Scenario: the goods are on the vessel, the documents are with the bank — then the issuing bank refuses payment under the L/C for «discrepant documents»: the invoice describes the goods one word differently, the bill of lading lacks a notation, presentation is two days late. The exporter faces goods gone, money not coming. This article explains why the bank may refuse, which discrepancies are truly fatal, and what payment routes remain.
Why the bank may refuse: the documentary logic of UCP 600
Letters of credit in international trade operate under the ICC’s Uniform Customs and Practice for Documentary Credits, UCP 600 (2007), which most L/Cs incorporate. Two foundation principles: (i) the L/C is independent of the sale contract — the bank does not care what the goods are really like; (ii) banks deal with documents only and check compliance on the face of the documents against the L/C terms.
Under Article 14 UCP 600, the bank has a maximum of five banking days following presentation to examine the documents. If it decides to refuse, Article 16 requires a single notice stating each discrepancy and how the documents are being held. A bank that notifies late or defectively is precluded from claiming the documents are discrepant — a practical lever sellers often miss in the panic.
Common discrepancies and how fatal they are
- Late presentation: documents arriving after the presentation deadline or after 21 days from shipment (unless the L/C says otherwise) — a hard discrepancy, almost incurable after the event;
- Description mismatches: the commercial invoice must correspond with the L/C description; other documents must not conflict with each other — names, quantities and marks are the most-caught group;
- Unclean bill of lading, missing endorsements, wrong ports, or a consignee not «to order» as required;
- Missing or wrong-form documents: no certificate of origin, no quality certificate, copies where the L/C demands originals.
- Some «soft» discrepancies can be cured if the buyer waives them — the issuing bank commonly asks the applicant before deciding on non-serious discrepancies.
The seller’s routes forward
First, audit the refusal notice: was it within five banking days and did it list all discrepancies in a single notice — if the bank breached UCP 600 procedure, the legal position flips. Second, if the L/C is still valid and time remains, correct and re-present the documents. Third, remember the root route: the buyer’s duty to pay the price exists independently of the L/C — the L/C is only a payment mechanism; the buyer cannot hide behind the bank’s refusal to escape the price if the goods conform to the contract. The seller may claim the price under the sale contract, in court or arbitration as agreed.
Prevention for the next shipment: review the draft L/C the moment it is issued, run a document checklist against each L/C condition, and adopt the rule «documents follow the L/C, not habit» for the documentation team.
Frequently asked questions
If the bank refuses the L/C over discrepancies, does the seller lose the price entirely?
Not necessarily. The L/C is a payment mechanism, not the source of the payment obligation. The buyer must still pay the price under the sale contract if the goods conform. The seller can claim against the buyer directly or sue under the contract.
How long does the bank have to examine and notify discrepancies?
Under Articles 14 and 16 UCP 600, a maximum of five banking days following presentation, and refusal must be by a single notice stating all discrepancies. A late or defective notice precludes the bank from relying on the discrepancies.
Can discrepant documents be corrected and re-presented?
Yes, if the L/C is still valid and within the presentation period — correct the documents and re-present in time. For incurable or expired discrepancies, the remaining routes are a buyer waiver or claiming the price under the sale contract.
If the buyer accepts the discrepancies, will the bank pay?
The issuing bank may seek the applicant’s waiver of the discrepancies. If the buyer waives, the bank has a basis to pay despite imperfect documents. When refused, working the buyer channel matters as much as working the bank.
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This legal analysis has been verified against current Vietnamese regulations and cross-border FDI transaction practices by the attorneys at FLAT LAW FIRM.
