Banking · Trade Finance
An Indian importer opens a confirmed Letter of Credit (LC) for machinery purchase from Germany. The exporter submits a bill of lading, invoice, and insurance, but the documents show a product code variation between the commercial invoice and LC terms. The bank refuses payment. Why is the bank's rejection justified?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Insurance documents must be notarized in both nations to be valid
- 2Under the principle of strict compliance in documentary credits, documents must exactly match LC terms✓
- 3The LC was automatically voided due to international transport
- 4Minor clerical mismatches are handled by customs, not banks
Correct answer
Under the principle of strict compliance in documentary credits, documents must exactly match LC terms
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