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L/C discrepancy
A conflict between the documents presented and the credit terms, between documents themselves, or with UCP 600 – typos, late shipment or late presentation, missing endorsement, a different description of goods, or a bill of lading that is not “clean”. With discrepant documents the bank is released from its obligation and payment depends on the buyer waiving the discrepancy, which weakens the seller’s position. Checking the draft credit before issue and pre-checking documents are the best defences.
Letter of credit (L/C) L/C
A documentary payment method in which the buyer’s bank (issuing bank) undertakes to pay the seller against timely presentation of complying documents specified in the credit – bill of lading, invoice, certificate of analysis, certificate of origin and so on. Banks deal only with documents, not goods, so the credit terms must match the sales contract exactly and be achievable. It is the most common secure payment method for large raw material deals and first-time counterparties.