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METHODS OF RECEIVING PAYMENT AGAINST EXPORTS
Before we proceed to understand the concept of Letter of Credit, let us understand the various
types of payment methods available against export.
METHODS OF PAYMENT
There are three methods of payment depending upon the terms of payment, and each method
of payment involves varying degrees of risks for the exporter. The methods are:
y Payment in advance
y Documentary Bills
y Letter of Credit
y O pen Account
y Counter Trade
A. PAYMENT IN ADVANCE
This method does not involve any risk of bad debts, provided entire amount has been
received in advance. At times, a certain per cent is paid in advance, say 50% and the rest on
delivery. This method of payment is desirable when:
y The financial position of the buyer is weak or credit worthiness of the buyer is not
known.
y The economic/ political conditions in the buyer¶s country are unstable.
y The seller is not willing to assume credit risk, as un the case of open account
method.
However, this is the most unpopular methods as a foreign buyer would not be willing to pay
advance of shipment unless:
y The goods are specifically designed for the customer, and
y There is heavy demand for the goods (a seller¶s market situation).
B. DOCUMENTARY BILLS:
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Under this method, the exporter agrees to submit the documents to his bank along with the
bill of exchange. The minimum documents required are
y full set of bill of lading
y commercial Invoice
y Marine Insurance policy and other document, if required.
There are two main types of documentary bills:
y Documents against Payment,
y Documents against Acceptance.
Documents against payment (D/P): The documents are released to the importer against
payment. This method indicates that the payment is made against Sight Draft. Necessary
arrangements will have to be made to store the goods, if a delay in payment occurs.
The risk involved that the importer may refuse to accept the documents and to pay against
them. The reason for non-acceptance may be political or commercial ones. In India, ECGC
covers losses arising out of such risks. Under this system, as compared to D/A, the exporter
has certain advantages:
y The document remain in the hands of the bank and the exporter does not lose
possession or the ownership of goods till payment is made,
y Other reason may include that the exporter may not be able to allow credit and wait
for payment.
Documents Against acceptance (D/A): The document are released against acceptance of
the Time Draft i.e. credit allowed for a certain period, say 90 days. However, the exporter
need not wait for payment till bill is met on due date, as he can discount the bill with the
negotiating bank and can avail of funds immediately after shipment of goods.
In case of D/A as compared to D/P bills, the risk involved is much grater, as the importer
has already taken possession of goods which may or may not be in his custody on the
maturity date of the bill. If the importer fails to pay on due date, the exporter, will have to
start civil proceedings to receive his payment, if all other alternatives fails. The risk involved
can be insured with ECGC.
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C. LETTER OF CREDIT (L/C):
This method of payment has become the most popular form in recent times, it is more
secured as company to other methods of payment (other than advance payment).
A letter of credit can be defined as ³ an undertaking by importer¶s bank stating that payment
will be made to the exporter if the required documents are presented to the bank within the
variety of the L/C´.
THE LETTER OF CREIDT
Introduction
The cycle of a business transaction can be said to be complete prima facie when the buyer has
received the product he desires to buy and the seller gets his payment in due consideration of
the product supplied.
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While the seller is keen to receive the payment for his supplies, the buyer is equally keen that
he gets what he wants by the paying for the same.
Tough there are many merit and demerits in each of the different mode of payments we have
discussed earlier, in relation either to the buyer or to the seller, we shall now deal in detailabout the mode of payment under the Documentary Credit.
Generally, though exporters are complacent once they get the letter of Credit on hand feeling
that their payment is secured, let me say it is as much a dubious instrument as is a safe
instrument.
If one does not understand the implications of the terms and condition of a letter of credit, the
provisions under UCP 500, how co-operative are the exporter¶s bank and how good are the
L/C opening bank and the reimbursement bank, he is sure to land in trouble at once stage or
another.
There are ample cases of frauds under the Letter of Credit. More and more ingenious methods
are adopted to circumvent the provisions of UPC 500 by fair or foul means. Hence, even the
safety and security under the Letters of Credit may prove to be no better than a mirage for a
man in the desert.
Hence, sufficient care is to be taken by the exporter to ensure that instrument is received in
order and the conditions of the L/C can be well complied with, and there are no clauses of
ambiguity.
