What is ECGC?

Export Credit Guarantee Corporation of India Limited, was established in the year1957 by the Government of India tostrengthen the export promotion drive by covering the risk of exporting on credit.

 What does ECGC do? Provides a range of credit risk insurancecovers to exporters against loss in export of goods and servicesOffers guarantees to banks and financialinstitutions to enable exporters to obtain better facilities from them

What does ECGC do? Provides Overseas Investment Insuranceto Indian companies investing in joint ventures abroad in the form of equity orloan 2/2

 How does ECGC help exporters? Offers insurance protection to exportersagainst payment risksProvides guidance in export-relatedactivitiesMakes available information on differentcountries with its own credit ratings 1/2

 How does ECGC help exporters? Makes it easy to obtain export financefrom banks/financial institutions Assists exporters in recovering bad debtsProvides information on credit-worthinessof overseas buyers 2/2

 Need for export credit insurance Risks even at the best of times War or civil war may block or delay paymentCoup or an insurrectionBalance of payment problemsInsolvency or protracted default of buyers

 SCR or Standard Policy Shipments (Comprehensive Risks) Policy,commonly known as the Standard Policy,is the one ideally suited to cover risks inrespect of goods exported on short-termcredit, i.e. credit not exceeding 180 days.This policy covers both commercial andpolitical risks from the date of shipment. 1/2

 It is issued to exporters whose anticipatedexport turnover for the next 12 months ismore than Rs.50 lacs.The appropriate policy for exporters withan anticipated turnover of Rs.50 lacs orless is the Small Exporter's Policy,described separately.

 Commercial Risks Insolvency of the buyerFailure of the buyer to make the paymentdue within a specified period, normally four months from the due dateBuyer's failure to accept the goods, subjectto certain conditions

 Political Risks Imposition of restriction by theGovernment of the buyer's country or any Government action, which may block ordelay the transfer of payment made by the buyer War, civil war, revolution or civildisturbances 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 outsideIndia resulting in payment of additionalfreight or insurance charges which can not be recovered from the buyer Any other cause of loss occurring outsideIndia not normally insured by generalinsurers, and beyond the control of boththe exporter and the buyer

 Small Exporters Policy The Small Exporter's Policy is basically theStandard Policy, incorporating certainimprovements in terms of cover, in orderto encourage small exporters to obtain andoperate the policy.It is issued to exporters whose anticipatedexport turnover for the period of one yeardoes not exceed Rs.50 lacs.

 Period of Policy: Small Exporter'sPolicy is issued for a period of 12 months,as against 24 months in the case of Standard Policy. Minimum premium: Premium payable will be determined on the basis of projected exports on an annual basissubject to a minimum premium of Rs.2000/- for the policy period

 No claim bonus in the premium rate isgranted every year at the rate of 5% (asagainst once in two years for StandardPolicy at the rate of 10%). Declaration of shipments: Shipmentsneed to be declared quarterly (instead omonthly as in the case of Standard Policy).

 Declaration of overdue payments: Small exporters are required to submitmonthly declarations of all paymentsremaining overdue by more than 60 daysfrom the due date, as against 30 days inthe case of exporters holding the StandardPolicy. 3/8

 Percentage of cover: For shipmentscovered under the Small Exporter's Policy ECGC will pay claims to the extent of 95% where the loss is due to commercial risksand 100% if the loss is caused by any of thepolitical risks (Under the Standard Policy,the extent of cover is 90% for bothcommercial and political risks).

 Waiting period for claims: The normal waiting period of 4 months under theStandard Policy has been halved in thecase of claims arising under the SmallExporter's Policy. 5/8

 Change in terms of payment of extension incredit period A small exporter may, without prior approval of ECGCconvert a D/P bill into DA bill, provided that he hasalready obtained suitable credit limit on the buyer onD/A terms. Where the value of this bill is not more than Rs.3 lacs,conversion of D/P bill into D/A bill is permitted even if credit limit on the buyer has been obtained on D/P termsonly, but only one claim can be considered during thepolicy period on account of losses arising from suchconversions. 6/8

 A small exporter may, without the priorapproval of ECGC extend the due date of payment of a D/A bill provided that a creditlimit on the buyer on D/A terms is in force atthe time of such extension.

