur most often, since a bank does not correct them on the beneficiary's behalf.
This matters to Delta Garments and Northline Apparel on Order B (the jeans), since a discrepancy found after shipment does not stop the goods moving, but it does stop the payment the credit was meant to guarantee. Sara and Mona both want the documents checked before presentation, not after a refusal.
Without this skill, a factory can ship goods correctly and still not be paid on time, because the papers describing the shipment do not match the letter of credit's own wording exactly. This lesson names the discrepancies that recur most often, states the rule for why even a small one is enough, and works through Order B (the jeans)'s own documents as Northline's own bank reviews them.
You need: lessons 15.2.1 and 15.2.2, since this lesson assumes you already know what a letter of credit promises and which of its own terms a factory must have already read and accepted.
By the end of this lesson you can:
Not covered here: fixing a letter of credit's own terms in advance, through a formal amendment, is lesson 15.2.4's own subject; assembling the full document checklist is lesson 15.2.5's own subject.
| Term | Meaning |
|---|---|
| Discrepancy | A difference between a presented document and a letter of credit's own terms, or between two of the presented documents themselves, that a bank can refuse payment over. |
| Complying presentation | A set of shipping documents that matches a letter of credit's own terms exactly, entitling the beneficiary to payment. |
| Document mismatch | A disagreement between two documents describing the same shipment, such as a quantity that differs between the invoice and the packing list. |
| Commercial invoice | The document that states the price and value of the goods being shipped, used by customs and by the bank. |
| Packing list | The document that states how the goods are packed: how many pieces are in each carton, and how many cartons in total. |
| Final inspection report | The single document that records a lot's identity, its sampling plan, its defect tally, and its signed overall result, so a buyer can act on it without further questions. |
The internationally standard rules for letters of credit require a bank to examine presented documents on their face, checking whether they comply with the letter of credit's own terms and with each other, without inspecting the actual goods that have shipped. This means a bank's decision to pay is based entirely on paper, and a single discrepancy, a date, a quantity, a missing signature, a spelling difference between two documents naming the same party, is enough grounds for refusal, whatever the physical condition or correctness of the goods themselves. The goods can be perfect and still unpaid on time, because the papers describing them did not match.
| What can differ | The shapes you will meet | Why it matters |
|---|---|---|
| A late shipment against the letter of credit's own latest shipment date, as on a domestic, made-to-order order like Order B (the jeans) | The bill of lading's own loading date falls after the date the letter of credit fixed, even by a single day. | The rule allows refusal for this alone; a shipment that is otherwise perfect is still late on paper if the date printed on the bill of lading says so. |
| Documents that do not match each other, most often the invoice, packing list and bill of lading disagreeing on quantity or description | One document states 3,000 pieces, another states 2,998, or one names "jeans" and another names "trousers" for the same goods. | Banks compare documents against each other as well as against the letter of credit; an internal mismatch is a discrepancy even if every individual document is otherwise correctly filled in. |
| A missing or incorrect signature, endorsement or certification the letter of credit itself required | A final inspection report is unsigned, or a document is not endorsed the way the letter of credit specifies. | A document is examined for whether it meets every stated requirement exactly, not for whether it is close enough or clearly genuine in substance. |
| An expired letter of credit at the time documents are actually presented, even if shipment itself was on time | Goods shipped inside the shipment date, but the documents reach the bank after the letter of credit's own expiry date. | Confirms that both dates named in lesson 15.2.2, the shipment date and the expiry date, must be met; meeting one does not excuse missing the other. |
Once Delta Garments ships Order B (the jeans), Mona assembles the documents for presentation: the commercial invoice, the packing list, the bill of lading, and the final inspection report, exactly as the letter of credit's own required-documents list, read in lesson 15.2.2, states. Northline's own issuing bank examines the set on its face before paying, checking each document against the letter of credit and against the other documents in the set.
The worked numberOrder B's own total order value under its letter of credit is USD 29,400 (9.80 × 3,000 pieces, from lesson 15.2.1's own worked number).
A common mistake is treating a minor difference, two pieces held back for a repair, a shortened company name on one document, a date one day later than another, as too small to matter, on the assumption a bank will read the intent behind the paperwork rather than the paperwork itself. The internationally standard rules for letters of credit do not ask a bank to judge intent; they ask it to check compliance, and a bank that finds any discrepancy is entitled to refuse the whole presentation, leaving the beneficiary to renegotiate payment on weaker terms for a shipment that has already left the factory.