What is a Documentary Credit?
To say in simple language, this is an Undertaking by a Bank associated with the buyer to
make the payment for the supply of goods by a seller subject to compliance of variousrequirements that may be specified in the document of undertaking by the Bank. This
document is known as Documentary Credit. A Documentary Credit is also called a Letter of
Credit (L/C).
CONTENTS OF A LETTER OF CREDIT
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A letter of credit is an important instrument in realizing the payment against exports. So,
needless to mention that the letter of credit when established by the importer must contain all
necessary details which should take care of the interest of Importer as well as Exporter. Let
us see shat a letter of credit should contain in the interest of the exporter. This is only an
illustrative list.
y name and address of the bank establishing the letter of credit
y letter of credit number and date
y The letter of credit is irrevocable
y Date of expiry and place of expiry
y Value of the credit
y Product details to be shipped
y Port of loading and discharge
y Mode of transport
y Final date of shipment
y Details of goods to be exported like description of the product, quantity, unit rate,
terms of shipment like CIF, FOB etc.
y Type of packing
y Documents to be submitted to the bank upon shipment
y Tolerance level for both quantity and value
y If L/C is restricted for negotiation
y R eimbursement clause
PROCEDURE INVOLVED IN THE LETTER OF CREDIT
The following are the step in the process of opening a letter of credit:
y Exporter¶s R equest: The exporter requests the importer to issue LC in his favor. LC is
the most secured form of payment in foreign trade.y Importer¶s R equest to his Bank: The importer requests his bank to open a L/C. He
May either pay the amount of credit in his current account with the bank.
y Issue of LC: The issuing bank issues the L/C and forwards it to its correspondent bank
with also request to inform the beneficiary that the L/C has been opened. The issuing
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bank may also request the advising bank to add its confirmation to the L/C, if so
required by the beneficiary.
y R eceipt of LC: the exporter takes in his possession the L/C. He should see it that the
L/C is confirmed.
y Shipment of Goods: Then exporter supplies the goods and presents the full set of
documents along with the draft to the negotiating bank.
y Scrutiny of Documents: The negotiating bank then scrutinizes the documents and if
they are in order makes the payment to the exporter.
y Negotiation: The exporter¶s bank negotiates the document against the letter of credit
and forwards the export documents to the L/C opening bank or as per their
instructions.
y R ealization of payment: The issuing bank will reimburse the amount (which is paid to
the exporter) to the negotiating bank.
y Document to Importer: the issuing in turn presents the documents to the importer and
debits his account for the corresponding amount.
In order to have uniformity and to avoid disputes, the ICC Paris has evolved uniform customs
and practices of documentary credit (UCPDC), in short known as UCP 500 effective from 1-
1-96. These are rules have been adopted by more than 150 countries. They provide the
comprehensive and practical working aid to banker, lawyer, importers, exporters, Exporters,
transporters, executives involved in international trade.
Note: as soon as an L/C is received ensure that the same is authenticated. Meaning that the
genuineness of the L/C is certified by the Advising Bank by an endorsement with the
marking µAUTHENTICATED¶ OR ELSE THE L/C IS OF NO USE.
Different Type of Documentary Credits.
There are various types of Documentary Credit opened by a bank in favour of it¶s customer
depending upon the requirement. Let us talk about few types of Documentary Credit which
are in common use.
y R evocable / Irrevocable Documentary Credit :A R evocable Documentary Credit can
be revoked (cancelled) by the buyer at his own discretion and this does not require the
consent of the seller. The risk factor here is that the L/C may be cancelled even after
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the shipment is done and before the beneficiary present the documents to the bank for
claiming the reimbursement. Hence, a revocable L/C is as goods as no L/C.
obviously, no seller will entertain a revocable L/C. Contrary to this, an Irrevocable
Documentary Credit once established and advised to the beneficiary, cannot be
revoked or cancelled unilaterally by the buyer without the consent of the beneficiary
(Seller).A Seller must always ask for an Irrevocable Letter of Credit.
