Why are most letter of credit presentations refused on first presentation?

By Saurabh Goyal, Founder & CEO of Phlo Systems. Published 24 July 2026.

A letter of credit is supposed to be the safest way to get paid in international trade: ship the goods, present the documents, the bank pays. In practice, surveys by the International Chamber of Commerce have repeatedly put the share of presentations refused on first presentation somewhere between 60 and 75 percent. Most exporters' first attempt to collect under a credit fails, and it fails on paperwork, not on the goods.

The 30-second answer: presentations are refused because the documents are produced by many different parties late in the trade, then checked against the credit only after shipment, when nothing about the shipment can be changed. The credit's terms have usually moved through amendments, the documents are drafted from the contract rather than from the credit, and small textual differences that a commercial reader would wave through are discrepancies to a bank examiner working under UCP 600. Each of those causes is preventable, but only before presentation, not after.

What a refusal actually costs

A refusal is not a polite request to resend a PDF. Under UCP 600 the bank has up to five banking days to examine the documents; a refusal notice restarts the clock on your cash. The issuing bank typically deducts a discrepancy fee from the proceeds for every discrepant presentation. And the real cost is bigger than the fee: a discrepant presentation converts your bank-guaranteed payment into a request for the buyer's waiver. You shipped against the promise of a bank; you are now asking the applicant, the very counterparty the credit was meant to de-risk, whether they would still like to pay you. In a falling market, some of them decide they would not, or that they would, at a renegotiated price.

Where the discrepancies come from

The pattern in refusal notices is remarkably stable. What varies is only which trap a given trade falls into.

Discrepancy	Typical origin	Curable after shipment?
Late presentation (outside the 21-day default or field 48 period)	Documents assembled slowly after the bill of lading date	Rarely
Late shipment (on-board date after field 44C)	Vessel slipped; nobody re-checked the credit	No
Goods description differs from field 45A	Invoice drafted from the contract, not the credit	Yes, reissue invoice
Missing or non-conforming document against field 46A	A certificate the credit names was never ordered, or the wrong issuer signed it	Sometimes
Inconsistent data across documents	Weights, marks or quantities differ between invoice, bill of lading and certificates	Sometimes
Wrong consignee, notify party or missing endorsement on the bill of lading	Shipping instructions written before anyone read the credit	Sometimes, via the carrier
Absence of an on-board notation, or a claused bill of lading	Carrier practice at the load port	Rarely

Three things stand out from that table. First, the documents come from different hands: the carrier issues the bill of lading, an inspection company issues the quality certificate, a chamber of commerce stamps the certificate of origin, an insurer issues the policy. No single person drafts the presentation, so no single person's care is enough. Second, the worst discrepancies, late shipment above all, are facts about the voyage, not the paperwork. Once the on-board date is after the latest shipment date, no amount of re-typing cures it. Third, most of the curable problems are cheap to fix before presentation and expensive to discover after it.

The structural cause: checking happens at the end

Every one of those discrepancies is visible earlier than it is usually found. The latest shipment date is knowable the day the credit is issued, and testable the day the bill of lading is drafted. The goods description in field 45A can be compared with the invoice template before a single document is couriered. The 46A list of required documents can be treated as a checklist from day one, with each item ordered from the right issuer in the right number of originals.

What actually happens in most trading operations is different. The credit arrives, someone confirms the amount and the expiry look right, and it goes in a folder. Amendments arrive and go in the folder too. Weeks later the cargo ships, the documents trickle in from carrier, inspector and insurer, and someone assembles the pack against a deadline. The first rigorous read of the credit, as amended, against the actual documents is performed by the bank examiner, the one person in the chain whose job is to find the differences and who is paid a fee when they do.

The discipline that fixes this is boring and completely effective: resolve the credit and all its amendments into one current set of terms, check the credit against the contract on the day it arrives (see what a letter of credit workability review is), and examine your own presentation against the effective terms, document by document and field by field, before the bank sees it. Banks check documents with a checklist and unlimited patience. Exporters mostly check them with experience and a deadline. The checklist wins.

Frequently Asked Questions

What percentage of letter of credit documents are rejected on first presentation?

Surveys by the International Chamber of Commerce and studies by trade banks have repeatedly put the figure between roughly 60 and 75 percent of presentations refused first time. The exact number varies by market and by year; the consistent finding is that discrepant presentations are the norm, not the exception.

What happens when a letter of credit presentation is refused?

The bank issues a refusal notice listing the discrepancies and holds the documents at your risk. You can cure curable discrepancies and re-present within the credit's time limits, or the applicant can waive the discrepancies and instruct the bank to pay. Either path costs days, a discrepancy fee, and your negotiating position, because payment now depends on the buyer's goodwill rather than the bank's undertaking.

What are the most common letter of credit discrepancies?

Late presentation, late shipment, goods descriptions that differ from the credit, missing or non-conforming documents against field 46A, data that is inconsistent between documents, and bill of lading defects such as a wrong consignee, a missing endorsement or the absence of an on-board notation.

Can a discrepancy be fixed after shipment?

Some can: an invoice can be reissued so its wording follows the credit, and some bill of lading defects can be corrected by the carrier. Facts about the voyage cannot be fixed: if shipment happened after the latest shipment date, or the presentation window has lapsed, the discrepancy is permanent and only the applicant's waiver gets you paid.

Does the buyer have to accept discrepant documents?

No. The applicant can waive discrepancies, and often does when they want the goods. But the choice is theirs, and under UCP 600 the bank may refuse even if the applicant waives. Relying on waivers means relying on your counterparty's mood and the direction of the market, which is exactly what the credit was supposed to remove.

How Phlo Systems helps

opsPhlo includes an L/C compliance workbench built for commodity traders. It extracts the credit's terms from the MT700 or the bank's PDF advice, folds in every amendment so checks always run against the credit as it stands, and examines your presentation the way a UCP 600 document checker would, before the bank does: required documents, goods description, amounts and tolerances, ports, dates and cross-document consistency, with every finding tied to the field it breaches and a note on how to cure it. See the opsPhlo L/C workbench.

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Related reading:

• What is a letter of credit workability review, and when should it happen?
• Can AI check letter of credit documents?
• Supply chain finance vs letters of credit vs factoring: which is right for a commodity trader?

Saurabh Goyal is the Founder & CEO of Phlo Systems. He has built finance and trading systems for commodity houses since 2008.