A bank pays against paper, not against the actual goods on the ship, so it checks whether the papers match the letter of credit's own words and match each other, and it is allowed to say no over even one small difference. The most common differences are a shipment that is a day late by the date on the bill of lading, two documents that state different numbers or names for the same shipment, a missing signature the letter of credit asked for, and documents that reach the bank after the letter of credit's own final date. None of these mean the goods themselves are wrong; they mean the paperwork describing the goods does not exactly match what the bank was told to expect, and that alone is enough for the bank to refuse to pay until it is fixed.
Sara, the buyer at Northline Apparel, is informed by Northline's own issuing bank that a discrepancy has been found in the documents Delta Garments presented for Order B (the jeans).
The document Sara reads:
Should Sara instruct her own bank to refuse payment outright over the mismatch, or waive the discrepancy since she does not dispute the shipment itself? Decide before opening the answer.
Sara should instruct her own bank to waive the discrepancy and proceed with payment, since she does not dispute the shipment.
First fact. The rule in this lesson is that a bank may refuse a non-complying presentation; it does not require the applicant to insist on that refusal once notified, and Sara, as the applicant, is entitled to accept the documents as presented despite the discrepancy.
Second fact. Refusing payment outright over a 2-piece difference Northline does not actually dispute would delay a shipment already in transit and correct in substance, without protecting Northline from any real loss, since the two documents' own mismatch does not change what physically shipped.
Waiving the discrepancy lets Order B (the jeans)'s own USD 29,400 payment proceed without further delay; insisting on refusal instead would cost both sides time over a difference Sara has already confirmed does not concern her.
Order B (the jeans)'s own total order value under its letter of credit is USD 29,400 (9.80 × 3,000 pieces, from lesson 15.2.1's own worked number). While a discrepancy notice is outstanding, none of that USD 29,400 is paid under the letter of credit, whatever the goods' own condition; resolving it, whether by correcting the documents before a second presentation or by the applicant waiving it as Sara does here, is what releases payment, and every day the discrepancy stays open is a day the factory's own working capital for Order B (the jeans) remains tied up in a shipment it has already sent.
Continue the Letter of credit document checklist by adding, for each required document, a column confirming it has been checked against the letter of credit itself and against every other document in the set, before presentation. Record any discrepancy found, and whether it was corrected or waived by the applicant, so the checklist shows the presentation's own final status. Download link: `templates/T15-C02-letter-of-credit-document-checklist.xlsx`.
1. Why can a bank refuse payment over a single discrepancy, even when the shipped goods are correct?
2. In the worked scenario, why is Sara entitled to have her bank pay Delta Garments despite the bank's own discrepancy notice?
| EN | AR | FR | TR | Meaning |
|---|---|---|---|---|
| Discrepancy | مخالفة مستندية | Réserve (irrégularité documentaire) | Belge uyumsuzluğu (rezerv) | A difference between a presented document and a letter of credit's own terms, or between two of the presented documents themselves, that a bank can refuse payment over. |
| Complying presentation | التقديم المطابق | Présentation conforme | Uygun ibraz | A set of shipping documents that matches a letter of credit's own terms exactly, entitling the beneficiary to payment. |
| Document mismatch | عدم تطابق المستندات | Discordance entre documents | Belge uyuşmazlığı | A disagreement between two documents describing the same shipment, such as a quantity that differs between the invoice and the packing list. |
| Commercial invoice | الفاتورة التجارية | Facture commerciale | Ticari fatura | The document that states the price and value of the goods being shipped, used by customs and by the bank. |
| Packing list | قائمة التعبئة | Liste de colisage | Çeki listesi | The document that states how the goods are packed: how many pieces are in each carton, and how many cartons in total. |
| Final inspection report | تقرير الفحص النهائي | Rapport d'inspection finale | Nihai kontrol raporu | The single document that records a lot's identity, its sampling plan, its defect tally, and its signed overall result, so a buyer can act on it without further questions. |
The next lesson teaches how to fix a letter of credit's own terms, through a formal amendment, before a discrepancy like the ones named here is allowed to happen. Back to the course map