y R estricted/ Unrestricted Documentary Credit: A Documentary Credit stipulates the
name of the bank who is authorized to negotiate the document for claming the
reimbursement. In this case the beneficiary is obliged to negotiate the documents only
through the specified bank i.e. Negotiation of document is restricted to that particular
bank. On the contrary if no specific bank is nominated for negotiation, it may say
µNegotiation by any bank¶ which means the beneficiary is free no negotiate the
document through the bank of his choice. This is beneficial because he can negotiate
the documents through his own bank where he is having an account. Since the bank is
not alien to him, he will not face any practical/procedural difficulty in negotiating the
document. It is suggested to have an unrestricted L/C or L/C which may be restricted
to the bank of the beneficiary¶s choice.
y Confirmed/
Unconfirmed
Documentary Credit: Confirmed
Documentary Credit is one
in which the beneficiary has the option to have the L/C confirmed by a bank in the
beneficiary country i.e. the bank who confirms the L/C takes the responsibility of
making the final payment to the beneficiary upon negotiation of the document in strict
compliance with the terms and conditions of the Letter of Credit. By this process the
final payment will be made in the beneficiary¶s country by the bank which confirms
the L/C immediately upon negotiation of the documents. The beneficiary do not stand
the risk of waiting for the document to reach the opening bank who will have the final
say so to the compliance under the L/C before making the payment. Further, the payment is also made immediately after negotiation and without recourse to the
beneficiary i.e. the payment once made by the confirmed bank cannot be revoked.
Moreover, if the importing country¶s regulation changes and the money is not allowed
to be repatriated, this will eliminate the risk. On the contrary, in an unconfirmed L/C,
the negotiating bank only accepts the documents and pays for the same with recourse
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i.e. if as and when the documents reach the opening bank, and the opening find some
discrepancy in the documents it may refuse to make the payment or seek clarification
for the applicant before reimbursement. The beneficiary is fully at the mercy of the
opening bank for payment. It is suggested to ask for a Confirmed L/C.
y With R esource and Without (Sans) R esource Letter of Credit: The revocable or
irrevocable LC can further be classified as with resource and without resource LC.
o With resource LC: In this type the exporter is held liable to the paying/
negotiating bank, if the draft drawn against LC is not honored by the
importer/issuing bank. The negotiating bank can make the exporter to pay
the amount along with the interest, which it has already paid to the
beneficiary.
o Without (Sans) R esource LC: In the case of sans (without) resource letter
of credit, the negotiating bank has no recourse to the exporter, but only to
the issuing bank or to the confirming bank.
Normally, the negotiating bank makes advance payment to the exporter in resource of
letter of credit either by discounting bills against letter of credit or by purchasing the
bills of exchange. In such an instance, if the issuing bank fails to make payment or
dishonor the letter of credit, then the negotiating bank cannot get the money back
from the exporter or hold him liable to pay the amount. However, in the case of with
resource letter of credit, the negotiating bank can ask the exporter to pay back the
money along with certain other expenses. For the exporter, sans R esource letter of
credit is more safe as compared to With R esource letter of credit.
y Transferable/Non-transferable Documentary Credit: In a transferable L/C, the
beneficiary can transfer the L/C opened in his name in favor of a third party who may
effect the shipment and negotiate the documents and claim payment under the said
L/C.
y R evolving Documentary Credit: Where an exporter is having a regular shipment for a
particular customer and the value of each shipment may also be of more or less equal
value, and then one can call for a R evolving Documentary Credit.
The salient feature of this L/C is that the buyer opens an L/C which can take care of
shipments, say, may be for a period of one year on a monthly basis.
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For e.g. an exporter enters into a contract for supply of 5000 pairs of Trousers valued
approx.US.$.75,000/- to be shipped every month. The buyer can open an L/C for a
value of US.$.75000/- with validity for 12 months stipulating shipment every month
for a value of US$. 75000/-and by adding a clause to make 12 shipment of like value
the L/C stands replenished for the full value of the L/C after each shipment is made
the documents are negotiated for which payment are also made immediately for the
value of the shipment. The main benefit in this L/C is that the buyer, the bank and the
exporter are saved from the routine of opening one L/C every month, the anxiety of
non-receipt of the L/C on time, the amendments that may be warranted every time, the
bank charges for opening number of L/Cs etc.,. A revolving Documentary Credit may
have cumulative effect i.e. if a particular shipment is not made, then the value is
added to the value for future utilization. In an automatic R evolving Credit, the bank is
liable for the total amount covering the entire shipment and where it is non-automatic
its responsibility is restricted to the value of one shipment. In automatic R evolving
Credit the value of the credit is automatically replenished by an amendment.
