Month: September 2024

what is specific shipment policy of exporter’s under ECGC

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specific shipment policy under Ecgc

Exporters who don’t have regular orders and engage in export business on an occasional basis, have infrequent export orders. Consequently, the standard policy, may not be suitable or applicable to their unique circumstances. In such cases, these exporters can take advantage of the Specific Shipment Policy (SSP). T

his policy allows them to outline the specific risks associated with their shipments and, in doing so, effectively communicate their unique needs. By indicating the distinct risks to be covered, exporters can create a tailored approach to hedge their credit risks more effectively, thereby enhancing their ability to navigate the inherent uncertainties of international trade.

The period of SSP would be valid for shipments made from date of issue of the policy and up to the last date for shipment under the relevant contract.

SSP covers commercial risk, buyer risk, political risk, LC opening bank risk. Percentage of cover is 80% and SSP mandates important obligations on the exporter.

Important obligations for exporter under specific shipment policy.
Processing fee of Rs 2000 nonrefundable is payable.
Upfront premium payment in full.
Submission of monthly declaration of shipments by 15th of the subsequent month.
Submission of payment advice slip.
Notifying or declaring. payments for bills that have remained unpaid beyond 30 days from its due date of payment by the 15th of the subsequent month.
Filing of claim within 360 days from the due date of export bill, or 540 days from the expiry date of the policy cover, whichever is earlier.
Initiating recovery steps, including legal action.
Sharing of recovery.

SSP is an insurance cover that is designed for the specific needs of an export transaction.

For example, if the consignment is destined to Syria, a war clause can be taken.

If the shipment is destined to Kenya, a civil disobedience clause is required.

And if the shipment is destined to Afghanistan, a terrorism clause should be taken for such specific shipments of export order.

The export order does not have to declare all other exports, if any, it extends credit insurance cover to Merchant Trade Transactions (MTT) with prior approval by making the necessary endorsement.

What is small exporter’s policy (SEP) under ECGC insurance cover

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small exporter's policy under ECGC

Small exporter’s policy (SEP) under ECGC

India has a large number of SMEs, which also export overseas It is estimated that 35 to 40% of India’s exports come from MSMEs. In order to fulfill the requirement of these small scale exporters, a variant of the standard policy, known as small exporter’s policy-SEP has been designed by ECGC.

SEP has all features of the standard policy incorporating certain improvements in terms of cover in order to encourage small exporters to obtain and operate the policy. SEP is issued to exporters whose anticipated export turnover for the coming one year is not more than 5 CRORE.

ECGC has fixed the maximum liability under SEP, and it should not exceed Rs 2 CRORE.

The coverage of various risks under SEP is similar to that of standard policy. The period of SEP is 12 months, and the minimum premium to be paid at the time of availing policy is Rs 5000. Which shall be adjusted for the premium of the shipments. No Claim Bonus (NCB), in the premium rate, is granted every year at the rate of 5%.

An exporter needs to declare the shipment executed on a monthly basis to ECGC. Further, small exporters are required to submit monthly declarations of all payments remaining overdue by more than 60 days from the due date, as against 30 days in case of exporters holding the standard policy.

An exporter can lodge a claim in case of non payment, 60 days after the due date of payments. ECGC can allow change in terms of payment by extending the credit, if Small exporters are confident of getting payment from overseas buyer with some delay.

Small exporter's policy -SEP

SEP is flexible to the dynamic needs of low value merchants. For example, a small exporter may without prior approval of ECGC, Convert a D/P bill into a D/A bill provided that he or she has already obtained suitable credit limit on the buyer on D/A terms.

Further, it conditioned that in cases where the value of this bill is not more than 3 lakh, a conversion of D/P bill into D/A bill is permitted, even if the credit limit on the buyer has been obtained on D/P terms only. But such claim can be considered during the policy, on account of losses arising from such conversions.

Small exporters are the most stressed and have limited knowledge and expertise in dealing with international payment realizations. Accordingly, it is allowed that a small exporter may, without the prior approval of ECGC, can extend the due date of payment of a D/A bill, provided that a credit limit on the buyer on D/A terms is in force at the time of such extension.

In cases where the importer has refused to take ownership of the cargo and pay at sight D/P, a small exporter can sell the cargo to alternate buyer without obtaining the prior approval of ECGC, even when the loss exceeds 25% of GIV.

ECGC may consider the payment of claims up to an amount considered reasonable, provided that ECGC is satisfied that the exporter does his best under the circumstances to minimize the losses. Other conditions are the same as the standard policy of ECGC.

