Letter of Credit Invoice: Documents and Discrepancies

Quick answer: A letter of credit invoice is the commercial invoice you present to a bank to get paid under a documentary credit. Under UCP 600, it must be issued by the beneficiary, made out to the applicant, in the credit's currency, and describe the goods as the credit does. Any mismatch is a discrepancy that can delay or block payment.

A letter of credit, also called a documentary credit, is one of the safest ways for an exporter to get paid by an overseas buyer, because a bank, not just the buyer, undertakes to pay. The catch is that the bank pays against documents, not goods. If the invoice, transport document or certificates do not comply with the credit, the bank can refuse to pay, and the exporter is suddenly back to relying on the buyer's goodwill. The commercial invoice is the document most often prepared in-house, which makes it the one you have most control over. This guide explains the rules, shows how to read a credit before invoicing, works through tolerances and deadlines with numbers, and lists the discrepancies that cause most rejections.

How a letter of credit works

In a typical documentary credit transaction:

1. The buyer and seller agree a sale with payment by letter of credit. The seller often sends a proforma invoice so the buyer can apply.
2. The buyer (the applicant) asks its bank (the issuing bank) to open a credit in favor of the seller (the beneficiary).
3. The credit is advised to the seller, usually through a bank in the seller's country (the advising bank), which may also add its own undertaking as confirming bank.
4. The seller ships the goods and prepares the documents the credit requires: commercial invoice, transport document, packing list, insurance document, certificate of origin and so on.
5. The seller presents the documents to the nominated bank before the deadlines. The banks examine them and, if they comply, pay or accept according to the credit's terms.

Most credits are issued subject to UCP 600, the Uniform Customs and Practice for Documentary Credits published by the International Chamber of Commerce (ICC). The ICC also publishes International Standard Banking Practice (ISBP), most recently revised as ISBP 821 in 2023, which explains how banks examine each type of document. ISBP does not change UCP 600; it explains how banks apply it.

UCP 600 rules for the commercial invoice

Article 18 of UCP 600 sets the core requirements. Unless the credit says otherwise, the commercial invoice:

• must appear to have been issued by the beneficiary (with an exception for transferred credits);
• must be made out in the name of the applicant;
• must be made out in the same currency as the credit;
• need not be signed.

Article 18(c) adds that the description of the goods, services or performance in the commercial invoice must correspond with that appearing in the credit. Article 14(d) adds a consistency rule: data in a document, read in context with the credit, the document itself and international standard banking practice, need not be identical to data in other documents but must not conflict with it.

The credit may add its own requirements, such as a signed invoice, a specific number of originals or copies, a statement certifying origin, or the credit number shown on the invoice. Those requirements are part of the terms and must be met exactly.

Read the credit before you write the invoice

Most discrepancies start before the invoice is written, when nobody reads the credit closely. When the credit arrives, check it against your sales contract and flag anything you cannot meet, so the buyer can arrange an amendment before shipment. Then extract every detail the invoice must reflect:

Invoice field	Where to find it in the credit	What to check
Seller name and address	Beneficiary field	Name matches; address in the same country if shown
Buyer name	Applicant field	Invoice made out to the applicant exactly
Currency	Currency and amount field	Same currency as the credit
Total amount	Amount field and any tolerance	Within the credit amount and any allowed tolerance
Goods description	Description of goods field	Corresponds with the credit; copy its wording
Quantity and unit price	Description of goods field	Within any tolerance; arithmetic correct
Trade term	Description or additional conditions, e.g. "CIF Rotterdam Incoterms 2020"	Shown as in the credit
Credit number, PO or contract number	Documents required or additional conditions	Included if the credit asks
Number of originals and copies	Documents required field	Presented as stated
Signature or certification	Documents required field	Signed or certified if required

For trade terms, our guide to Incoterms on an invoice explains how to show them correctly, and our article on the HS code on a commercial invoice covers tariff classification when the credit or customs requires it.

Letter of credit invoice worked example: tolerances and deadlines

Tolerances and deadlines are where careful arithmetic saves payments. The figures below are illustrative.

Scenario A: the credit uses "about"

The credit reads: amount about USD 50,000.00; goods: about 10,000 units of ceramic tiles at USD 5.00 per unit, CIF Rotterdam Incoterms 2020.

Under UCP 600 article 30(a), "about" allows a tolerance of up to 10% more or less.

