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.
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.