Shipments comprehensive risk policy of ECGC; SCR

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 Export Credit Guarantee Corporation of India (ECGC) provides Export Credit Insurance Policy in India. ECGC offers a range of turnover based credit insurance policy to exporters. Turnover policies are based on the total sales generated by an export business in a specific period. The export turnover of a firm is sometimes referred to as gross revenue or gross income. The export turnover of a firm is the key measure based on which, the ECGC covers most of the export shipments under the shipments comprehensive risk policy or standard policy.

shipments comprehensive risk

Standard policy- shipments comprehensive risk policy; SCR

The shipments comprehensive risk policy or standard policy protects an exporter of goods and services against the risk of non-payment by an overseas buyer. This means that if an overseas buyer fails to make payment for the goods or services received the insurance company will reimburse the seller. This Policy is safer alternative than Letter of credit in export transactions.

This credit insurance product is for exporters whose annual export turnover is more than 5 crores. An exporter below this export turnover is not eligible for this policy.

All export shipments of an exporter should be covered under this policy. It is also known as standard whole turnover policy and the period of policy is 12 months.

Risk covered under this policy include commercial risk, buyer risk, political risk and LC opening bank risk.

The percentage of cover is 90% under the standard policy. Any exporter is required to pay a minimum premium of 10,000 at the time of availing of this policy. And such a premium will be subsequently adjusted towards premiums falling due on shipments affected under the standard policy.

The standard policy mandates certain important obligations to an exporter:

Obtaining a valid credit limit on buyers and banks from ECGC.
Premium is payable in advance before the commencement of risks and sufficient premium deposit is also to be maintained in advanced based on the turnover projection at all times during the policy.
Submission of monthly declaration of shipments by 15th of the subsequent month.
Notifying/declaring payments for bills, that have remained unpaid beyond 30 days from its due date of payment by the 15th of the subsequent month.
Filing of claim within 360 days from the due date of the export bill, or 540 days from expiry date of the policy cover, whichever is earlier.
Initiating recovery steps, including legal action.
Sharing of recovery.

Benefits of shipments comprehensive risk policy OF ECGC:

The standard policy offers credit insurance to Indian exporters at the lowest premium and is the largest selling policy of ECGC. Certain unique features make this policy very acceptable for India’s trade community.
Standard policy is flexible and can offer a higher percentage of insurance cover from the standard limit of 90%.
The standard policy also offers discrepancy covers for L/C transaction, subject to certain conditions.
If an exporter cannot sell it in the overseas market, It provisions for automatic cover for resale or reshipment up to 25% of the gross invoice value(GIV) of the export turnover
It provides the availability of discretionary credit limits on buyers on conditions. It offers cover for merchanting trade transactions( MTTs) with approval by an endorsement.
Shipment comprehensive risk policy or the standard policy of the ECGC covers risk from date of shipment.

The risks covers under SCR policy of ECGC:

Commercial risk, which can be on the part of the overseas buyer, insolvency of the buyer.
Buyer fails to make payment within a specified agreed due date. which is normally four months from the due date.
The buyers failure to accept the goods subjected to certain conditions
risk associated with the LC opening bank such as insolvency of the LC opening bank and failure of LC opening bank to make the payment due within a specified. normally for four months from the due date.
The standard
It also covers the political risks such as imposition of payment restrictions by the government of the buyer’s country, because of war, civil war, revolution, and civil disturbances in the buyers country.
New import restrictions or cancelation 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.
The standard policy of ECGC covers other causes of loss occurring outside India, not normally insured by general insurers and is beyond the control of both exporter and the importer.

The shipments comprehensive risk policy does not cover the following claims:

Commercial disputes, including quality disputes raised by the buyers, unless the export obtains a decree from a competent court of law in the buyers country in his or her favor.
Causes or defects inherent in the nature of goods.
Buyer’s failure to obtain necessary import or exchange authorization from authorities in his country.
Insolvency or default of any agent of the exporter or the collecting bank.
Loss or damage to goods which can be covered by general insurers.
Failure or negligence on the part of the exporter to fulfill the terms of the export contract.

Summary:

The shipments comprehensive risk Policy of ECGC insures the complete export turnover of the company and not any specific transaction.

Types of credit insurance cover from ECGC for export promotions

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credit insurance cover- export risks covered by ECGC

Risk is an undeniable and integral part of international trade transactions. Payments for exports in international trade are always open to risks. The quantum of risks have assumed larger proportions in today’s globalized world, due to unstable political and economic changes that create uncertainties around the world. Export credit risks can be managed by taking in credit insurance cover from ECGC.

The uncertainties faced during execution of export-import trade can be –

  • an outbreak of war or civil war
  • A coupe and insurrection may also bring the economic and political system into a halt.
  • Countries impose restrictions on transfer of payments for goods imported due to negative balance of payment.
  • Financial bankruptcy of a country due to economic breakdown.
  • Commercial insolvency of the foreign buyer.

