Bill of Exchange Under an LC: How to Draw It So It Isn't Discrepant
A bill of exchange (draft) is one of the simplest documents in an LC set — and one of the easiest to get rejected. Here's how to draw it field by field so it matches the credit and the invoice.
Under a letter of credit, a bill of exchange (or draft) is the exporter's written demand for payment, drawn on the bank the credit names — never on the buyer. To avoid a discrepancy, its drawee, tenor and amount must match fields 42a, 42C and 32B of the LC, and its amount must agree with the commercial invoice.
The draft is usually a one-page document, and exporters often fill it in last, in a hurry. That's exactly why it turns up so often in discrepancy notices. Our bill of exchange guide explains what the document is and how it works under collections; this post is about drawing one under an LC so the bank accepts it first time.
When an LC requires a bill of exchange
Check fields 41a and 42C of the MT700. If the credit is available "by acceptance" or "by negotiation", or 42C shows a tenor ("at sight", "90 days after B/L date"), a draft is required. Credits available "by payment" at sight often need no draft at all — don't add one the LC doesn't ask for. See LC fields explained for where each field sits.
Field by field: drawing the draft
| Draft field | Take it from | Common mistake |
|---|---|---|
| Drawer | The beneficiary (field 59) | Name spelled differently from the LC |
| Drawee | Field 42a | Drawn on the applicant (buyer) instead of the bank |
| Tenor | Field 42C | "90 days sight" when the LC says "90 days after B/L date" |
| Amount | Invoice value, within 32B / 39A | Exceeds the credit, or differs from the invoice |
| Currency | Field 32B | Different currency code or symbol than the LC |
| Amount in words | Same as figures | Words and figures disagree |
| LC reference | Field 20 and issuing bank | Missing "Drawn under" clause when 47A asks for it |
| Payee | Usually your negotiating bank, or "to our order" | Not endorsed when drawn to your own order |
| Date and signature | On or after the shipment date, before expiry | Unsigned, or dated after the presentation deadline |
Getting the amount right
The draft amount normally equals the commercial invoice total — the amount you're claiming. Two exceptions: when the LC says drafts are for a percentage of invoice value (for example "90% of invoice value", with the balance paid another way), and when part of the invoice was paid in advance. In both cases the draft follows the LC wording, but the invoice still shows the full value. Never exceed the credit amount plus any tolerance in field 39A.
Getting the tenor right
Copy the tenor from field 42C. If it's a usance draft calculated from an event — "60 days after bill of lading date" — the maturity must be determinable from the documents, so the B/L date has to be clear and the draft should state the basis exactly as the credit does. Writing "60 days sight" changes when the clock starts, and the bank will treat that as a different instrument.
Five checks before you present
- Drawee is the bank named in 42a — not the buyer.
- Tenor wording is identical to 42C.
- Amount in figures and words match each other and the invoice, and stay within 32B plus 39A.
- Currency code matches the credit.
- Signed, dated, endorsed if drawn to your own order, and carrying the LC number if 47A requires it.
Frequently Asked Questions
Who is the drawee of a bill of exchange under an LC?
The bank named in field 42a — usually the issuing or confirming bank. UCP 600 says a credit must not be issued available by a draft drawn on the applicant, so a draft drawn on the buyer under an LC is a discrepancy.
Does the bill of exchange amount have to match the invoice?
Normally yes — it's the amount you're claiming against the invoice. The exception is when the LC states drafts are for a percentage of invoice value; then the draft follows that percentage while the invoice shows the full value.
Is a bill of exchange always required under an LC?
No. Credits available by acceptance or negotiation usually call for drafts; many sight-payment credits don't. Follow fields 41a and 42C, and don't add a draft the credit doesn't ask for.
What happens if the amount in words and figures differ?
The bank will raise it. Fix it before presentation — a corrected draft costs nothing, while a discrepancy can mean fees and a payment delay while the buyer decides whether to waive it.
The draft only works if the invoice behind it is right. Bilexor keeps your commercial invoice and packing list on one shipment record in the LC's currency, so the figure you put on the draft matches the documents it's drawn against. Informational only — confirm LC-specific requirements with your bank.
Informational only — not legal, banking, tax, or customs advice. Always verify document and LC requirements with your bank, CHA / customs broker, and buyer before presentation.