Your supplier has shipped the goods, but the bank says the documents contain discrepancies. Can you accept them and clear the cargo? The answer depends on documentary-credit rules, Pakistan’s import regulations and the status of your financial instrument.
A Pakistani importer orders industrial machinery from China under an irrevocable letter of credit. The machinery reaches Karachi, but the bank reports two problems: the bill of lading shows shipment after the permitted date, and the documents were presented later than the LC allowed. The importer needs the machinery urgently. Storage and container detention charges may already be accumulating.
He tells the bank that he is willing to accept the discrepancies. Does that settle the matter? Not necessarily.
A documentary discrepancy can affect the issuing bank’s obligation to pay under the letter of credit. Separately, the bank must satisfy Pakistan’s foreign-exchange and import requirements. The importer must also ensure that the relevant transaction details can be used for customs clearance through Pakistan Single Window (PSW). These processes are related but not interchangeable.
1. Two Sets of Rules Apply to an Import LC
A letter of credit is a bank’s independent undertaking to honour a complying presentation. Where the credit incorporates the International Chamber of Commerce’s Uniform Customs and Practice for Documentary Credits, UCP 600 governs document examination and payment. Under Articles 4 and 5, banks deal with documents rather than the underlying goods.
This means the issuing bank generally determines whether documents comply with the LC, not whether machinery actually performs as promised.
The second set of requirements comes from Pakistan’s regulatory framework. Chapter 13 of the SBP Foreign Exchange Manual governs imports and related foreign-exchange procedures. The applicable Import Policy Order, subsequent SBP instructions and PSW processes must also be considered.
A bank examines documents under the LC while acting as an Authorized Dealer responsible for foreign-exchange regulations. An importer may overlook a documentary discrepancy, but that does not mean the bank can disregard a separate regulatory restriction. Equally, not every discrepancy is an SBP violation.
2. The Five-Banking-Day Rule
UCP 600 Article 14(b) gives the issuing bank, confirming bank and a nominated bank acting on its nomination a maximum of five banking days following the day of presentation to determine compliance. These are banking days at the relevant place, not simply five calendar days. If documents arrive on Monday at a bank operating Monday through Friday, with no holidays, Tuesday is day one and the following Monday is day five.
Under Article 16, a bank that decides to refuse a discrepant presentation must give the presenter a notice stating its refusal and identifying the discrepancies. It must also explain how it is dealing with the documents, such as holding them pending instructions or, for an issuing bank, pending an applicant waiver the bank agrees to accept. The notice must be sent by the close of the fifth banking day following presentation.
Article 16(f) provides that an issuing or confirming bank failing to act in accordance with Article 16 may be precluded from claiming that the documents are not a complying presentation. The provision should not be described as imposing identical consequences on every nominated bank.
That is why a bank may issue a formal refusal while it is still discussing the matter with its importer. Asking for a waiver does not extend the examination deadline. Nor does a missed UCP deadline automatically cancel mandatory import prohibitions or sanctions restrictions.
3. Can the Importer Waive a Discrepancy?
Under Article 16(b), the issuing bank may approach the applicant for a waiver. The bank is not obliged to accept it.
Suppose a commercial invoice conflicts with an LC description, or the supplier ships after the latest shipment date. The importer might decide the goods are commercially acceptable and request that the bank accept the documents. The bank must decide whether to proceed in light of the credit terms and applicable legal and regulatory obligations.
It helps to distinguish three situations. First, a documentary discrepancy alone may be accepted if the issuing bank agrees. Second, a discrepancy accompanied by an FI or banking-data problem may require both acceptance and additional processing. Third, a prohibited import or other mandatory legal restriction cannot be cured by a customer waiver. These are practical distinctions, not formal categories defined by UCP 600 or SBP.
4. Late Shipment, Late Presentation and LC Expiry
Late shipment: The credit specifies the latest permitted shipment date. If the relevant transport document establishes shipment after that date, the presentation may be discrepant. A later LC expiry date does not cure late shipment.
Late presentation: For presentations including original transport documents subject to UCP 600 Articles 19–25, Article 14(c) generally requires presentation within 21 calendar days after shipment unless the credit stipulates another period, and always no later than expiry. The 21-day rule should not be applied indiscriminately to every presentation.
Expired credit: An LC states the place and final date for presentation. Article 29 contains rules for expiry or presentation dates falling on days when a bank is closed, subject to the separate interruption provisions of Article 36. Importantly, the latest shipment date is not extended simply because it falls on a bank holiday.
For example, if the latest shipment date is Sunday, 18 October 2026, shipment evidenced on Monday, 19 October is ordinarily late. The bank’s Sunday closure does not extend that deadline.
