Firstly, both the buyer and seller explicitly stipulate in the trade contract the use of a letter of credit as the payment method. This is the basis for issuing the letter of credit, ensuring that both parties reach a consensus on the payment method.

Next, the buyer will notify the issuing bank they have chosen (usually a bank with which they have business dealings) and request them to open a letter of credit in favor of the seller. After receiving the buyer's application, the issuing bank will conduct strict review to ensure that the application complies with relevant regulations and bank rules.

After the review is approved, the issuing bank will officially open the letter of credit and notify the seller of the letter of credit through the notifying bank (usually the bank in the seller's location). After receiving the letter of credit, the notifying bank will immediately notify the seller that the letter of credit has been opened.

After receiving the letter of credit, the seller will carefully verify its contents to ensure that it meets the requirements of the contract. Once confirmed as correct, the seller will begin preparing to ship the goods and ensure that all documents comply with the terms of the letter of credit.

After the goods are shipped, the seller will submit the relevant documents to the designated bank (which may be the issuing bank or the payment, acceptance or negotiation bank specified in the letter of credit). The bank will review the documents in accordance with the provisions of the letter of credit. If the documents meet the requirements of the letter of credit, the bank will make payment, acceptance or negotiation in accordance with the provisions of the letter of credit.

Finally, banks other than the issuing bank will send the documents to the issuing bank. After verification, the issuing bank will reimburse the banks that have paid, accepted, or negotiated in accordance with the letter of credit in the agreed manner. At this point, the entire issuance process is completed.