Under the rules of Uniform Customs and Practice for Documentary Credits, the bank is required to examine documents within seven (7) banking days following the day of receipt of the documents and decide whether to accept or refuse the documents. The bank must inform the presenter of the documents of its decision accordingly without delay.

In practice, the examination of documents is often done within 72 hours following the day of receipt of the documents, some banks with ample staffs may do it within 24 hours after receipt.

It is important to time the shipment and the presentation and examination of documents within the letter of credit (L/C) validity so that in the event of a discrepancy, documents can be corrected and resubmitted for examination. Otherwise, the amendment of letter of credit may be required.

Discrepancy Between the Letter of Credit and Documents
or Among the Documents

If the bank determines that the documents appear not to be in compliance with the terms and conditions of the letter of credit (L/C), there is a discrepancy. A discrepancy also occurs if the documents appear to be inconsistent with one another. Therefore, a discrepancy among the documents is regarded as not in compliance with the terms and conditions of the L/C.

In the sample letter of credit it was stipulated that "Freight Prepaid" be marked on the ocean bill of lading. Referring to the sample Ocean Bill of Lading, although this bill of lading (B/L) has the word "Prepaid", if the words "Freight Prepaid" are not indicated on the B/L, a discrepancy occurs between the L/C and B/L, and the bank will reject the documents.

The U.S. Dollar (US$) is the currency most often used in international trade. If the currency of export sales is different from the currency of the exporting country, for example a Japanese exporter sells in U.S. Dollars, the exporter may encounter exchange risks---risks from fluctuations in exchange rates, for example between the U.S. Dollar and the Japanese Yen.

In case of the Yen appreciation at the time of converting the U.S. Dollar to the Yen, the exporter will get less Yen per U.S. Dollar. Conversely, in case of the Yen devaluation the exporter will get more Yen per U.S. Dollar. Hence, in time of currency appreciation in the exporting country, it is important that the exporter ships the goods earlier, unless an earliest date for shipment is stipulated in the L/C or has been agreed upon between exporter and importer, and present the negotiating documents to the bank immediately.

The exporter may contract with the bank to sell the U.S. Dollar forward in a so called forward exchange, at a predetermined rate on an agreed future date, thus he/she will not be affected by the currency appreciation and will receive a fixed amount in his/her own currency at a future date.

In time of currency devaluation in the exporting country, the exporter may delay the shipment, unless the latest date of shipment is stipulated in the L/C or has been agreed upon between exporter and importer and the remaining time in the delayed shipment is enough to present the negotiating documents to the bank before the L/C expiry date.