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Inward Letter of Credit An inward l/c is opened in favour of the exporter, i.e. it is the buyer, the importer in another country who through and by his bank, opens the l/c. The exporter will receive his payment from his own bank or from the bank which advises the credit. Such bank(s) may either confirm, or not confirm the l/c, i.e. effect a separate undertaking on its own behalf that correct payment will be effected provided terms and conditions as stipulated in the l/c are being met. The foreign importer will often stipulate the l/c terms in such a manner that they to, a maximum extent, satisfy his own requirements. It is therefore important that buyer and seller agree in advance on how l/c terms are to be formed. Status of the l/c opening bank must also be assessed (is seller absolutely sure that the opening bank really can pay and/or should the l/c be confirmed by a third party bank or by the advising bank?). In order to obtain payment on the basis of an incoming credit it is essential to present documentation to the paying bank which is 100% correct and in conformity with the l/c requirements. Experience shows that banks very often receive documentation which contains errors in which case the bank will not pay, the l/c may lose its value and the seller may easily lose the security attached to the l/c, which was the original intention by receiving a l/c. In the mean time the goods may well be on the way to the foreign importer and documents will have to be sent on a collection basis or in other unsecured manner from seller’s bank to buyer’s bank, - thus the exporter may only hope that they finally are being paid (the importer’s discretion). An inward l/c may often be used as collateral supporting purchase of rawmaterials or deliveries from sub-suppliers.