Role of ECGC in Export Credit - Management Duniya

Role of ECGC in Export Credit

Insurance Policies for Exporters 

SCR or Standard Policy

Shipments (Comprehensive Risks) Policy, commonly known as the Standard Policy, is the one ideally suited to cover risks in respect of goods exported on short-term credit, i.e. credit not exceeding 180 days. This policy covers both commercial and political risks from the date of shipment. It is issued to exporters whose anticipated export turnover for the next 12 months is more than Rs.50 laces.

Under the Standard Policy, ECGC covers, from the date of shipment, the following risks:

a. Commercial Risks

• Insolvency of the buyer.


• Failure of the buyer to make the payment due within a specified period, normally four months from the due date.


• Buyer’s failure to accept the goods, subject to certain conditions.

b. Political Risks

• Imposition of restriction by the Government of the buyer’s country or any Government action, which may block or delay the transfer of payment made by the buyer.


• War, civil war, revolution or civil disturbances in the buyer’s country. New import restrictions or cancellation of a valid import license in the buyer’s country.


• Interruption or diversion of voyage outside India resulting in payment of additional freight or insurance charges which cannot be recovered from the buyer.

 

2. Export Turnover Policy (Sourced from www.ecgc.in)

Turnover policy is a variation of the standard policy for the benefit of large exporters who contribute not less than Rs. 10 lacs per annum towards premium. Therefore all the exporters who will pay a premium of Rs. 10 lacs in a year are entitled to avail of it.

The turnover policy envisages projection of the export turnover of the exporter for a year and the initial determination of the premium payable on that basis, subject to adjustment at the end of the year based on the actual. The policy provides additional discount in premium with an added incentive for increasing the exports beyond the projected turnover and also offers simplified procedure for premium remittance and filing of shipment information.

3. Buyer Exposure Policy (Sourced from www.ecgc.in)

Presently, in the policies offered to exporters premium is charged on the export turnover, though the Corporation’s exposure on each buyer is controlled through a system of approval of credit limits on the buyer for covering commercial risks. While this suits the small and medium exporters, many large exporters having large number of shipments have been complaining about the volume of returns to be filed under the policy necessitating the deployment of their resources for this purpose and also resulting in possible unintentional omissions or commissions in such reporting, which have an impact on the settlement of claims. There has been a demand for simplification of the procedures as well as for rationalization of the premium structure. Considering the requirements of such exporters, the Corporation has decided to introduce policies on which premium would be charged on the basis of the expected level of exposure.

4. Consignment Exports Policy (Sourced from www.ecgc.in)

One of the methods being increasingly adopted by Indian exporters is consignment exports where the goods are shipped and held in stock overseas ready for sale to overseas buyers, as and when orders are received. To protect the Indian Exporters from possible losses when selling goods to ultimate buyers, it was decided to introduce Consignment Policy Cover.

A consignment Exports (Stock-holding Agent) Policy will be appropriate for each exporter – stock holding agent combination provided the following criteria are satisfied:

• Merchandise are shipped to an overseas entity in pursuance of an agency agreement;


• The overseas agent would be an independent and separate legal entity with no associate/sister concern relationship with the exporter;


• The agent’s responsibilities could be any or all of the following, viz., receiving the shipment, holding the goods in stock, identifying ultimate buyers and selling the goods to them in accordance with the directions, if any, of his principal (exporter); and


• The sales being made by the agent would be at the risk and on behalf of the exporter (whether or not such sales are in the agent’s own name or otherwise) in consideration of a commission or some similar reward or compensation on sales completed.

 

 

 

 

 

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By: Management Duniya