What is document consistency and how to achieve document consistency effectively?

1.What is document consistency?

Consistency of documents means that all documents provided by the exporter shall strictly comply with the requirements of the letter of credit issued by the issuing bank of the importer, or all documents related to the sale of the goods made and provided by the exporter shall be completely consistent with the requirements of the L/C issued by the importer without contradiction.

2.Consistent points of documentation

In order to be consistent with the documents, the bank must be reasonably careful to review all the documents, to ensure that the type, content and number of documents submitted by the beneficiary, and even the wording of the documents must be completely consistent with the provisions of the letter of credit, even if the actual shipment of goods or the content of the contract and confirmation letter and the provisions of the letter of credit, the letter of credit must prevail.

Therefore, if the bank negotiates documents that appear to be in conformity with the L/C but the goods are not, the bank will not bear any responsibility because it has no way of knowing. On the contrary, if the actual goods are correct and the documents do not appear to be in accordance with the provisions of the credit, the bank is liable and the applicant can refuse payment on the basis of the redemption bill.

3. Analysis of examples in document consistency

In the actual export business, the content of the negotiation document must be strict with the provisions of its related credit - so, this is a general rule. However, it is sometimes difficult for the seller to ensure that every negotiation document is identical to the contents of its related letter of credit.

The following case reflects the fact that the exporter was refused payment due to discrepancies in the documents: Company A of China and Company B of West Africa signed A contract for the sale of cloth goods, by which Company A sold a batch of cloth goods to Company B on CIF terms, and both parties agreed to pay by letter of credit. After the contract was concluded, Company B issued A letter of credit in accordance with the contract, which stipulated that Company A's quantity of delivery was "approximately 50,000 yards" and required Company A to provide an insurance policy covering W.P.A. and WAR RISK.

As it is customary for Company A to take out ALLRISKS and war risks when exporting such goods, Company A took out Allrisks and war risks without careful verification. After shipping the goods, Company A submits documents to the bank for payment. After examining the documents, the bank found that the documents did not match and refused to pay.

There are two discrepancies cited by the bank:

1. The risks in the policy do not conform to the provisions of the letter of credit;
   
2. The bill of lading indicates that the quantity of goods delivered by Company A is 44,800 yards, which is different from the approximately 50,000 yards stipulated in the L/C. Company A is of the view that the coverage of all risks is greater than that of W.P.A., which is in Buyer B's favor. As for the quantity of goods, because the letter of credit stipulates "about 50,000 yards", without specifying the specific increase or decrease, the number of 44,800 yards in the bill of lading is also in line with the provisions of the letter of credit.
   

Obviously, in this case, Company A has insured all risks and war risks, while the letter of credit requires WPA and war risks. Although the coverage of all risks is greater than that of WPA, which is beneficial to Company B, the bank only needs to check whether the surface of the documents is consistent with the letter of credit, regardless of the rights and obligations of the parties. The bank is entitled to refuse payment if the insurance policy submitted by Company A does not cover the risks specified in the letter of credit.

As regards the discrepancy between the quantity of the goods in the bill of lading and the provisions of the credit raised by the bank, in accordance with the provisions of Article 39 (UCP500), the words "approximately", "at most" or similar, when applied to the amount, quantity and unit price of the credit, shall be construed to mean an increase or decrease of not more than 10% of the relevant amount, quantity or unit price.

Therefore, if the quantity of goods in the bill of lading submitted by Company A is between 55,000 and 45,000 yards, it is consistent with the letter of credit. But in fact, the quantity of goods indicated in the bill of lading submitted by Company A is 44,800 yards, which is inconsistent with the provisions of the letter of credit, and the bank has the right to refuse payment. It indicates that in the export business, due to various reasons, the documents are inconsistent, and the beneficiary cannot be corrected within the prescribed time limit due to the limitation of time conditions, so that it is at a disadvantage in international trade.

4. How to effectively achieve document consistency

In international trade, it is very common to settle by letter of credit. Therefore, Chinese enterprises should strictly abide by the principle of consistency of documents in export business. After receiving a letter of credit opened by a foreign buyer, they should carefully review the letter of credit to determine whether the provisions of the letter of credit are consistent with the contract, whether there are soft clauses in the letter of credit, and whether the provisions of the letter of credit are capable of being fulfilled by the seller.

Once any problem is found, the buyer shall be informed to amend the L/C in time, and must not take any chance. If you think there is no problem after certification, you should carefully make documents in accordance with the provisions of the letter of credit, so that the documents are strictly consistent, in order to avoid the occurrence of adverse situations, prevent problems before they occur, and effectively protect your rights.

--END--

See u~