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Introduction to Discrepancies

Introduction to discrepancies

When a beneficiary of a LC presents his documents to the bank,
the bank will examine the documents to ascertain whether they appear "on
their face" to comply with the requirements dictated by the applicant.


Two theories exist in the United States addressing the
question, to which degree the documents have to comply:

a) supporters of the "strict compliance" theory
posit that any deviation renders the documents discrepant with the consequence that
the bank cannot pay the beneficiary under the LC.

b) supporters of the "substantial compliance
theory" believe that a certain degree of leniency is permitted.

I mention these views because they are the only two
imaginable positions which will exist in similar attire in any given jurisdiction.

When trying to analyze whether a document is discrepant, the
examiner has to read the text of the UCP which stipulates requirements for the
different types of documents.

Since no experience exists regarding the UCP 600, the
following cases, as reported by the ICC Banking Commission in their Opinions,
reflects the interpretation of the UCP 500. It remains to be seen, whether the
drafters of the UCP 600, who intended to adapt the UCP to technological changes
and clean up the language, achieved this goal, thus leaving the substantive provisions
of the UCP 500 intact.

Invoices/packing list

Since the Beneficiary him/herself can issue the commercial
invoice, courts and the reporters for the ICC banking commission have not shown
any mercy towards the Beneficiary as can
be seen from the following; even slight deviations are considered discrepant.

Documents Presented

did not show agreed upon shipping term "FOB Shanghai"

Requirement

"signed commercial invoice in triplicate"

Discrepant YES

Basis of decision

Article 37 c; wording "FOB" is often placed in the
field "Goods description" and considered part of the description of
the goods.

Other documents

Documents Presented

Inspection report describing goods as "PAKISTANESE
(COLOURED) POPPYSEED"

Requirement

no inconsistency with invoice which read: "PAKISTANESE
POPPYSEED" (and thus complied with credit)

Discrepant:
Inspection report is discrepant

Basis of decision:

Article 37 c prohibits inconsistencies between invoice and
other documents (here: inspection report)


Bill of lading

Documents Presented

bill of lading evidencing Bangkok
as the port of loading with addition of the words “via Singapore" to indicate that there will be a
transshipment in Singapore, Rotterdam as the port of
discharge, "vessel Y" as the ocean vessel.

Requirement

bill of lading covering a port to port shipment from Bangkok to Rotterdam,
allowing transshipment

Discrepant: NO

Basis of decision:

Article 23 requires among others, indication of port of
loading, port of discharge, and that the goods have been loaded on board a
named vessel. The fact that the presented BL furthermore indicates the port of
transshipment and the name of the vessel does not violate the requirements of
Article 23.

If you are trying to resolve a question in greater detail,
please refer to the interpretation of the individual articles of the UCP 500 which
you can find above under the UCP 500 text  (organized by the section letters of the UCP 500).