Central to letters of credit, this stands for the idea that the obligation of an issuing bank to honor a drawing request under a letter of credit is independent of the transaction that the letter of credit supports. When deciding whether to make a payment, the issuing bank is concerned only with the terms of the letter of credit and the documents presented by the beneficiary. If the beneficiary presents documents that comply with the terms of the letter of credit, the issuing bank must honor the drawing request and pay the beneficiary. The issuing bank does not look beyond the face of the documents. It cannot consider extraneous matters, such as the contract between the applicant for the letter of credit and the beneficiary, or any changes to it.

Disputes between the applicant and the beneficiary about the beneficiary's performance are also not relevant to the issuing bank's decision. The sole exception to the independence principle is where there is clear evidence of fraud on the face of the presented documents. Only then can the issuing bank refuse to make payment on conforming documents. If the bank merely suspects fraud or needs to conduct an investigation to uncover fraud, it cannot refuse to make payment.