LC discrepancy checklist - the 24 issues banks reject on
The exact discrepancies UCP 600 and ISBP 821 let issuing banks refuse payment on: late presentation, transport-document defects, insurance shortfalls, and the wording traps that cost beneficiaries thousands per set.
A letter of credit is only as good as the documents that draw on it. Banks reject roughly 70% of first presentations on first pass - not because the underlying trade is unsound, but because the paperwork triggers one of a small number of recurring discrepancies. This checklist walks through the 24 issues that account for almost every MT734 refusal.
Timing discrepancies (5)
- Presentation after LC expiry date
- Presentation later than the presentation period (default 21 days after shipment)
- On-board date on the transport document later than latest shipment date
- Insurance effective date later than shipment date
- Draft drawn on a date the LC does not permit
Transport document discrepancies (6)
- Bill of lading not marked "on board" (UCP 600 Article 20)
- B/L consigned "to order" without endorsement
- Freight-collect B/L when LC requires "freight prepaid"
- Notify party missing or not matching Field 50
- Short-form or charter-party B/L when LC prohibits it
- Ports of loading or discharge not matching Field 44E / 44F
Insurance discrepancies (4)
- Insured amount less than 110% of CIF value (Article 28(f)(ii))
- Currency of insurance not matching the LC currency
- Cover from a date later than shipment
- Institute Cargo Clauses letter not matching LC requirement (A vs C)
Wording and consistency discrepancies (9)
- Invoice description "not corresponding" to LC description (Article 18(c))
- Invoice value exceeds LC amount (no tolerance permitted unless Field 39A specified)
- Weights or measurements inconsistent across invoice, packing list and B/L
- Beneficiary or applicant name spelt differently across documents
- Certificate of origin not signed by the required authority
- Inspection certificate issued before shipment (when LC requires "at time of loading")
- Draft not drawn on the correct drawee bank
- Missing legalisation or embassy stamp required by Field 46A
- Multiple originals presented when LC calls for a specific number
The LC Draft Review toolautomates 27 of these checks against an MT700 paste; use it before the seller ships, not after documents are already on their way to the issuing bank.
Frequently asked questions
What is an LC discrepancy?#
A discrepancy is any deviation between the documents presented under a letter of credit and the terms of the credit or the requirements of UCP 600 and ISBP 821. On a discrepant presentation the issuing bank can refuse payment under Article 16 and either return the documents or hold them at the presenter's disposal. In practice each discrepancy costs the beneficiary a USD 75 to USD 150 fee even when the applicant later waives it.
How many days does the bank have to check documents?#
Five banking days following the date of presentation under UCP 600 Article 14(b). Not five calendar days - Saturdays, Sundays and local bank holidays at the presentation place all extend the deadline. If the bank has not sent an MT734 refusal within that window, it is precluded from claiming a discrepancy (Article 16(f)) and must pay.
What are the top five LC discrepancies?#
Late presentation (documents tendered after the presentation period or LC expiry), late shipment (on-board date after latest shipment date), missing or unsigned bill of lading, insurance certificate for less than 110% of CIF value, and inconsistent data between documents (invoice weight not matching packing list). These five account for roughly 60% of MT734 refusals in the SWIFT sample.
Can the applicant waive a discrepancy?#
Yes but they are not obliged to. Under Article 16(b) the issuing bank may, in its sole judgement, approach the applicant for a waiver, but it may also refuse independently. Once the applicant waives in writing, the issuing bank still has the final call - it can honour, or it can refuse and rely on a reason of its own. Never assume a waiver is automatic.
How do I dispute a wrongful refusal?#
The MT734 refusal message must list each discrepancy and state the disposition of documents (Article 16(c)). If any listed discrepancy is not a genuine breach of UCP 600 or ISBP 821, the beneficiary can ask for reconsideration citing the specific article. The next escalation is ICC DOCDEX arbitration under the DOCDEX Rules - a low-cost, documents-only ruling that most banks respect.