Letters of Credit and Shipping Documents: Avoiding Discrepancies

Letters of credit remain central to trade in many markets, including across the Gulf, South Asia and Africa. They protect both sides only if the documents comply. Banks examine documents, not goods, and a single discrepancy can delay payment, trigger fees or give the buyer grounds to refuse.

The rules banks apply

Most documentary credits are issued subject to the ICC's Uniform Customs and Practice for Documentary Credits, UCP 600. Practice is further detailed in the ICC's International Standard Banking Practice (ISBP). Key provisions for shippers include:

• Article 14(b): banks have a maximum of five banking days following presentation to determine whether it complies.
• Article 14(c): transport documents must be presented within 21 calendar days after the date of shipment (unless the credit specifies otherwise), and in any case no later than the expiry date of the credit.
• Article 14(d): data in documents need not be identical, but must not conflict with each other or with the credit.
• Article 20: sets requirements for bills of lading, including an indication that goods have been shipped on board a named vessel, by pre-printed wording or an on-board notation dated with the date of shipment.
• Article 27: banks accept only clean transport documents, without clauses declaring a defective condition of the goods or packaging.

The discrepancies that cause most rejections

1. Late shipment or late presentation, often because the vessel slipped or originals took too long to reach the bank.
2. Missing or incorrect on-board notation, particularly for received-for-shipment bills or where the loading vessel differs from the intended one.
3. Description conflicts between the invoice, bill of lading and credit. The commercial invoice description must correspond with the credit; other documents may be more general but must not conflict.
4. Wrong parties or ports: consignee, notify party or port of loading not as the credit requires.
5. Transshipment or partial shipment where the credit prohibits it.
6. Claused bills of lading noting damaged packaging.
7. Incoterm inconsistencies, for example an FCA sale with a credit requiring an on-board bill of lading without the arrangement to obtain one. See FOB vs FCA for container shipments.

Planning backwards from the credit

The most effective control is to read the credit before booking:

• Check the latest shipment date against realistic vessel schedules and cut-offs, including VGM and documentation deadlines.
• Confirm the credit's port of loading and discharge match the actual routing, and whether transshipment is allowed.
• Align the goods description and HS classification across contract, invoice and credit; see HS code classification.
• Allow courier time for original bills to reach the bank within 21 days.
• Where the buyer needs originals to take delivery, factor bank processing into free-time planning; see demurrage and detention explained.

Electronic bills of lading

Paper originals are a major source of delay and cost. Electronic bills of lading (eBLs) are now gaining legal and practical footing:

• UNCITRAL's Model Law on Electronic Transferable Records (MLETR) provides a legal basis for electronic equivalents of transferable documents such as bills of lading. Several jurisdictions have adopted it, including Bahrain, Singapore, and the United Kingdom through the Electronic Trade Documents Act 2023.
• The ICC eUCP supplement to UCP 600 provides rules for presentation of electronic records under documentary credits.
• The Digital Container Shipping Association publishes eBL data standards adopted by major carriers, supporting interoperability between platforms.

Adoption varies by bank, carrier and jurisdiction, so check that every party in the chain, including the issuing and confirming banks, can accept the eBL platform before specifying it in a credit.

Frequently asked questions

How many days do I have to present documents under a letter of credit?

Under UCP 600 Article 14(c), transport documents must be presented within 21 calendar days after the date of shipment, unless the credit states otherwise, and never later than the credit's expiry date.

What is an on-board notation on a bill of lading?

It is a dated notation confirming that the goods have been loaded on board a named vessel. UCP 600 Article 20 requires a bill of lading to show shipment on board, either through pre-printed wording or such a notation.

Are electronic bills of lading accepted under letters of credit?

They can be, where the credit is subject to eUCP and the banks and carriers involved accept the eBL platform. Legal recognition is growing through adoption of UNCITRAL's MLETR in a number of jurisdictions.

References

1. International Chamber of Commerce, UCP 600, ISBP and eUCP.
2. UNCITRAL, Model Law on Electronic Transferable Records (2017).
3. Digital Container Shipping Association, electronic bill of lading standards.
4. FIATA, fiata.org (FIATA multimodal transport documents).

Prepared by the Apex Ocean Lines industry experts and editorial team, checked against the sources cited. Short forms link to our shipping glossary.