 Resale of unaccepted goods: If, upon non-acceptance of goods by a buyer, the exporter sellsthe goods to an alternate buyer withoutobtaining prior approval of ECGC even when theloss exceeds 25% of the gross invoice value,ECGC may consider payment of claims upto anamount considered reasonable, provided thatECGC is satisfied that the exporter did his bestunder the circumstances to minimize the loss.

 Specific Shipment Policy -Short Term (SSP-ST) Specific Shipment Policies - Short Term(SSPST) provide cover to Indianexporters against commercial and politicalrisks involved in export of goods on short-term credit not exceeding 180 days.Exporters can take cover under thesepolicies for either a shipment or a few shipments to a buyer under a contract

 Commercial Risks Risks covered under SSP (ST) Insolvency of the buyerFailure of the buyer to make the paymentdue within a specified period, normally four months from the due date.Buyer's failure to accept the goods

 Political Risks Imposition of restrictions by the Government of the buyer's country or any Government action whichmay block or delay the transfer of payment made by the buyer War, civil war, revolution or civil disturbances inthe buyer's country New import restrictions or cancellation of a validimport licenseInterruption of voyage outside India resulting inpayment of additional freight or insurance charges which cannot be recovered from the buyer

 Insolvency & default of LC opening bank Insolvency of the LC opening bank Failure of the LC opening bank to makethe payment due within a specified period,normally four months, from the due date

 Commercial disputes including quality disputes raised by the buyer, unless theexporter obtains a decree from acompetent court of law in the buyer'scountry in his favourCauses inherent in the nature of goodsBuyer's failure to obtain necessary importor exchange authorization from authoritiesin his country

 Insolvency or default of any agent of theexporter or of the collecting bank Loss or damage to goodsExchange rate fluctuationFailure of the exporter to fulfill the termsof the export contract or negligence on hispartNon-payment under a letter of credit dueto any discrepancy pointed out by the LCopening bank

 Export (Specific Buyers)Policy Buyerwise Policies - Short Term (BP-ST)provide cover to Indian exporters againstcommercial and political risks involved inexport of goods on shortterm credit to aparticular buyer. All shipments to the buyer in respect of whom the policy isissued will have to be covered (with aprovision to permit exclusion of shipmentsunder LC).

 Different types of BP (ST) Buyerwise (commercial and political risks)Policy - short-termBuyerwise (political risks) Policy - short-term.Buyerwise (insolvency & default of L/Copening bank and political risks) Policy -short-term

 Export (Specific Buyers) Policy The Maximum Liability (ML) is the limit up to which ECGC would accept liability under thepolicy A credit assessment fee of Rs. 1000/shall bepayable for proposals for buyerwise policy inrespect of each buyer/bank. A credit enhancement fee of Rs. 500/- is payablein case an enhancement in the limit is desireddue to increased volume of business.

Obligations on the part of theexporter holding BP Submission of statement of shipments made :Exporter has to submit, within 15 days after theend of the quarter, a statement of shipmentsmade during the quarter in respect of the buyer/bank covered under the Buyer wise policy Submission of statement of overdue: On or before 15th of every month is required to astatement of payments against the shipmentsunder the contract which have remained overduefor more than thirty days from the due date

 Intimation of event affecting the risk: If theexporter comes to know any event likely to affectthe risk the same has to be intimated to ECGCand in any case by not later than 30 days Action for minimizing loss: Immediate steps areto be taken in the event of nonpayment for any shipment. On learning of nonpayment for theshipment, for which the policy is obtained,exporter is required to take action to prevent /minimize the loss

 Export Turnover Policy Turnover policy is a variation of thestandard policy for the benefit of largeexporters who contribute not less than Rs.10 lacs per annum towards premium.Therefore all the exporters who will pay apremium of Rs. 10 lacs in a year areentitled to avail of it.

 The Buyer Turnover Policy V/sStandard Policy The turnover policy envisages projectionof the export turnover of the exporter for a year and the initial determination of thepremium payable on that basis, subject toadjustment at the end of the year based onactuals 1/2

 The policy provides additional discount inpremium with an added incentive for increasingthe exports beyond the projected turnover andalso offers simplified procedure for premiumremittance and filing of shipment informationThe holders of turnover policy need not submitmonthly declarations of shipment. Instead, they have only to submit a statement of shipmentsmade during the quarter in a prescribed format within 30 days of the end of the quarter

 Buyer Exposure Policies There has been a demand forsimplification of the procedures as well asfor rationalization of the premiumstructure. Considering the requirements osuch exporters, the Corporation hasdecided to introduce policies on whichpremium would be charged on the basis othe expected level of exposure.

