OBTAINING EXPORT CREDIT INSURANCE

            Export credit insurance protects your from the consequences of the payment risks, both political and commercial.  It enables you to expand your overseas business without fear of loss.  Further, it creates a favorable climate for you under which you can hope to get timely and liberal credit facilities from the banks at home.  You can obtain Export Credit Insurance from the Export Credit Guarantee Corporation of India Limited.

            In order to provide you Export Credit Insurance, the following covers are issued by the ECGC:

(a)                Standard policies to protect you against risk of not receiving payment while trading with overseas buyers on short-term credit.

(ii)                Specific policies designed to protect you against the risk of not receiving payment in respect of : (a) exports on deferred payment terms, (b) services rendered to foreign parities, and (c) construction work, including turnkey project undertaken abroad.

The policies are either :

1.                  Whole Turnover Policies in the form of ‘Open Cover’ in respect of shipments made during 24 months period DP, DA & open delivery terms.  You have to obtain credit limit on each one of your buyers to enable ECGC to approve a limit on the basis of credit worthiness of the buyer.  Further your have to declare the detail of shipments on monthly basis.

2.                  Specific Policies for exports of capital goods on medium or long term credit, turnkey projects, civil construction works and technical services.  These policies are basically similar to whole turnover  policies but only apply to specific contracts.

(iii)               Financial guarantees issued to banks against risk involved in providing credit or guarantee facilities to you, both at the pre-shipment or post-shipment stages and

(iv)              Special schemes viz, transfer guarantee issued to protect banks which add confirmation to letters of credit, Insurance cover for Buyers’ Credit, Lines of Credit, Overseas Investment Insurance and Exchange Fluctuation Risk Insurance.

The other guarantees which banks can offer to you through ECGC schemes are :

·        Bide Bonds,

·        Advance payments guarantee,

·        Bank guarantee for due performance of the contract by the exporter,

·        Bank guarantee for payment of retention money,

·        Bank guarantee for loans in foreign currencies.

Details of these schemes can be obtained from your own banker or local office of the Export Credit Guarantee Corporation of  India Ltd.

The Shipment (Comprehensive Risks) Policy is the one ideally suited to cover risks in respect of goods exported on short-term credit.

Shipments to associates or to agents and those against letters of credit can be covered for only political risks by suitable endorsements to the Shipments (Comprehensive Risks) Policy Premium is charged on such shipment at lower rates.

For obtaining a policy you should apply to the nearest office of the ECGC in the prescribed Form (obtainable from ECGC). You should also confirm your acceptance of the premium rates, which will be intimated to you at the time of obtaining the prescribed proposal form from the ECGC office.  You should also remit Minimum Premium of Rs. 7,500/-

As commercial risks are not covered in the absence of a credit limit your are advised to apply to ECGC for approval of credit limit on buyer in the prescribed Form No. 144 (obtainable from ECGC) before making shipment Credit Limit is the limit upto which claim can be paid under the policy for losses on account of commercial risks.

If no application for Credit Limit on a buyer has been made, ECGC accepts liability for commercial risks upto maximum of Rs. 5,00,000 for D.P./C.A.D. transactions on a particular buyer subject to the condition that the claims will be limited to two buyers during the currency of the policy or commercial risks upto maximum of Rs. 3,00,000 for DA transactions and Rs. 10,00,000 for DP/CAD transactions provided that atleast three shipments have been effected to the buyer during the preceding two years on smiliar payment terms and atleast one of them was not less than the discretionary limit availed of by the exporter and the buyer had made payment on the due dates.