Where there are continuous shipments like the one stated above one can call for a
R evolving Letter of Credit.
y Assignable Documentary Credit: In this type of L/C the benefit is shared between the
first beneficiary and the parties whose names are assigned on the L/C. The assignee isnot a party to the letter of credit but he only derives the benefit as per the L/C. this is
more beneficial to the assignee because he receives his part of the money once the
documents are negotiated by the first beneficiary in whose name the L/C is opened.
Calls for an L/C as necessary.
y Stand by Letter of Credit: This is aimed at providing a security to a seller in case the
buyer fails to perform his part. Thus this L/C is used in case of non-performance
while the other types of L/Cs are generally for some performance. Such credits are
paying on first presentation and the only document required therein is a simpledeclaration of non-performance along with the statement of claim. This type of L/C is
mainly common in U.S.A.
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A standby Documentary Credit is generally common on open account trading where
the seller may expect some security for getting his payment. This is not permitted in
India.
y R ed Clause LC: The red clause LC is the usual irrevocable LC with further authorities
the negotiating bank to make advance to the beneficiary for the purpose of processing
the export goods. Thus, the red LC enables the exporter to obtain packing credit
facility for the purpose of processing the goods. It is called a red-cause LC because it
is generally printed/ typed in red ink.
y Green Clause LC: The Green LC in addition to permitting packing credit advance also
provides for the storing facilities at the port of shipment. Green LCs is extensively
used in Australian wool creditors.
y Back-to-Back LC: Back-to Back LC is a domestic letter of credit. It is a ancillary
credit created by a bank based on a confirmed export LC received by the direct
exporters. The direct exporter keep the original LC (received from issuing bank) with
the negotiating or some other bank in India, as a security, and obtains another LC in
favour of domestic supplier. Through this route the domestic supplier gains direct
access to a pre-shipment loan based on the receipt of domestic or back-to-back LC.
y Documentary LC: Most of the L\C is documentary L\C. Payment is being made by
the bank against delivery of the full set of documents as laid down by the terms of
credit. The important documents required to be submitted by the exporter under
documentary LC includes the following:
o Bill of Lading /Airway Bill or any other transport document
o Commercial Invoice
o Insurance Policy
o Shipping Bill
o Certificate of Origin
o Combined Invoice and Certificate of Value and Origin
o GSP/CWP certificate
o Packing List
o Certificate of Quality Inspection
o Bill of Exchange
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o Any other document if required.
A letter of credit may call for some or most of the above documents and may also call for
some other documents specific to the shipment.
y Traveler¶s LC: Traveler¶s LC is issued to the person who intends to make a journey
abroad. The correspondent/ agent of the bank honors all the cheques drawn on this
credit by its holder up to the amount mentioned in LC. Traveler¶s LC has more
advantages as compared to traveler¶s cheques. In case of cheque, the holder can
withdraw up to the amount of the cheque. Again, he has to carry a number of cheque.
In case of traveler¶s LC, the holder can draw any amount up to the limit mentioned in
the LC, and he need to carry only one paper of LC.
Types of Payments under a Documentary Credit.
Payment under a documentary credit can be of the following types:
y payment at Sight: In this mode, the payment is made by the L/C opening bank or its
nominated bank or by a confirming bank on presentation of the documents in full
conformity with the L/C. The L/C may or may not call for draft at sight for the full
value of the documents.
y Deferred Payment Scheme: In this case the payment is to be made at a future date as
stipulated in the L/C. Here, generally NO draft is required as the due date of payment
is defined in the L/C. In case of a confirmed L/C, the final payment is made by the
confirmed bank on due date and by the issuing bank or its nominated bank if the L/C
is not confirmed.
y Acceptance Credit : This type of credit requires a usance draft to be drawn on a
nominated or accepting bank. The payment is made by the nominated/accepting bank
on the due date as per instructions of the negotiating bank. In case of a confirmed L/C
the payment on due date is made by the negotiating bank (confirming bank).
y Negotiation Credit: Here the payment is made by the negotiating bank upon
negotiation of the documents if it prepares to take the risk and will recourse to the
beneficiary. If the credit is confirmed, then the negotiation bank is obliged to make
the payment upon submission of a clean document by the beneficiary.