 Two types of Exposure policies are offered, viz, Exposure (Single Buyer) Policy for coveringthe risks on a specified buyer and Exposure (Multi Buyer) Policy for coveringthe risks on all buyers.

 Exposure (Single Buyer) Policy Buyer Exposure Policy will be issued foreach buyer covering all the exports to bemade to the buyer during a period of twelve months.If the exporter has opted for commercialand political risks cover, failure of the LCopening bank in respect of exports againstLC will also be covered, for the banks with World Rank (WR) up to 25,000 as perlatest Bankers almanac

 For covering any bank with ranking beyond thatlevel, the exporter has to obtain specific approvalfrom the branch, which issued the policy prior tomaking the shipmentShipments to the buyers covered under BuyerExposure Policies would be excluded from thepurview of the Standard Policy. Risks covered would be same as covered under the existingBuyerwise Policy. 2/2

 Exposure (Multi Buyer) Policy Some exporters export to large number o buyers. The number of shipments made by them is also quite high. They may not findit convenient to apply for buyer exposurepolicy for all their buyers. It may also bedifficult for them to declare their exportsshipment-wise under the Standardpolicies. In order to meet the needs of suchexporters, Multi-buyers Exposure Policyhas been introduced.

 Exporters can take cover for an AggregateLoss Limit (ALL) on all their buyers to whom they propose to sell on credit termsin open cover countries While accepting the proposal, theCorporation would expect the ALL soughtto be not less than 10% of the past 12month turnover applicable for thecategories/countries for which cover issough 2/2

 Consignment Exports Policy There are two policies available forcovering consignment export viz; Consignment Exports (Stock-holding Agent) Consignment Exports (Global Entity Policy)

 Risks covered under ConsignmentExports (Stock-holding Agent)Commercial risks on both stock-holdingagent and ultimate buyers with political risksfor the entire periodCommercial risks on the ultimate buyers only with political risks for the entire periodCommercial risks on the stock-holding agentonly with political risks for the entire periodOnly political risks for the entire period

 Consignment Exports (Stock Holding Agent) Policy A consignment Exports (Stock-holding Agent)Policy will be appropriate for each exporter stock holding agent combination provided thefollowing criteria are satisfied: Merchandise are shipped to an overseas entity inpursuance of an agency agreementThe overseas agent would be an independent andseparate legal entity with no associate/sisterconcern relationship with the exporter

 The agents responsibilities could be any or all of the following, viz., receiving the shipment, holdingthe goods in stock, identifying ultimate buyers andselling the goods to them in accordance with thedirections, if any, of his principal (exporter); andThe sales being made by the agent would be at therisk and on behalf of the exporter (whether or notsuch sales are in the agents own name orotherwise) in consideration of a commission orsome similar reward or compensation on salescompleted 2/2

 Consignment Exports (GlobalEntity) Policy The merchandise are shipped forstockholding to an overseas party whoreceives and holds the goods whether ornot under written agreementThe overseas party could be the exportersown branch office / authorizedrepresentative / warehousing agent /associate or sister concern / subsidiary company

 Risks covered under ConsignmentExports (Global Entity Policy)Commercial risks on the ultimate buyersonly with political risks for the entireperiodInsolvency of the global entity andcommercial risks on ultimate buyers withpolitical risks for the entire periodInsolvency of the global entity withpolitical risks for the entire period

 Service Policy Where Indian companies concludecontracts with foreign principals forproviding them with technical orprofessional services, payments due underthe contracts are open to risks similar tothose under supply contracts. In order togive a measure of protection to suchexporters of services, ECGC hasintroduced the Services Policy

 Different types of Services Policy Specific Services Contract (ComprehensiveRisks) Policy Specific Services Contract (Political Risks)Policy Wholeturnover Services (ComprehensiveRisks) Policy Whole-turnover Services (Political Risks)Policy