How to Resolve Letter of Credit Discrepancies

In international trade, a discrepancy notification from a bank acts as a “Code Blue”. This alert signifies that the protective shield of the Letter of Credit (LC) has been broken, leaving your payment entirely dependent on the buyer’s decision.

When an issuing bank identifies a discrepancy, they hold the documentation at the seller’s risk and disposal. The consequences extend beyond simple delays, as this situation creates a significant shift in power. Buyers may use even a minor, non-detrimental typo as leverage to force a price reduction or, in volatile markets, to abandon the deal entirely.

If you find yourself holding “unclean” documents, there are four primary courses of action you can take to attempt to secure your payment:

• You can ask the buyer to formally amend the LC to align with the documents you have already presented.
• You can ask the issuing bank to contact the buyer to request that they formally waive the identified discrepancies and accept the documents as they are.
• If time remains before the credit expires, you can attempt to correct the documents and re-present them to the bank before the deadline.
• You may be able to reach an agreement where the bank releases the payment “under reserve,” meaning you agree to refund the payment if the buyer ultimately refuses to accept the documents.