Every trade has a buyer and a seller, and banks, insurers and agencies fill the roles between them
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Ossiano Guides · Foundations of trade finance
The names change with the instrument, from applicant and beneficiary under a letter of credit to drawee and principal under a collection, but the same roles recur in every cross-border sale.
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01 · The trading parties
Buyer and seller take a different name under each rulebook
Every cross-border sale starts with two commercial parties, the exporter and the importer. The rules behind each payment method give them formal titles. Under a , the is the party at whose request the credit is issued, usually the importer, under the ICC's UCP 600. The is the party in whose favor the credit is issued, under UCP 600 article 2 as quoted by the UK Supreme Court in Taurus v SOMO in 2017. The ICC Academy describes the beneficiary as normally the provider of the goods, services or performance.
Under a , the ICC's URC 522 names the exporter the , the party entrusting the handling of a collection to a bank. The is the party to whom the documents or draft are presented for payment or acceptance, usually the importer.
The transport document adds a third pair of names. Under US federal law, 49 U.S.C. 80101, the is the person named in a as the one from whom the goods were received for shipment, and the is the person to whom the goods are to be delivered. In the US International Trade Administration (ITA) illustration of a letter of credit, the exporter hands the goods and documents to a , and the importer later claims the goods from the .
Figure 1 · Interactive
One party, four names
Tap a role to see its name under a letter of credit, a collection and a bill of lading. Tap a name for its definition.
Sources: ICC UCP 600 (2007) and URC 522 (1995); ICC Academy; 49 U.S.C. 80101 via the Office of the Law Revision Counsel. The role mapping is editorial, drawn from the definitions' own wording, such as "usually the importer" and "usually the exporter". n/a: the definitions give that party no formal title.
02 · Letter of credit banks
Four bank roles make a letter of credit work
The ICC Academy guide to documentary credits, by David Meynell of the ICC Banking Commission, sets out the bank roles under UCP 600. The issues the credit at the request of an applicant or on its own behalf. The advises the credit at the request of the issuing bank. The is the bank with which the credit is available, or any bank if the credit is available with any bank.
A adds its : a definite undertaking, in addition to the issuing bank's, to honor or negotiate a complying presentation. Beneficiaries request confirmation over issuing bank risk, country risk or documentary risk, the ICC Academy notes. The chain starts with the buyer: in the ITA illustration, the importer applies for the credit to a local bank, which evaluates the importer's creditworthiness.
Each bank is paid for its own role. The worked example below uses illustrative inputs, not market figures and not Ossiano pricing: a USD 1,000,000 credit valid for 180 days, with 90 days of usance, and interest counted on an Actual/360 basis, the standard US money market convention recommended by the Alternative Reference Rates Committee and used in the Federal Reserve's H.15 release. Our guide to how trade finance is priced covers each fee in depth.
Figure 2
Who is paid what on one confirmed usance credit
Each card is one fee line and the party it is paid to. Inputs are illustrative.
Our Research Desk computed these figures with a verifying script (lc-issuance-cost.py): fee = face value x fee rate per period x number of periods; usance interest = face value x annual rate x days / 360. All inputs are illustrative, are not market figures and are not Ossiano pricing.
Actual fees vary with the banks, the countries, the tenor and the documents involved.
03 · Collection banks
In a collection, banks move documents without a payment undertaking
Under URC 522, the is the bank to which the principal has entrusted the handling of a collection. A is any bank, other than the remitting bank, involved in processing it, and the is the collecting bank that makes presentation to the drawee.
Banks control the flow of documents but neither verify the documents nor take any risks, the ITA guide explains. Once the collecting bank receives payment, it forwards the proceeds to the remitting bank, which credits the exporter.
The exporter's bank and the importer's bank work together through a banking relationship of their own. is the provision of banking services by one bank, the correspondent, to another bank, the respondent, in the FATF glossary definition. See our guides to documentary collections and letters of credit.
Figure 3 · Interactive
Pick an instrument, see who acts at each step
Tap a tab. Each step names the party acting and its formal title under the rules.
Sources: US International Trade Administration, Trade Finance Guide, 2022 edition; ICC Uniform Rules for Collections (URC 522); ICC UCP 600 definitions as summarized by ICC Academy; Global Supply Chain Finance Forum, factoring technique page (settlement steps).