5. The PSW Financial Instrument Problem
Pakistan Single Window links import declarations with banking information and relevant Financial Instruments (FIs). Depending on the transaction, an FI may relate to an LC, advance payment or contract/collection arrangement.
PSW’s published guidance requires an active FI when it is associated with an import declaration. An expired FI cannot be newly associated. Importers should confirm the status of an existing association with their bank rather than assume every LC expiry prevents clearance.
An importer may have obtained agreement to accept a late presentation yet still need to resolve an FI-related issue. But LC expiry and FI expiry should not automatically be treated as identical. Ask the bank whether the FI is active, whether it has already been associated with the declaration, whether payment mode and currency are correct, whether available value is sufficient and whether an electronic update is required.
6. What If the Invoice Exceeds the LC Amount?
Suppose the importer opens an LC for $100,000 and the supplier presents an invoice for $103,000. The bank must first examine the credit amount and any applicable tolerances. UCP 600 contains tolerance provisions, but not every excess amount is permissible.
The bank must separately consider whether additional payment is allowed under applicable SBP instructions and whether the amount recorded in PSW needs attention. A customer waiver alone does not authorise a larger foreign-exchange remittance. Ask the bank to identify the precise current rule and any permitted correction procedure instead of relying on assumed universal percentage or extension limits.
7. Can a Sight LC Be Changed to Deferred Payment?
A supplier may agree to allow 60 or 90 days instead of payment at sight. This is not achieved simply by writing “usance accepted” on a waiver letter. The bank must consider the existing undertaking, the positions of any confirming or nominated bank, the supplier’s agreement and applicable regulation.
If the arrangement requires an amendment or a separate documentary collection, the parties must use the appropriate banking procedure. Related transaction information in PSW may also require updating. Do not assume that a sight LC can always be converted merely because the supplier agrees.
8. Shipping Guarantees: Understand the Risk
Sometimes cargo reaches Karachi before the original shipping documents. The importer may ask about obtaining delivery without the original bill of lading, potentially through a shipping guarantee or another acceptable arrangement.
This may be useful but creates exposure. The bank may undertake obligations to a carrier, and the importer may have to provide an indemnity, security or financing. Once goods are obtained, later discrepancies may leave the importer with fewer commercial options.
It is too broad to say that every shipping guarantee automatically waives every documentary discrepancy. Consequences depend on the guarantee, indemnity, credit terms and other obligations. Obtain the proposed indemnity wording and ask the bank to explain the payment and documentary risks before proceeding.
9. The Importer’s Practical Checklist
- Request the complete discrepancy list, identifying the document and relevant LC condition or UCP provision.
- Ask whether the bank has already refused the presentation under Article 16 or is still examining it.
- Assess the commercial impact: quantity, specifications, delivery timing, insurance and cost.
- Ask whether there is a separate SBP, import-policy or PSW problem.
- Check FI status, payment mode, amount and declaration association.
- If appropriate, request acceptance of the identified discrepancies in writing.
- Confirm the payment obligation, charges and conditions for release before arranging delivery.
Communicate with the supplier when corrected or replacement documents are possible. Not every discrepancy warrants a dispute, and not every discrepancy should be waived.
10. A Documentary Discrepancy Does Not Prove the Goods Are Defective
A late bill of lading or inconsistent certificate can create a documentary problem even when the goods are satisfactory. Conversely, complying documents do not guarantee that goods meet the buyer’s expectations. Banks examine documents, not cargo.
Importers should address quality, quantity and inspection protections in their commercial contracts and, where appropriate, in the documents required by the LC. Trying to use an unrelated documentary discrepancy to resolve a quality dispute can create further complications.
11. What SBP Chapter 13 Adds
Chapter 13 governs Pakistan’s import-related foreign-exchange arrangements and Authorized Dealer responsibilities. It must be read alongside later circulars and applicable trade-policy requirements. For example, SBP EPD Circular Letter No. 09 of 2026, dated 23 April 2026, addressed particular Financial Instrument arrangements for crude oil and petroleum products and standby letters of credit for specified energy imports. These sector-specific provisions should not be generalized to ordinary machinery or consumer goods.
Importers should check whether an older permission requirement or restriction remains applicable rather than assume a historical version of the manual is current.
Before You Sign the Waiver
Ask your bank for two things: the complete list of documentary discrepancies and confirmation of whether any separate SBP or PSW issue remains unresolved. The first tells you what you are accepting. The second tells you whether accepting it will actually allow the transaction to proceed.
For the opening stage, see our guide to opening an import LC in Pakistan. For related payment difficulties, read why Pakistani banks reject or delay international payments and how SWIFT payments travel between banks.
This article provides general information, not transaction-specific legal or banking advice. Verify current SBP, trade-policy and PSW requirements with your Authorized Dealer.