Letters of credit for first-time exporters: the discrepancies that delay payment

A letter of credit (LC) is often described as the safest way for an exporter to be paid. That is true only on one condition: the documents you present must comply with the terms of the credit. If they do not, the bank's promise to pay falls away, and payment depends again on the buyer's goodwill.

Discrepancies are common. Trade Finance Global, reporting on the ICC Banking Commission's 2022 briefing on reducing discrepancy rates, cites estimates that 65 to 80 percent of documentary credit presentations are refused on first presentation. Banks also charge a discrepancy fee, which Trade Finance Global says often ranges from the equivalent of US$25 to US$500 per presentation. This article focuses on where first-time exporters go wrong and how to prevent it.

The rules that apply in 2026

Most LCs are issued subject to UCP 600, the ICC's Uniform Customs and Practice for Documentary Credits, in force since 2007. Banks examine documents using ISBP 821, the 2023 edition of International Standard Banking Practice, which explains in detail how UCP 600 is applied to each document.

At the time of writing, October 2026, there is no new version of the UCP. After ICC national committees voted against a revision, the ICC Banking Commission adopted a UCP/ISBP action plan for 2026 to 2027 that focuses on clarification, interpretation and education on ISBP 821 rather than a new rulebook. Check the latest position with your bank.

Four UCP 600 rules every exporter should know

• Deadline for presentation (Article 14(c)): where original transport documents are required, documents must be presented no later than 21 calendar days after shipment, and in any event not later than the expiry date of the credit.
• Examination time (Article 14(b)): each bank has a maximum of five banking days after the day of presentation to decide whether the documents comply.
• Consistency (Article 14(d)): data in a document need not be identical to other documents or the credit, but it must not conflict with them.
• Refusal (Article 16): if a bank refuses, it must send a single notice listing every discrepancy, no later than the close of the fifth banking day after presentation.

The discrepancies that most often delay payment

• Late shipment, late presentation or presentation after expiry. Timing problems are among the most frequent causes of refusal. A delayed vessel can push you past the latest shipment date or the 21-day window.
• Invoice errors. Under Article 18 the commercial invoice must appear to be issued by the beneficiary, be made out in the name of the applicant, be in the currency of the credit, and describe the goods in a way that corresponds with the credit. A changed product code, a spelling error in the description or a total above the LC amount can all cause refusal.
• Conflicting data between documents. Different weights on the packing list and bill of lading, a different consignee address, or a port of loading that does not match the credit.
• Transport document problems. A bill of lading that is not signed in the required way, that carries a clause declaring the goods or packaging defective, that names the wrong ports, or that shows the wrong notify party.
• Insurance problems under CIF or CIP terms. If the credit does not state the amount, cover must be at least 110 percent of the CIF or CIP value (Article 28(f)), and the insurance document must not be dated after shipment unless it shows cover from no later than the shipment date (Article 28(e)).
• Certificates issued by the wrong party, unsigned, or missing the LC reference: certificates of origin, inspection certificates, phytosanitary or analysis certificates.
• Additional conditions overlooked. Requirements written in field 47A of the SWIFT MT700, such as quoting the LC number on every document or sending copies to the buyer by courier.
• Unauthenticated corrections. A handwritten change to a document can be treated as an alteration. Reissuing a clean document is safer.

Worked example: quantity tolerance

A rice exporter receives an LC for 20,000 kg at US$1.00 per kg, total US$20,000, with no word such as about in the quantity or amount. Because the goods are bulk and not stated as a number of bags or units, Article 30(b) allows a quantity tolerance of 5 percent more or less, so 19,000 to 21,000 kg is acceptable.

However, the same article requires that total drawings do not exceed the amount of the credit. If the exporter ships 21,000 kg and invoices US$21,000, the invoice exceeds the credit and is discrepant. The exporter can either keep the shipment at or below 20,000 kg, so the invoice stays within US$20,000, or ask the buyer, before shipment, to amend the credit to about US$20,000, which under Article 30(a) allows a 10 percent tolerance on the amount. If the quantity were stated as 800 bags, the 5 percent quantity tolerance would not apply at all.

Before the LC is issued

• Send the buyer a draft of the LC terms with your pro forma invoice, and agree the exact goods description, documents and issuers.
• Ask for expiry and presentation at a bank in your own country, and a presentation period long enough to collect all documents.
• Make sure the latest shipment date leaves a margin for vessel delays.
• Avoid documents you cannot control, such as an inspection certificate that must be signed by the buyer. This effectively lets the buyer decide whether you are paid.
• If the issuing bank or its country is a concern, ask your bank about adding a confirmation.

When the LC arrives

Read every field within a day or two, preferably with your bank's trade finance team and your freight forwarder. Check names and addresses, the goods description, Incoterms rule, ports, dates, partial shipment and transhipment terms, and every condition in field 47A. Request any amendment immediately: once the goods have shipped, your negotiating position weakens.

Before presenting documents

• Check every document against the LC, then against each other, line by line.
• Confirm dates: shipment within the latest date, presentation within 21 days or the shorter period stated, and before expiry.
• Check invoice amount, currency, unit price and goods description against the credit.
• Check signatures, originals and copies, endorsements and the number of originals required.
• Ask your bank to pre-check the set before formal presentation, if it offers this service.

If documents are refused

If time remains before expiry and the presentation deadline, you may correct the documents and present again. Otherwise the bank will usually hold the documents while it asks the applicant whether to waive the discrepancies. The buyer often does, but the issuing bank is not obliged to accept a waiver, and a buyer facing a falling market may use the discrepancy to renegotiate. For significant amounts, take advice from your bank or a trade finance lawyer.

Finding buyers on Nexus BYF

On Nexus BYF, exporters can list sell offers and a company profile free, respond to buyer requirements, and agree payment terms such as letters of credit directly with buyers. Membership gives access to direct contact details, so you can discuss draft LC terms with the buyer early, before the credit is opened.