The very purpose of export credit insurance cover is to protect exporters from such payment risks, arising out of both political and commercial reasons, and to provide them a platform to cover such risks so that they can explain their overseas with them business, says without any fear of loss.

Why credit Insurance cover is needed for exporters ?

Protection from corporate insolvency
Protection from bankruptcy
Helps in dealing with bad debts
Helps the exporter in dealing with the country court and administration of recovery order

 

what is the role of ECGC in export promotion?

Helps an expansion of sales.
Helps in protecting the exporter against bad debts.
Helps in credit facilitation and boost his borrowing power.
Helps in stabilizing and assuring the cash flow.
Helps in exploring and developing new markets.
Role of ECGC in export Promotion

 

Different types of Credit insurance cover under ECGC.

ECIESHORT-TERM TURNOVER BASEDSHORT-TERM EXPOSURE BASEDMEDIUM & LONG TERM BASED
1.Shipments comprehensive risk policy -SCRBuyer exposure policy -BEPConstruction works policy- CWP
2.Small exporters policy- SEPIT enabled services policy single customer – SITESSpecific policy for supply contract
3.Specific shipment policy- SSP SMESpecific shipment policy – SSP
4.Services policy -SRCSoftware project policy-SPP Specific services policy
5.Export turnover policy – ETP L/C confirmation cover
6.Exporter specific buyers policy -BWP———————-———————-
7.Consignment exports policy (stockholding agent; CSA———————–———————–
Export credit insurance for the exporter (ECIE) given under ECGC,GOI.

The various policies offered by ECGC help manage both political and economic uncertainties associated with realization of export proceeds from overseas markets.

In order to address the risk involved at various levels of export payment chain, ECGC has designed multi products and special services products for exporters and bankers. ECGC offers a range of turnover based credit insurance policies to exporters.

summary:

The export credit insurance is designed to protect Indian exporters from the consequences of payment risk, both political and commercial, and to enable them to expand their overseas businesses. ECGC works in close association, not only with Indian exporters, but with credit insurers of other countries and cooperates with multilateral investment guarantee agency MIGA, an arm of World Bank.

MIGA offers protection from political risks, which are usually beyond the control of ECGC, as it cannot control the events in foreign countries which have an adverse effect on the Indian exporters. MIGA provides technical assistance in reducing litigations and prompt dispute resolution between different countries, thus helping ECGC to promote India’s exports.

Export Credit Corporation of India(ECGC)

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Export credit guarantee corporation of India (ECGC) is established by Government of India to strengthen. to strengthen and boost the export. of the country by covering the credit risk. and to promote the exports of our country. ECGC is the largest credit insurer of the world in terms of coverage of national exports. It is managed by a board of directors, Hamming Expertise in the area of insurance banking management. and comprises of representatives from GOI, RBI, banking insurance and exporting community of the nation.

ECGC has designed its policies keeping in mind the interests of various section of the exporters, such as small exporters, large scale exporters, IT services, exporters, occasional exporters. And has one of the largest range of products and services to enable the exporter to choose the best possible. It offers various policies based on risk perception, and usually the premium is less in the case of lower risk transactions and countries.

Functions of ECGC ;

     1. ECGC provides. a wide range of credit risk insurance covers and products to exporters so as to enable them against the losses in the export of goods and services in international transactions.

       2. ECGC helps the exporters in financing their trade transactions by offering guarantees to commercial banks and financial institutions, particularly in cases where exporters have risky payment options and are having problems in pre shipment and post shipment finances for export transactions.

      3. ECGC also provides overseas investment insurance to Indian companies, which are investing in joint ventures abroad in the form of equity or loan, thereby covering their exposure to rest, enable them to make a foray in the international markets.

      Specific functions of ECGC :

      ECGC

      -ECGC helps exporters by offering the insurance coverage against the payment. risks. where many Indian exporters are for the first time, pouring into international trade.

      -ECGC has first hand information in export related activities, particularly in areas of potential risk associated with countries. Modo and mode of payment in a globally challenging trade rejig and offers guidance to exporters to help them out to avoid risk in such deals.

      -ECGC with its networks. with other credit risk agencies in the world published. the information on risk perception of different countries with its own credit ratings and helps the exporters to avoid them.

      -ECGC acts as facilitators in obtaining the export finance from banks and financial institutions through various guarantees to banks and financial institutions.

      -ECGC assists exporters In recovering bad debts from defaulters by helping them out to proceed legal and diplomatic channels.

      ECGC maintains database of domestic and international exporters and importers, and shares it with other credit risk insurance agencies provides information on the creditworthiness of overseas and domestic traders.

      ECGC offers a wide range of products And services to exporters, including customized products to meet their requirement and needs for the export credit insurance.

