Poorly prepared documents can have a severe detrimental impact on a transaction, leading (at best) to delays in settlement. Global statistics differ, but it appears that the percentage of documents refused by banks on first presentation ranges between 65% and 80%.
Furthermore, as a result of discrepancies in a presentation, additional costs are often incurred in the form of discrepancy fees (of the nominated bank and/or issuing bank); fees for communications sent; loss of interest and increased administrative costs; all leading to a reduced profit margin on the transaction and increased operational issues / costs for all parties.
Whilst a number of the more common discrepancies are due to timing issues (expiry, shipment and presentation period), quite a number of them derive from poorly prepared documents or presentations, including typographical errors or misspellings.
Documentary credit practitioners will be familiar with the fact that such issues can cause all sorts of problems and, in a worst-case scenario, will often lead to a refusal of documents.
However, not all misspellings and typing errors make a document discrepant if they do not affect the meaning or intent of a word or sentence.
The position taken in UCP 600 sub-article 14 (d) is one of "reading data in context" to determine whether or not a conflict exists. This concept also recognises that the data need not be identical, thus allowing for the type of misspelling shown below. The last example indicates a version that would not be acceptable.
It is imperative that practitioners have a thorough understanding of UCP 600, in particular an awareness of the implications of articles 14 and 17-32.
It is also strongly recommended that practitioners have an understanding of the ICC publication ‘International Standard Banking Practice for the Examination of Documents under UCP 600' (ISBP 745) which includes reference to misspellings and typing errors.
These issues are covered in more depth within our training modules at www.tradefinance.training