The advising bank has been instructed by the issuing bank to effect payment against documents remitted by the beneficiary.
The place of payment or the place where the credit is domiciled is the advising bank.

As a result:
* If the advising bank has not confirmed the credit, it can refuse to effect payment even if the documents are already in its possession.
* On the other hand, once it has effected payment, the payment is definite and can't be cancelled.
* Unless stipulated to the contrary in the credit, all costs and fees incurred are to be borne by the issuing bank. It is indeed the issuing bank which instructed the advising bank to pay against documents which showed all appearances to comply with the conditions of the credit.
* If for any reason - excluding an error on the part of the advising bank -, the documents sent by the advising bank are mislaid or destroyed, the issuing bank will still be obliged to reimburse the advising bank for any amounts paid.

The seller, the beneficiary of the credit, agrees to ship the goods and remit the documents to the issuing bank, possibly via the advising bank, not against payment or acceptance but in exchange for an undertaking to pay at a later date.

This type of credit therefore allows the buyer to take possession of the goods he ordered before he has paid for them.

The credit does not take the form of a bill of exchange.

Acceptance by the advising bank

Main characteristics :
* a bill is drawn by the exporter on the advising bank
* the bill is accepted by the advising bank on behalf of the issuing bank
* the bill is payable at maturity with the advising bank.

An acceptance credit is above all a guarantee procedure, a signature-lending operation. What the exporter obtains is essentially a guarantee covering:
* the delivery period according to the documentary credit
* the term for payment granted to the buyer under the acceptance credit.

Acceptance by the issuing bank.

Main characteristics :
* a bill is drawn by the exporter on the issuing bank
* the bill is accepted by the issuing bank on behalf of the buyer
* at maturity, the bill is payable with the issuing bank

This means that the exporter assumes a risk on the foreign country, since the bill can be affected by unforeseeable political and economic factors in the drawee's country.

Acceptance by a third-party bank

Main characteristics :

* the issuing bank chooses a correspondent which has granted it an acceptance credit facility.
* this third-party bank immediately credits the seller with the face value of the bill, all charges being borne by the issuing bank,
* the issuing bank covers the third-party bank at maturity by debiting its customer's account in its books.

This payment is mainly used when the seller sells spot to the buyer in a currency other than the currencies of their respective countries and when the buyer asks his bank for credit.

Acceptance by the buyer

In certain countries it is prohibited to issue bills of exchange drawn on local banks.
Consequently, in these countries, documentary credits are usually payable against the remittance of a bill drawn on the buyer mentioning "without recourse against the drawer".
These words indicate that the issuing bank undertakes to make a definite payment at maturity against presentation and receipt of documents which comply with the conditions of the credit.

Negotiation means the purchase (discount) by the advising bank authorized to negotiate (or by any bank if the credit is freely negotiable):

 * either of bills drawn by the beneficiary on the issuing bank or any other drawee bank mentioned in the credit (excluding of course the advising bank)
* or of documents presented in accordance with the terms and conditions of the credit.

The negociating bank is covered if the issuing bank fails to honour the bill or other stipulated documents.