How should we address to Mr. Discrepancy?

[AbdulkaderBazara]

Though I have been handling letters of credit for years and screening discrepancies, I was astonished to find myself not able, in clear terms, give a responce. The UCP doesn’t differentiate between material and immaterial discrepancies. The strict compliance approach was the norm before and many banks have lost cases in the court due to the fact that in some cases the discrepancies are considered harmless according the judgement of the courts. UCP 500, in article 13a, adopted the term “international standard banking practice”. This has not yet been completely defined and we are still awaiting ICC brochure on these standards. Nevertheless, based on article 13, as someone has said, we could no longer conclude that in checking documents all discrepancies are the same and that there is no such thing as a minor or major discrepancy. Bernard Wheble, Honorary Chairman, ICC Banking Commission has also said : " ... banks are expected to pay and not to look for technical excuses not to pay, although they are not expected to disregard obvious discrepancies that warrant dishonour"

In practice, some banks have adopted “the could not possibly mislead” approach when handling documents under credits they have issued and “strict compliance” approach when handling credits issued by other banks. In both cases their intention seem to be to protect their clients and themselves from any future disputes. In many cases we have gone against our clients to accept discrepancies that we feel are not material. We have in one case even stopped dealing with an applicant that we found is looking for minor discrepancies just to get a discount. The most important issue here is banks should greatly apply “the know your customer policy”. If we deal with the right customer, we should have fewer problems in handling credits.

In short, the reply to your query is not easy and still we have to go a long way, if ever, to come to a unanimous answer on Mr. Discrepancy.

[T.O.Lee]

HOW TO DESCRIBE DISCREPANCIES?

Since we have not received any further comments or opinions about discrepancies description after waiting for a reasonable time, it is now time for us to give our own opinions about discrepancies.

According to the ICC Banking Commission, as reflected by so many ICC opinions published so far, there is no such thing as material, immaterial, serious, trivial, typo, small, big, apparent, important or unimportant discrepancies.

We have only two kinds of discrepancies, valid one and invalid one.

http://www.tolee.com

[edited 11/25/01 3:43:22 PM]