04 · Finance providers
Factors, forfaiters and payables programs buy the receivable
In export , the exporter signs with an , which selects an through an international correspondent factor network; the import factor then checks the buyer's credit, the ITA guide explains. FCI calls this the . FCI has over 350 member companies in more than 90 countries, according to its About page. On the due date the buyer pays the finance provider, which pays the seller the remaining invoice value less fees and discount, as the Global Supply Chain Finance Forum (GSCFF) describes.
is the without recourse purchase of future payment obligations represented by financial instruments, at a discount or at face value for a financing charge, according to the GSCFF. The buyer of the claim is the .
starts from the other side of the trade. The GSCFF defines it as provided through a buyer-led program in which sellers in the buyer's supply chain access finance by selling their receivables. See our guides to factoring vs invoice discounting, forfaiting and payables finance.
05 · Risk carriers
Credit insurers and export credit agencies take the payment risk
An supports national exports with export credit insurance, loan guarantees and direct loans. The Export-Import Bank of the United States (EXIM) describes itself as the official export credit agency of the United States on its About page.
Berne Union members protected approximately 14% of world annual cross-border trade in goods and services in 2025, amounting to USD 3.71 trillion, according to the Berne Union State of the Industry Report 2025, published in June 2026. Short-term trade insured by members reached USD 3,345 billion in 2025, and total claims paid were USD 11,107 million, according to the report's data highlights.
The EXIM Export Finance Solutions Guide of March 2026 shows lender, exporter and agency as three separate parties. Its Working Capital Guarantee covers 90 percent of the bank loan, including principal and interest, and only the lender can apply. Its generally covers up to 180-day terms at 95 percent for commercial and political nonpayment.
Each party is named in a live deal. On September 18, 2025, EXIM's board approved nearly USD 185 million for Grupo Mexico Transportes (GMXT) to buy modernized locomotives from Wabtec Corporation, according to an EXIM press release. Buyer, exporter and agency each appear by name. See our guide to trade credit insurance.
Figure 4 · Interactive
The support layer: insurers, agencies and development banks
Tap a tab for the headline figures from each institution.
06 · Network
Swift and development banks connect the system
Swift, the messaging network between banks, was founded in 1973 by 239 banks in 15 countries, according to its history page. Today it describes a global network of over 11,000 financial institutions on its About page.
Development banks run trade programs that work through partner banks. The Asian Development Bank Trade and Supply Chain Finance Program has over 250 partner financial institutions worldwide and has supported more than 104,000 transactions valued at USD 74 billion since 2009. The EBRD Trade Facilitation Program counted more than 100 issuing banks and over 800 confirming banks in March 2017. The International Finance Corporation reports USD 23 billion of trade and supply chain finance committed and mobilized in FY26.
07 · Ossiano view
Clear roles let risk move to the party best placed to hold it
OBSERVATION 01
Roles are fixed by the rules
UCP 600 defines the beneficiary and URC 522 defines the principal and the remitting bank. Parties in different countries work from the same definitions.
OBSERVATION 02
Confirmation adds a second bank
A confirming bank gives a definite undertaking in addition to the issuing bank's. Beneficiaries use it to address issuing bank, country or documentary risk.
OBSERVATION 03
Risk transfer is a measured market
Berne Union members insured USD 3,345 billion of short-term trade in 2025. Credit insurance is a standing part of the transaction chain.
Summary
The same roles recur in every trade, under different names
Under a letter of credit the importer is the applicant and the exporter the beneficiary. The issuing bank issues the credit, the advising bank advises it, a nominated bank can honor it and a confirming bank adds its own undertaking. Under a collection the exporter is the principal, working through remitting, collecting and presenting banks. The bill of lading names the consignor and consignee. Factors, forfaiters and payables programs buy receivables, and export credit agencies and insurers take payment risk.
Related guides: What is trade finance?; Trade credit insurance; Letters of credit; Documentary collections; The bill of lading; Know your customer in trade finance. Every term on this page is defined in the Trade Finance Glossary.
Instrument cards: Letter of credit (sight); Confirmed letter of credit; Documentary collection, documents against payment (D/P); Factoring; Trade credit insurance; ECA-backed finance (buyer and supplier credit).
