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What to do if the documents are inconsistent and customs clearance fails?

Published:2026-10-21 02:35
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What Is Document Consistency?

Document consistency means that all documents provided by the exporter must strictly comply with the requirements of the letter of credit issued by the importer's bank. In other words, all documents prepared and submitted by the exporter related to the shipment of goods must fully match the documentary requirements of the L/C applied for by the importer, with no discrepancies.

Key Points for Documentary Consistency
To achieve documentary consistency, the bank must examine all documents with reasonable care to ensure that the type, content, number of copies, and even the wording of the documents presented by the beneficiary strictly conform to the terms of the letter of credit. Even if the actual shipped goods or the contents of the contract and confirmation correspondence contradict the L/C terms, the L/C must prevail. Therefore, if the documents negotiated by the bank appear on their face to comply with the L/C but the goods do not, the bank bears no liability as it has no way of knowing. Conversely, if the actual goods are correct but the documents on their face do not conform to the L/C, the bank will be held liable, and the applicant may refuse to honor the documents and make payment on that basis.

 

Case Analysis of Documentary Consistency

In actual export business, it is a standard rule that the content of negotiated documents must strictly conform to the stipulations of the relevant letter of credit. However, it can sometimes be very difficult for the seller to ensure that every set of negotiated documents is completely consistent with the terms of its related L/C.
The following case illustrates how discrepancies in documents can lead to a refusal of payment against the exporter:Chinese Company A entered into a contract with West African Company B for the sale of a batch of fabrics, with Company A selling to Company B on CIF terms, and payment to be made by letter of credit.After the contract was signed, Company B duly issued a letter of credit stipulating that Company A’s delivery quantity was “about 50,000 yards” and requiring Company A to provide an insurance policy covering W·P·A (With Particular Average) and WAR RISK.As it was customary for Company A to insure such goods under ALL RISKS and War Risk when exporting, and without carefully reviewing the credit terms, Company A took out insurance covering All Risks and War Risk.After shipping the goods, Company A presented the documents to the bank to request payment.Upon examining the documents, the bank identified discrepancies and refused payment.

        The bank raised two discrepancies:

        1. The coverage stated in the insurance policy did not match the credit requirements;

        2. The bill of lading indicated the delivered quantity as 44,800 yards, which did not conform to the credit stipulation of about 50,000 yards. Company A argued that All Risks coverage is broader than W.P.A. and thus more favorable to the buyer, Company B.
As for the quantity, since the credit stated “about 50,000 yards” without specifying a tolerance range, the 44,800 yards shown on the bill of lading should still be deemed compliant with the credit terms.
Clearly, in this case, Company A insured the goods under All Risks and War Risk, whereas the credit required W.P.A. and War Risk. Although All Risks provides broader coverage than W.P.A. and is more beneficial to Company B, banks examine documents solely on their face value against the credit terms, without regard to the rights and obligations of the parties. The bank was entitled to refuse payment because the insurance policy submitted by Company A did not match the coverage specified in the credit.

Regarding the bank’s claim that the quantity on the bill of lading did not conform to the credit, according to Article 39 of UCP 500, terms such as “about,” “approximately,” “circa,” or similar expressions used in connection with the credit amount, quantity, or unit price are to be construed as allowing a tolerance of not more than 10% more or less.Therefore, if the quantity on the bill of lading submitted by Company A had been between 55,000 and 45,000 yards, it would have complied with the credit.In reality, however, the bill of lading presented by Company A stated a quantity of 44,800 yards, which did not conform to the credit terms, and the bank was entitled to refuse payment.

This demonstrates that in export business, discrepancies between documents and credit terms can arise for various reasons, and if the beneficiary is unable to correct them within the prescribed time due to time constraints, they may be placed at a disadvantage in international trade.

How to Effectively Ensure Documentary Compliance

Settlement by letter of credit is now very common in international trade. Therefore, Chinese enterprises should strictly adhere to the principle of documentary compliance in their export operations. Upon receiving a letter of credit issued by an overseas buyer, they should carefully review it to confirm whether its terms align with the contract, whether any soft clauses exist, and whether the seller is capable of meeting all the requirements stipulated in the credit.
 
If any issues are identified, the buyer must be promptly notified to amend the letter of credit, and no chances should ever be taken.If the review reveals no problems, documents should be carefully prepared in strict accordance with the credit terms to ensure full documentary compliance. This helps avoid adverse situations, prevents problems before they occur, and effectively protects your rights.