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Expect in the case of confirmed L/C there is always a time lag between the date of
negotiation of the document and the date of receipt of the payment. This is a grey area. If the
bank acts swiftly and without prejudice, one gets payment within a week¶s time. If the
payment is delayed beyond this time, though an exporter has every right to ask for
compensation, in actual practice, no justice is done to the exporter for the delayed payment.
Very rarely, on persistent approach by the exporter/their banker, does a defaulting bank
comes forward to compensate for the delayed payment. Generally the exporter has to forego
lot of money in correspondence through the negotiating bank because every communication
of the bank is charged to the exporter. It is no surprise many exporter suffer this loss silently.
Feature of a Documentary Credit
A documentary credit is a document in writing issue by the bank on behalf of its customer
(The Buyer). Documentary Credit must stipulate the Type of Credit as detailed above and
inter alia will also stipulate the
Following details :
y the name of the Bank issuing the Documentary Credit.(The L/C O pening Bank)
y the name and address of the buyer on whose behalf the credit is Issued.(The
Applicant)
y the name and address of a bank in the country of the seller the credit through Whom
the L/C is to be advised to the seller.
y The name and address of the Seller (Beneficiary)
y The Maximum Value the opening bank undertakes to pay to the Beneficiary.
y The date of issue of the credit.
y The Expiry Date of the L/C
y The Validity Date for shipment.
y The
D
etails of the product to be shipped.(D
escription)y Details of document required for claiming the payment from the O pening bank.
y The name and address of the bank authorized to negotiate the documents.
y The R eimbursement Clause.
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As soon as an L/C is received ensure that the L/C is authenticated. If the L/C received in mail
the signatures are got to be verified by the advising bank. In case of telex/swift the bank
should endorse on the document authenticated and then only the L/C is a valid document.
W
hile the above details are the minimum that aD
ocumentary Credit may have in actual practice there can be other stipulations mutually agreeable to the buyer, seller and the
opening bank as also the negotiating bank.
The guidelines for the interpretation and usage of Letter of Credit are governed by the UCP
500 (Uniform Customs Practice for Documentary Credit) published by the International
Chamber of Commerce (ICC). The UPC 500 covers all the procedural aspects relating to the
transactions under a Letter of Credit. Hence one is suggested to be familiar with all the 49
Articles as detailed in the UCP 500 of 1994.
While all the elements and events that one may encounter in each and every organization can
not be explained, the UCP 500 has attempted to take care most of the queries that one may
encounter normally.
The ICC Uniform Customs and Practice was first published in 1993. Taking into the
consideration of the various developments in the transactions under the Documentary Credit
the ICC has been reviewing these rules and updating the same. As time changes and the
international transactions faces new aspects, attempts will be made to get the UCP 500
revised.
Scrutiny of letter of credit
Mere receipt of letter of credit is no guarantee of payment. There are many ifs and buts before
the documents are submitted to the bank against the letter of credit for realization of proceeds
from the opening bank. As soon as the letter of credit is received a through scrutiny is to be
undertaken to ensure that
y First and foremost that the credit is properly authenticated by the advising bank.
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y The letter of credit has been opened in accordance with the terms of the contract.
y The name and address of the beneficiary has been spelt properly.
y The details of product description, quality, and value are in order.
y The validity of shipment and expiry are correct.
y The documents that are required can be submitted.
y There is sufficient % of tolerance of quantity and value.
y The unit price and the terms of contract are correct.
y The terms and conditions stipulated can be complied with.
y That the credit is available for negotiation without restriction.
y In case of exports requires the credit to be confirmed by the local, then necessary
clause is incorporated by the opening bank on the credit.
y Last but not the least; the credit has a reimbursing clause enabling the negotiation
bank to get reimbursement of the money paid to the exporter against the documents.
There are only few suggestions. The requirement may differ for different exporter and the
scrutiny has be done relative to the requirement.
AMENDMENTS TO THE CREDIT
On scrutiny of the letter of credit, if the exporter finds that some change are required to be
made in the credit, he should immediately request the buyer to make necessary change in theletter of credit and the opening bank issued necessary amendment in this respect. Any oral
and written agreement by the importer about change in the credit directly to the exporter
should not be accepted as it is not valid under the credit. Any change must be advised by the
importer through the opening bank only as a sort of amendment to the original credit.
