Common LC Mistakes That Cause Payment Delays – And How to Avoid Them
| Main Heading | Subtopics |
|---|---|
| H1: Common LC Mistakes That Cause Payment Delays – And How to Avoid Them | – |
| H2: Why Accuracy Matters in LC Transactions | – Role of Banks in LC Review – How Small Errors Cause Big Delays |
| H2: How Letters of Credit Work (Quick Recap) | – Basic Workflow from LC Issuance to Payment – Importance of Documentation |
| H2: Common LC Mistakes Exporters Make | – Inconsistent Document Details – Late Shipments or Delayed Submission – Incorrect Product Descriptions – Non-Compliant Incoterms – Ignoring Shipment or Expiry Dates |
| H2: Bank-Level Errors That Can Affect LC Payments | – Wrong SWIFT Field Entries – Mismatched Currency Codes – Missing Confirmation Instructions |
| H2: Discrepancies vs Errors – What’s the Difference? | – Minor vs Major Discrepancies – Impact on Payment Release – How Banks Handle Each |
| H2: Real Case Study: LC Delayed Due to Packing List Error | – What Happened – How It Was Resolved – Key Lessons for Exporters |
| H2: How to Avoid Common LC Mistakes – Exporter’s Checklist | – Align Documents With LC Terms – Double-Check Key Details – Use Pro Forma Invoices Early – Review SWIFT MT700 Before Shipment |
| H2: Tools and Professionals Who Can Help | – Trade Finance Consultants – Bank LC Pre-Check Services – Shipping & Freight Partners |
| H2: Using Technology to Eliminate LC Mistakes | – Digital LC Platforms – Document Matching Software – Blockchain and eUCP |
| H2: FAQs: Common LC Mistakes That Cause Payment Delays | – What if the name is misspelled on the LC? – Can you resubmit corrected documents? – Who pays if an LC is rejected? – How long does LC payment take after compliance? – Can a confirming bank still reject documents? – Are all discrepancies fatal to payment? |
| H2: Conclusion | – Recap of Avoidable Mistakes – Final Tips to Ensure Smooth LC Payments |
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Common LC Mistakes That Cause Payment Delays – And How to Avoid Them
Why Accuracy Matters in LC Transactions
A Letter of Credit (LC) is one of the safest ways to get paid in international trade—but it’s also one of the most document-sensitive. One tiny mistake can cause your LC to be flagged as “discrepant,” delaying payment or even risking rejection.
In LC transactions, banks don’t assess goods—they assess paperwork. If your documents don’t match the LC terms word for word, you’re setting yourself up for delays. That’s why knowing the common LC mistakes that cause payment delays – and how to avoid them is essential for every exporter.
How Letters of Credit Work (Quick Recap)
Here’s a brief refresher on how LCs work:
- Buyer and seller agree to use a Letter of Credit.
- Buyer’s bank issues the LC via SWIFT (MT700).
- Seller ships the goods, gathers documents, and submits them to the bank.
- The bank checks all documents against LC terms.
- If compliant, payment is released.
Any error at Step 4 can pause the process—even if everything else is perfect.
Common LC Mistakes Exporters Make
These are some of the most frequent errors that lead to discrepancies:
- Inconsistent Document Details: The invoice says “ABC Ltd.” while the LC lists “ABC Limited.” This minor mismatch can stall your payment.
- Late Shipment or Document Presentation: Missing deadlines specified in the LC can void your claim.
- Incorrect Product Descriptions: Even a small deviation from the LC wording—like « blue shirts » vs « navy blue shirts »—can cause rejection.
- Wrong or Missing Incoterms: If your invoice says “FOB” and the LC says “CIF,” that’s a discrepancy.
- Ignoring Expiry Dates: Presenting documents after the LC expiry date leads to automatic rejection.
Bank-Level Errors That Can Affect LC Payments
It’s not always the exporter’s fault. Sometimes banks make clerical mistakes in the MT700 format such as:
- Wrong SWIFT Field Entries (e.g., field 45A or 46A)
- Currency Code Errors (USD vs US$)
- Lack of Clear Confirmation Instructions (especially in high-risk markets)
These errors may result in delays or confusion, especially if the issuing and advising banks aren’t well-coordinated.