      ECGC and its structure;

      • ECGC is established on 13 July 1957 and mandated to promote exports.
      • Managed by Board of directors and the Ministry of Commerce and industry, GOI.
      • Incorporated as export risk insurance corporation. Eric 1957 and converted to ECGC in 1964. And finally, known as ECGC in 1983
      • ECGC has authorized capital up to 1000 crores and paid up capital of 900 crores.
      • Register office Mumbai 5 regional offices and 52 branches.
      • member of Barne Union. Fifty three members from 40 to countries. are members of this international unit of credit investment insurers.
      • Alliance with COFACE, France, D & B
      • Registered with insurance regulatory and development authority during September 2002.
      • ECGC branches RISO 9001: 2001 certified.
      • ECGC has largest database of buyers and also maintains list of buyers with adverse experience.
      • GOI instilled confidence in ECGC by establishing national export insurance account with a corpus of rupees 2000 crore to be operated by ECGC.
      • Tie up with NSIC to offer our products to a number of SME's spread over India.
      • Full fledged factoring scheme launched.
      • Domestic credit risk insurance is on the agenda
      • A creditor with IAAA by investment information and credit rating agency. Associate of Modi's investors service, indicating high claim paying ability and best prospects of meeting PH' S obligation.

      Did supply chain and logistics play a major role in Lebanon Pager blasts?

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      pager blasts in lebanon

      Behind every trade that happens, there is an organized and well coordinated supply chain and logistics cycle. Every layer of the cycle plays a significant role in delivering the products to its end customer. The recent Lebanon pager blasts across multiple cities reveals the hidden layers in the supply chain network.

      Security sources from Lebanon say that Israeli spy intelligence Mossad is believed to be the mastermind behind these attacks. Israel has neither confirmed nor denied the accusations.

      Hezbollah officials have accused Israel of targeting their communication devices. “The Mossad injected a board inside of the device that has explosive material that receives a code. It’s very hard to detect it through any means, even with any device or scanner.” An unnamed source said that 3,000 of the pagers exploded when “a coded message was sent” to them, simultaneously activating the explosives.

      detonated pager

      One must be wondering why Lebanon’s are still using pagers when the world is moving forward with 5G technology. Well, it’s not the common people who are using this. The pagers are used as a main communication device by the members of the Hezbollah group. Since the attack of Hamas in October last year on Israel, there has been escalating tensions between Israel and Hezbollah of Lebanon.

      Hezbollah chief has earlier warned their members to disown the smartphones and find 5G technologies, as he believed that they would become a soft target of the Israeli intelligence. Moving a step forward, the group transition to using pagers for secure communication. Dating back to three months from today, the Hezbollah group has ordered 5000 pagers from a Taiwanese company named Gold Apollo.

      The company’s founder, Hsu Ching-kuang, told reporters, that the AR-24 Model pagers that expolded in Lebanon were made by another company licensed to use its brand.

      Gold -Apollo
      Hsu Ching-kuang, the head of the Taiwanese company Gold Apollo .

      Gold Apollo founder, identified that the BAC Consulting company, based in Hungary is authorized to use Gold Apollo’s logo for product sales in certain regions.

      However, BAC Consulting Chief Executive Cristiana Bársony-Arcidiacono confirmed that her company worked with Gold Apollo. But stated that their company didn`t make any pagers, and they are just an intermediary in the manufacturing of pagers delivered.

      Hungarian Justice Ministry records show that a firm with the name BAC Consulting was registered as a new company on May 21, 2022. Its main activities listed retail trade of telecommunications products, as well as management consulting, jewelry making and cultivation of fruit.

      A record from May 2, 2020, suggests that a company of the same name had existed in the past and was shut down in 2020.

      Zoltán Kovács, a spokesperson for the Hungarian prime minister, said on X that authorities have confirmed that BAC Consulting was a trading intermediary that was not manufacturing or operating in Hungary and that “the referenced devices have never been in Hungary.”

      Taiwan’s Economic Affairs Ministry said on Wednesday that Gold Apollo had exported 260,000 pagers from 2022 to August 2024, primarily to European and American markets. In a statement, it said there had been no reports of explosions related to those products and that there were no records of the company exporting pagers directly to Lebanon.

      So what remains as as a puzzle is “Was this batch of pagers actually tampered in the supply chain cycle? ….. Did another manufacturer produce them and simply label them with the Apollo brand? …….Did Israel float shell companies across various countries, seizing the opportunity to overpower the militant Hezbollah group by counterfeiting those products by deceptive means. This part is still under investigation by the authorities.

      N.R. Jenzen-Jones, director of Armament Research Services, a technical intelligence consulting firm said that. “The scale suggests a complex supply-chain attack, rather than a scenario in which devices were intercepted and modified in transit,” he said on X.