Letter of CreditThe Meaning and Importance of Discrepancy:

A discrepancy refers to documents that do not meet the requirements of the L/C, such as delayed delivery, incomplete documents, or even typos. Once a discrepancy occurs, it means the L/Cs payment guarantee to the seller becomes invalid.Possible Methods for Handling Discrepancies:

(1) If the buyer does not mind the discrepancy, the L/C will continue to be executed, but a penalty, known as a discrepancy fee, will be imposed.
(2) If the buyer does not accept the discrepancy, the bank will refuse payment and return the documents to the seller.
(4) If the buyer is willing to accept the discrepancy but requests a deduction, the buyer and seller must negotiate separately.
Handling Minor Discrepancies:

In theory, minor discrepancies, such as typos that do not affect the validity or nature of the documents, should not constitute grounds for refusal and may not even require consulting the buyers opinion.Warning Against Bad Practices:

Some international buyers may exploit the document-centric nature of L/Cs by setting trap clauses to create discrepancies or make the L/C revocable, which requires vigilance.Some international buyers may exploit the documentary supremacy of letters of credit to set trap clauses, create discrepancies, or make the credit revocable, which requires vigilance.

Suggested cautious approach:Before issuing a letter of credit (L/C), carefully review to ensure all document requirements are reasonable and feasible; when preparing goods and documents according to the L/C, maintain the principle of L/C supremacy, documents first.