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It is essential that the exporter reads and understands the Credit, raises any queries or doubts with the Advising Bank or the buyer, and gets the required amendments before shipping. If all this is done the  chances of speedy payment are greatly enhanced.

When he first receives a Credit, an exporter must:

• Carefully read every detail of it

• Check it against the sales contract to see whether any previously agreed terms have been amended

• Query with the buyer matters that need the buyer’s clarification.

• Seek the independent advice about any terms the exporter does not understand (including technical terms).

Credits are unacceptable if compliance with their terms and conditions is outside the exporter’s control. Unacceptable Credits demonstrate the need for the exporter not just to read but also to understand the Credit.

Common discrepancies that compromise payment

Dates

Among the commonest discrepancies that cannot be corrected by the exporter are:

• Credit expired: the exporter receives documents to present to the bank only after the Credit has expired.

• Late shipment: The transport document is dated after the last date for shipment allowed by the Credit.

• Late presentation: documents are presented after the period for presentation indicated in the Credit (or, if no period is indicated in the Credit, later than 21 days after date of shipment).

If the exporter can anticipate these discrepancies before shipment, he should request the necessary amendments to the Credit and withhold shipment until the Credit is amended. If the exporter did not anticipate these discrepancies before shipment, he can instruct the bank to seek the

buyer’s approval of the necessary amendments by telex through the Issuing Bank. However, the exporter is now entirely in the buyer’s hands: without the buyer’s necessary approval, the shipment is outside the Credit, and the exporter has forfeited the guarantee of payment under the Credit.

Bills of Exchange

Payment will be compromised if Bills of exchange:

• Are not signed by the exporter

• Are not drawn on the party indicated in the Credit

• Are drawn for an incorrect amount

• Do not show the Credit number or other detail as required in the Credit.

Although these are the main reasons, this list is not exhaustive.

Invoices

Payment will be compromised if the description of the goods on the invoice does not correspond with that on the Credit. This is one of the commonest reasons for refusal of payment. As an (admittedly extreme) example, in a case where the Credit showed the contract number as 123456, but the invoice showed it as 12.34.56, payment was refused.

500 requires the description in the commercial invoice to “correspond” with the description in the Credit and further indicates that in all other documents the goods may be described in general terms “not inconsistent” with the description of goods in the Credit. In order to be safe, it is best to use the EXACT description as stated in the Credit not only in the invoice but also in all other documents. The exact
description can be used as a main heading, with any further necessary detail (e.g. relating to a partial shipment) or any other information added beneath the exact description.

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Insurance documents

• The currency of the insurance is not that of the Credit

• Ports of loading and discharge are not shown as in the Credit

• The policy is not endorsed when endorsement is required.

• Specific risks required to be covered are not shown

•  The insurance is effective only after shipment

•  The insurance cover is insufficient.

Although these are the main reasons, this list is not exhaustive.

Transport documents

Payment will be compromised if transport documents:

• Do not clearly show who the carrier is, with the carrier’s name shown on the same side of the document as all the other details

• Have been clearly signed by the named carrier or by the named carrier’s named agent. Marine bills of lading bring additional requirements:

• The ports of loading and discharge as indicated on the Credit must be shown.

• Goods must be shown to be on board a named ocean vessel.

• If the bills of lading indicate an intended ocean vessel, there must be an additional, separate endorsement showing the actual ocean vessel used (even if it is the intended ocean vessel).

• If the bills of lading indicate a similar qualification about the port of loading, there must be an additional, separate endorsement showing the port of loading (even if the port has already been shown elsewhere).

The exporter should also do an overall check to ensure that:

• All required documents have been assembled

• The required number of copies of each document are also assembled

• Any document requiring any consular or other certification has been certified exactly as required by the Credit

• All documents are consistent with each other – i.e. nothing in any document should contradict or cast doubt upon the information in the same or any other document.

Overcoming discrepancies

If payment is not received because the exporter has presented documents that are not in accordance with the Credit, the following methods are available for processing such documents.

• Correction of documents: Documents issued by the exporter may be corrected in accordance with  the advice of the Advising or Negotiating Bank. Other documents such as transport and insurance  documents may be corrected by the issuers. However, documents that bear any third party  attestation or certification may require the preparation of new documents.

• If documents cannot be corrected, or if the necessary amendments are not received, the Issuing  Bank may still be prepared to grant authority for payment. Alternatively, the Negotiating Bank may be  willing to pay the exporter on a with-recourse basis against the exporter’s indemnity.

• If documents cannot be corrected and it is not possible to obtain the Issuing Bank's authority to  accept discrepancies, the exporter may authorise the sending of documents to the Issuing Bank for  payment.

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