• Quantity range: 10,000 × 0.90 = 9,000 to 10,000 × 1.10 = 11,000 units.
• Amount range: USD 50,000 × 0.90 = USD 45,000 to USD 50,000 × 1.10 = USD 55,000.

The seller ships 10,800 units. Invoice amount: 10,800 × USD 5.00 = USD 54,000.00. Both quantity and amount are inside the tolerance, so the invoice complies on these points.

Scenario B: no "about" and quantity in units

Now the credit reads: amount USD 50,000.00; goods: 10,000 units at USD 5.00. There is no "about," and because the quantity is stated in individual items, the 5% quantity tolerance in article 30(b) does not apply. Shipping 10,800 units and invoicing USD 54,000 would not comply: the quantity exceeds the credit, and banks will pay no more than USD 50,000 in any case. If the buyer wants more goods, the credit should be amended before shipment.

Deadlines

The credit expires on October 31 and does not state a presentation period. The bill of lading is dated September 22. Under article 14(c), a presentation including an original transport document must be made no later than 21 calendar days after the shipment date, and in any case not later than the expiry date.

• 21 days after September 22: September has 30 days, so 8 days take you to September 30 and 13 more to October 13.
• Latest presentation: the earlier of October 13 and October 31, which is October 13.

Presenting on October 20 would be late, even though the credit itself is still valid.

Common letter of credit invoice discrepancies

• Wrong party names. Applicant or beneficiary names that differ from the credit, including abbreviations the credit does not use.
• Goods description that does not correspond. Using your catalog wording instead of the credit's, or adding details that conflict with it.
• Amount over the credit. Or outside the tolerance, or arithmetic errors between quantity, unit price and total.
• Wrong currency. Invoicing in your home currency when the credit is in US dollars or euros. Our guide to the foreign currency invoice covers currency display.
• Missing trade term or wrong Incoterms version. If the credit says "CIF Rotterdam Incoterms 2020," the invoice should too.
• Conflicting data across documents. Gross weight, number of packages or marks that differ between the invoice, packing list and bill of lading. Our article on the packing slip vs invoice explains how the documents relate.
• Invoice marked "proforma" or "provisional." Not acceptable as the commercial invoice unless the credit allows it.
• Unsigned invoice when the credit requires a signature. UCP 600 does not require one by default, but the credit can.
• Late presentation. After the presentation period or the expiry date.
• Charges or deductions not allowed by the credit. Adding freight or other charges, or deducting advance payments, in ways that conflict with the credit's terms.

What happens if the bank finds a discrepancy

Under article 14(b), each bank has up to five banking days following the day of presentation to examine the documents. If they do not comply, article 16 allows the bank to refuse, but it must send a single notice listing every discrepancy. The issuing bank may also approach the applicant for a waiver. Many buyers do waive minor discrepancies, but you lose control: payment becomes dependent on the buyer again, and banks commonly charge a discrepancy fee. If time allows before the deadlines, you can often correct and re-present the documents.

Letter of credit invoice checklist

• Credit checked against the sales contract on arrival; amendments requested before shipment.
• Invoice issued by the beneficiary named in the credit.
• Invoice made out to the applicant exactly as named.
• Currency matches the credit.
• Goods description copied from the credit, with any extra detail kept consistent.
• Quantity, unit price and total within any tolerance; arithmetic checked.
• Trade term and Incoterms version shown as in the credit.
• Credit number and any required references included.
• Signature, certification and number of originals as the credit requires.
• Weights, packages and marks consistent with the packing list and transport document.
• Presentation date calculated: within 21 days of shipment (or the stated period) and before expiry.

Preparing the invoice itself

A letter of credit invoice is still a commercial invoice, so it should include the standard export details your customs authorities and the buyer's need. Keep the layout plain and readable; a clean design such as the corporate invoice template works well for bank documents. You can build the invoice in the free invoice generator: enter the beneficiary and applicant exactly as named in the credit, set the credit's currency, enter quantities and unit prices so the totals calculate, and use the notes field for the credit number, trade term and any required statements. Then compare the PDF line by line with the credit before presentation. Our wider guide to invoicing international clients covers tax and currency points beyond the credit itself.

Remember that the generator lays out the document; it does not check compliance or submit anything to the bank. Many exporters ask the advising or confirming bank, or a freight forwarder, to pre-check documents before the first few presentations.

Next step

Take the last credit you received and fill in the table above from it. If any field was unclear, ask your bank how it reads it before your next shipment. For more on getting paid across borders, see our payments articles.