LC Discrepancies Explained: Why Banks Reject Import Documents and How to Avoid It

A letter of credit is often described as the safest way to pay a Chinese supplier. It is safe for a specific reason: the bank pays only against documents that comply with the terms of the credit. That same rule creates the most common LC problem in practice — the discrepancy. When the documents presented by the supplier do not match the LC exactly, the issuing bank is entitled to refuse them, and a routine import can turn into weeks of back-and-forth between banks, supplier and buyer while the cargo waits at Chattogram.

This guide explains what a discrepancy is under UCP 600, the most frequent ones in China-to-Bangladesh trade, what happens step by step when your bank finds one, and how to write an LC that reduces the chance of it happening. It builds on our introduction to LCs for China imports.

How banks examine documents under UCP 600

Most commercial LCs issued by Bangladeshi banks are subject to UCP 600, the International Chamber of Commerce’s Uniform Customs and Practice for Documentary Credits. Three principles from UCP 600 explain almost every discrepancy:

• Banks deal with documents, not goods. The examining bank does not know or care whether the goods are good. It checks whether the documents, on their face, comply with the credit.
• Data must not conflict. Under Article 14, data in a document does not have to be identical to data in other documents or the credit, but it must not conflict with them. A different gross weight on the packing list and the bill of lading is a conflict.
• Time limits are strict. Banks have a maximum of five banking days after presentation to decide whether documents comply. If no presentation period is stated, documents must generally be presented within 21 calendar days after the date of shipment, and never after the LC expires.

The International Standard Banking Practice (ISBP) publication from the ICC fills in the detail — for example, which spelling mistakes are acceptable and which are not. Your bank’s trade services team applies both.

The discrepancies we see most often

In China-to-Bangladesh trade, a handful of errors account for most refusals:

Discrepancy	Typical cause	How to prevent it
Late shipment	Goods loaded after the latest shipment date in the LC	Build a realistic shipment date; amend before it expires, not after
Late presentation	Supplier sends documents to their bank too slowly	Allow a sensible presentation period and chase the supplier
Goods description mismatch	Invoice description differs from the LC wording	Copy the LC description exactly onto the commercial invoice
Amount or quantity over tolerance	Shipped quantity or value exceeds what the LC allows	Use “about” wording or explicit tolerances where needed
Bill of lading issues	Claused (foul) BL, wrong consignee, missing on-board notation	Specify BL requirements clearly and check the draft BL
Inconsistent weights or marks	Packing list, invoice and BL show different figures	Ask the supplier to prepare all documents from one data sheet
Missing or wrong LCA and IRC details	Bangladesh-specific references omitted from documents	Tell the supplier exactly which references must appear

The Bangladesh-specific items matter more than many Chinese suppliers expect. Bangladeshi LCs commonly require documents to show references such as the LC number, the importer’s IRC number, the LCA details or the HS code. A supplier who has shipped LCs to many other countries may not include them unless you tell them precisely.

Tolerances: the rule that saves many shipments

Physical goods rarely come out at exactly the ordered quantity. UCP 600 Article 30 gives some room. Where the words “about” or “approximately” are used for the amount, quantity or unit price, a tolerance of up to 10 percent more or less is allowed. Where no such words are used and the quantity is not stated as a number of packing units or individual items, a tolerance of 5 percent more or less applies to quantity, provided the drawing does not exceed the credit amount.

The trap is that the 5 percent rule does not help when the LC states quantity in pieces or cartons — which is common for manufactured goods from China. If your supplier might ship 2,040 pieces against an LC for 2,000, the LC needs explicit tolerance wording. Discuss this before the LC is opened, not after the goods are packed.

What happens when your bank finds a discrepancy

Walking through the process step by step helps explain why discrepancies cost time and money even when they are eventually resolved:

• 1. Presentation. The supplier presents documents to their bank in China, which checks them and forwards them to your issuing bank in Bangladesh.
• 2. Examination. Your bank examines the documents within its five banking days and finds one or more discrepancies.
• 3. Approach to the applicant. The bank may contact you, the importer, to ask whether you will waive the discrepancies. It is not obliged to accept a waiver, but in practice this is the usual route.
• 4. Refusal notice. If the bank decides to refuse, it must send a single notice stating all the discrepancies and what it is doing with the documents.
• 5. Resolution. The supplier may correct and re-present documents, you may accept the discrepancies, or the parties negotiate.

While this happens, the original bill of lading is held in the banking system, and without it you cannot take delivery at the port. Every day of delay can add port storage and container charges — the mechanics are covered in our guide on what to do when the original BL is delayed. Banks on both sides usually charge a discrepancy fee, normally deducted from the supplier’s proceeds; the amount depends on the bank and should be confirmed with them.

Accepting a discrepancy: when it makes sense and when it does not

Many discrepancies are technical — a typo in a street address, a missing reference number. Accepting them is often the practical choice, because refusing delays your own cargo. But accepting a discrepancy means giving up the protection the LC was supposed to give you. Before you accept, ask:

• Does the discrepancy hint at a real problem with the goods? A late shipment date may mean the goods were rushed; a claused bill of lading may mean the carrier noted damage at loading.
• Has an independent pre-shipment inspection confirmed the goods match the order?
• Will the discrepancy cause problems at customs? A description or HS code difference between the invoice and the bill of entry can create a separate issue at Chattogram, even after the bank accepts it.

If the documents suggest the goods themselves are wrong, refusing gives you leverage while it still exists. Once you accept and the bank pays, that leverage is largely gone.

Writing an LC that reduces discrepancies

Most discrepancies are designed in when the LC is drafted. Before your bank issues the credit, send the draft to your supplier and ask them to confirm, in writing, that they can comply with every term. Specifically:

• Keep the goods description short and general enough to match the invoice exactly; put detailed specifications in the proforma invoice referenced by the LC.
• Set a latest shipment date and expiry date with a realistic buffer, allowing for Chinese holidays and vessel availability.
• Only require documents the supplier can actually obtain — for example, a certificate of origin from the right issuing body, or an inspection certificate from a named company.
• State tolerances clearly if quantity may vary.
• Avoid conditions without documents — requirements that do not specify which document must evidence them. Under UCP 600 banks will disregard them, so they give you no protection.

Your AD bank’s trade desk will also review the draft. The earlier you involve both sides, the fewer surprises there are when the documents arrive.

Talk to DE International

DE International works with Bangladeshi importers on LC-backed China orders every week — checking draft documents with suppliers before presentation, arranging inspection, and handling freight and customs clearance. See our China sourcing and buying agent service, browse our shop, or contact us to review an LC draft before you open it.