The letter of credit that fell short

A trader buys a ship full of iron ore. The contract lets the seller load a little more, or a little less.

To pay for it, the trader's bank issues a letter of credit: a promise to pay the seller, once the shipping documents arrive.

But the credit was written for the cargo in the contract, and nothing more.

Then the seller loads a little extra, just as the contract allowed.

Now the cargo is worth more than the credit can pay. Part of it has no money behind it, and nobody saw it coming.