For questions on how these roles apply to existing or planned trade finance exposures, contact the Ossiano Research Desk.
Sources
- Swift, About us, undated. Supports: a global network of over 11,000 financial institutions (page accessed September 2026).
- Swift, Swift history page, undated. Supports: founded in 1973 by 239 banks in 15 countries.
- FCI, About FCI, undated. Supports: over 350 member companies in more than 90 countries (page accessed September 2026).
- FCI, International Factoring, undated. Supports: definition of the two-factor system.
- Berne Union, State of the Industry Report 2025, June 2026. Supports: members protected approximately 14% of world annual cross-border trade in goods and services, USD 3.71 trillion in 2025 (PDF page 43).
- Berne Union, State of the Industry 2025, data highlights, June 2026. Supports: short-term trade insured of USD 3,345 billion and total claims paid of USD 11,107 million in 2025.
- Asian Development Bank, Trade and Supply Chain Finance Program, September 17, 2026. Supports: over 250 partner financial institutions; more than 104,000 transactions valued at USD 74 billion since 2009; USD 5.7 billion and 24,722 transactions supported in 2025.
- International Chamber of Commerce (ICC), UCP 600 rules text, ICC Digital Library, 2007. Supports: Article 2 definitions of applicant and advising bank.
- UK Supreme Court, Taurus Petroleum Ltd v State Oil Marketing Company [2017] UKSC 64, October 25, 2017. Supports: UCP 600 article 2 definition of beneficiary, quoted at para 19.
- ICC Academy (David Meynell, ICC Banking Commission), Introduction and Types of Documentary Credit, undated. Supports: definitions of beneficiary, issuing bank, advising bank, nominated bank and confirmation; reasons beneficiaries request confirmation.
- International Chamber of Commerce (ICC), URC 522 rules text, ICC Digital Library, 1995. Supports: Article 3(a) definitions of principal, remitting bank, collecting bank, presenting bank and drawee.
- Office of the Law Revision Counsel, US House of Representatives, 49 U.S.C. 80101, Definitions, undated. Supports: definitions of consignor and consignee.
- International Trade Administration, US Department of Commerce, The Trade Finance Guide: A Quick Reference for U.S. Exporters, 2022 edition, July 2022. Supports: illustrated letter of credit steps (Chapter 4); bank role in collections (page 12); collection steps (page 13); two-factor export factoring flow (page 22).
- Financial Action Task Force (FATF), FATF Glossary, undated. Supports: definition of correspondent banking.
- Global Supply Chain Finance Forum, Factoring technique page, October 31, 2024. Supports: factoring settlement on the due date.
- Global Supply Chain Finance Forum, Forfaiting technique page, October 31, 2024. Supports: definition of forfaiting.
- Global Supply Chain Finance Forum, Payables Finance technique page, October 31, 2024. Supports: definition of payables finance.
- Export-Import Bank of the United States, About EXIM, undated. Supports: EXIM as the official export credit agency of the United States.
- Export-Import Bank of the United States, EXIM Export Finance Solutions Guide (EBK-EFSG-26-03-20), March 20, 2026. Supports: Working Capital Guarantee cover of 90 percent and lender-only application; short-term export credit insurance terms of up to 180 days at 95 percent.
- Export-Import Bank of the United States, EXIM Board of Directors approves infrastructure investments totaling nearly $285 million, September 18, 2025. Supports: nearly USD 185 million for GMXT to buy modernized locomotives from Wabtec Corporation.
- European Bank for Reconstruction and Development, Trade Facilitation Program reaches new milestone, March 28, 2017. Supports: more than 100 issuing banks and over 800 confirming banks.
- International Finance Corporation, Global trade finance page, 2026. Supports: USD 23 billion committed and mobilized in FY26; more than USD 330 billion supported over the past 20 years.
- Alternative Reference Rates Committee, SOFR "In Arrears" Conventions for Syndicated Business Loans, July 22, 2020. Supports: Actual/360 as the standard US money market day count, used in Figure 2.
- Board of Governors of the Federal Reserve System, Selected Interest Rates (Daily), H.15, September 29, 2026. Supports: money market rates annualized on a 360-day year, used in Figure 2.
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