Our contributor, Xavier Fornt, identifies common discrepancies in letters of credit presentations and provides practical guidance on avoiding errors in documentation to ensure compliance with ISBP and UCP 600 standards.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of ICC Academy or ICC.
The International Standard Banking Practice (ISBP) for the Examination of Documents under UCP 600 is a very useful ICC Publication, which was first approved by the ICC Banking Commission in 2002 and published in 2003 (Publication 645), later updated in 2007 (Publication 681), and again in 2013 (Publication 745) and 2023 (Publication 821).
International Standard Banking Practice – ISBP
As stated in the Preliminary Considerations, this publication is to be read in conjunction with UCP 600 and not in isolation. ISBP does not modify UCP 600.
However, despite all efforts made, a significant number of presentations under letters of credit are found to contain discrepancies, and these discrepancies can delay payment or even lead to refusal by the issuing bank. Understanding the most common issues helps minimise risk and ensure smooth transactions.
UCP 600 and ISBP 821 Practitioner
Before issuance
Some of the actions aimed at minimising risks must be carried out before the letter of credit is issued, when the commercial forces of seller and buyer negotiate and agree on quantities, prices, and transaction deadlines. However, they rarely agree on the necessary documents, their content, or who should issue or sign them. This opens the door to complications. It would be very helpful, therefore, to agree on these points beforehand.
Before analysing the most frequent discrepancies in detail, let’s reflect on ambiguity as the fastest path to disaster. Oversimplifying the credit terms leaves the door open to ambiguity, and with it, conflict is guaranteed.
Importance of documents and commercial invoice
Importance of documents
Unlike other documents under a credit, where banks will accept presentation even without stipulated issuer or data content, UCP 600 holds the commercial invoice, transport document, and insurance document to more specific standards, as stated in Article 14, sections e. and f.:
e. In documents other than the commercial invoice, the description of the goods, services or performance, if stated, may be in general terms not conflicting with their description in the credit.
f. If a credit requires presentation of a document other than a transport document, insurance document or commercial invoice, without stipulating by whom the document is to be issued or its data content, banks will accept the document as presented if its content appears to fulfil the function of the required document and otherwise complies with sub-article 14 (d).
Errors in the commercial invoice
Invoices frequently include mistakes in currency, unit price, total value, or description of goods. Even minor spelling or numerical errors can lead to discrepancies if they differ from the credit. The ISBP Publication dedicates sections C1) to C15) to invoices.
Discrepancies in transport documents
Errors in the bill of lading, airway bill, or other transport documents are common. Examples include missing signatures, incorrect shipment dates, or unauthorised carriers. Inaccurate indication of ports of loading or discharge is also a frequent cause for rejection.
The ISBP Publication dedicates sections D1) to D32) to transport documents covering at least two different modes of transport, the so-called multimodal or combined transport documents.
For bills of lading, the ISBP Publication dedicates sections E1) to E28), and for non-negotiable sea waybills, sections F1) to F25). Charter party bills of lading are also covered by the ISBP Publication in sections G1) to G27).
Regarding air transport documents, ISBP dedicates sections H1) to H27), and for road, rail or inland waterway transport documents, the ISBP Publication dedicates sections J1) to J20).
Insurance documents and inconsistencies
Insurance document irregularities
Insurance policies or certificates often fail to meet credit terms – such as insufficient coverage, wrong currency, or missing endorsement. The coverage must align precisely with the requirements of the credit. The ISBP Publication dedicates sections K1) to K8) to insurance documents and coverage.
Inconsistencies between documents
One of the most frequent discrepancies occurs when details such as the beneficiary’s name, description of goods, quantities, or shipment details differ among documents (e.g., between the invoice and bill of lading). Under UCP 600 rules, all documents must be consistent and not contradict each other.
Be careful – from my experience, let me emphasise that the devil is often hiding in Field 47a (Additional Conditions in SWIFT MT700 message format). This field allows issuing banks to add specific requirements that, if overlooked, can create significant compliance issues.
Dates, certificates and amendments
Dates
Late presentation or expiry issues arise when documents fail to be presented within the period specified in the credit. Under UCP 600 Article 14 (c), documents must be presented within a maximum of 21 calendar days after the date of shipment, but in any event no later than the expiry date of the credit. Failure to meet these deadlines renders the documents non-compliant.
Missing or incorrect certificates
Credits may require specific certificates (e.g., certificate of origin, inspection certificate). Common errors include missing signatures, unauthorised issuers, or incorrect references to the letter of credit.
One of the most important certificates is the Certificate of Origin, covered by sections L1) to L8) in the ISBP Publication.
Beneficiary’s certificates are mentioned in the ISBP Publication in sections P1) to P4), and other types of certificates, such as analysis, inspection, health, phytosanitary, quantity, quality and others, are mentioned in sections Q1) to Q11).
The General Principles of the ISBP Publication also mention, in sections A3) to A5), important points regarding certificates, certifications, declarations and statements.
Amendments and corrections
Unauthorised amendments or alterations – documents containing unapproved corrections or alterations – especially if not properly authenticated – are also grounds for refusal.
If a document needs to be corrected, it is much better, if possible, to issue it again rather than make corrections to it, which could be considered an alteration of the original document. The ISBP Publication dedicates sections A7) to A9) in the General Principles to corrections and alterations.
Ensuring compliance and avoiding discrepancies
Discrepancies in documentary credit presentations often arise from simple oversight or misunderstanding of the credit terms. Exporters can reduce these risks by carefully reviewing the credit upon receipt, ensuring compliance with every condition, and preparing documents under the guidance of the ICC Uniform Customs and Practice for Documentary Credits (UCP 600) and the International Standard Banking Practice for the Examination of Documents under UCP 600.
Accuracy and attention to detail are essential to secure prompt payment under a letter of credit and avoid discrepancy fees, which represent a cost – often high – that we cannot control but can certainly avoid.
UCP 600 and ISBP 821 Practitioner
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