Also known as a commercial letter of credit, commercial credit or documentary credit.

A type of letter of credit that is used as a primary means of making payments due under a contract. It is the most frequent form of payment in international trade.

It is issued by a bank (the issuing bank) at the request of the buyer of goods (the applicant) in favour of the seller of those goods (the beneficiary). The expectation is that once the seller has fulfilled its obligations under the purchase agreement (typically by shipping the goods to the buyer), the seller may present the documents listed in the letter of credit to the issuing bank and receive payment directly from a bank under the letter of credit instead of from the buyer.

For more information on documentary letters of credit, see Practice note, Documentary letters of credit.