Export (Specific Buyer) policy of ECGC:
The ECGC credit insurance policies protects an exporter of goods and services against the risk of non-payment by an overseas buyer. If an overseas buyer fails to make payment for the goods or services received, the ECGC insurance company will reimburse the seller or exporter. The specific buyer policy and consignment export policy are designed to cover credit risk associated with such transactions.
when is (Specific Buyer) policy needed for an exporter?
An exporter may require an insurance policy for a specific buyer or an LC opening bank which may tend to default payment.
This policy is suitable for importers located in countries within volatile, ambiguous business environment. The specific buyer policy, provides cover for shipments made to a Specific Buyer or an LC opening bank for a set of Buyers.
The exporter has to take the export specific buyers policy if he/she does not hold the standard policy or whole turnover policy. ECGC covers the credit risk through this policy in such cases.
what is the period of specific buyer policy and percentage of risk covered?
The period of this policy is 12 months and risk covered the same as that of the standard policy. Percentage of risk tower is 80%.
what are the important obligations for an exporter to obtain export specific buyer policy ?
| Important obligations for exporter under specific buyer policy |
|---|
| Processing fee of Rs 2000 nonrefundable is payable. |
| The premium is payable in four equal instalments in advance before commencement of risk |
| 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. |
key highlights of Export Specific Buyer policy are:
- only a selective buyer can be insured.
- If an importer has a tendency to default and are located in countries within volatile, ambiguous business environment, one can have a standard policy and simultaneously an export specific buyer policy.
- An exporter does not have to declare all the other export shipment under export specific buyer policy.
- The policy offers a facility of no claim bonus of 5% subject to no claim up to a maximum of 50% as in the case of other credit insurance products of ECGC.
- Exporter needs to take a separate policy for each buyer.
Consignment export policy (stockholding agent) of ECGC:
Consignment sales has recently emerged as a new focal area of business opportunity in foreign markets.
The consignment sale is a trade where a seller or a consignor, hands over his cargo to a buyer or consignee on the expectation of possible and emergent sale in the consignee’s market.
This consignment sale is based on payment mode of Documents against acceptance (DA) or time draft.
The consignment sale is executed without receiving the payment of the exported goods and trust between the consignor and consignee is the basis of this EXIM transaction.
The consignor is exposed to unlimited risk as the consignee or the stock holding agent may sell the cargo and does not remit export proceeds or cargo may not get sold at all.
The consignment sale as a marketing technique is increasingly adopted by Indian exporters to have an agency agreement with independent and separate entities in foreign countries.
Such business entities can be an agent, a franchise, a licensee, a consignee and an importer who receive and hold cargo stocks ready for sale to overseas buyer, as and when order are received, find buyers and sell them for a commission on such sales.
In order to address a credit risk associated with such unique, unpredictable transaction, ECGC has designed a separate credit insurance policy known as consignment export policy, which is introduced to cover the shipments made by exporters on consignment basis to their agent.
The risks covered under the policy are commercial or political risk on stockholding agent and ultimate buyers.
Key Highlights Of the consignment export policy are
- the risk cover is available only for those EXIM transactions which are affected under the consignment sale.
- The period of the policy is 12 months.
- ECGC allows an extended PERIOD for the realization of up to 360 days.
- The policy also has a standard clause of offering NCB of 5% subject to no claim until a maximum of 50%.
- ECGC offers very high percentage of the cover of 90% for EXIM transaction under consignment export policy.
There is an automatic cover on ultimate buyers to discretionary limits, subject to buyers in a country placed in open cover category and not in the list of buyers on whom the ECGC corporation has adverse information referred to as Buyers specific approval list.
| Important obligations for exporter under consignment export policy |
|---|
| Processing fee of Rs 4000 nonrefundable is payable. |
| The premium is payable in four equal instalments in advance before commencement of risk and sufficient deposit should be maintained in advance. |
| 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. |
This policy is unique in the sense that it offers coverage, even for commercial risk, on sales agents.