DOCUMENTARY CREDIT IN GENERAL
Of all the various type of payments, the most safest as far as the exporter is concerned is to
get an advance payment in full for the value of shipment to be effected. O bviously, this puts
the buyer totally at the mercy of the seller and unless the buyer feels unavoidable he will not
be prepared to make advance payment. Hence, of the rest of the modes of payment, the best is
calling for a Documentary Credit for any shipment. Now let us see how we can take care of
the interest of the exporter while an L/C is established.
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It is suggested that the exporter gives the full details as to the various requirements to the
buyer for incorporation in the L/C. this will avoid the necessary of asking for amendments
and will save both time and money. Bear in mind every amendment costs you badly. Care
are should be taken to ensure that there are NO spelling mistakes, omission and commission
of ³, or´, or such small things. A discrepancy is a discrepancy and there is nothing like minor
discrepancy or major discrepancy as far as the bank is concerned. A bank strictly deals in
documents and the documents are expected to be cent percent in line with details give in the
Documentary Credit. Ensure that the Validity for shipment and for negotiation of documents
can be complied with. If not possible, call for amendment extending the validity as required.
Unless the L/C specifies the tolerance for the quantity and value, the exporter should follow
the quantity and value as stipulated in the L/C. There is provision for a tolerance of the
quantity up to 5 percent more or less than stipulated in the L/C even if the L/C does notspecify tolerance exclusively and unless tolerance is prohibited 0 specifically. However, the
value of documents, on no account, could exceed the limits of the L/C.
Check the description of the product properly, the rates if specified, and quantity of each of
the items. Ask for amendment where you cannot copy with the terms. Make sure that all the
documents as called for by the Credit can be submitted without any exception.
The last but not the least is the R eimbursement clause (Getting the funds for the shipment
made). An L/C without this clause is no L/C. if there is no provision as to from where the
exporter is going to get paid for, the whole exercise of the L/C is futile. The opening bank
may specify the reimbursement clauses as follows:
y The negotiating bank to send the documents to the opening bank who will, upon
receipt of the documents, arrange for reimbursement as claimed by the negotiation
bank.
y The negotiating bank can claim reimbursement directly from a nominated bank (say
ABC Bank, New York) either upon negotiation of documents or after a period of ¾
days of negotiation subject to the documents being submitted by the beneficiary is
strictly in conformity with terms and condition of the letter of credit.
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I for one prefer the reimbursement clause as in b) so that on one hand my bank sends the
documents to the opening bank and at the same times claims the reimbursement from
nominated bank.
These are some of the aspects one should take care to ensure that the L/C established in hisfavor is in order and that he can comply with all the provision thereof. However, one is
advised to make a checklist and take a note of each and every condition of the L/C for
compliance at the right time.
PARTIES TO LETTER OF CREDIT
y Applicant: the buyer or importer of goods.
y Issuing Bank: importer¶s bank who issues the L/C.
y Beneficiary: the party to whom the L/C is addressed. The seller or supplier of goods.
y Advising Bank: issuing bank¶s branch or correspondent bank in the exporter¶s country
to which the L/C is sent for onward transmission to the beneficiary.
y Confirming Bank: the bank in beneficiary¶s country which guarantees the credit on
the request of the issuing bank. (Many a times the advising bank and confirming bank
are one and the same).
y Negotiation Bank: the bank to whom the beneficiary present his documents for
Payment u Under L/C.
y R eimbursing Bank: the bank which will reimburse the negotiating bank for the value
of the credit.
Where an L/C stipulates that the Negotiation is restricted to a specific bank which is not the
Advising Bank or Where the L/C is not restricted, and the seller desires to negotiate the
document which is not the advising bank, then we have a separate Negotiating Bank.
Where the opening bank prefers to advise the L/C through its own branch in the beneficiary
country or through another bank of its choice, then the L/C may be advised to the beneficiary
directly by this bank or if it instructed to advise the L/C through the buyer¶s nominated bank
then it does so. Here, we have two advising bank.
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As far as possible, one should restrict the involvement of the number of the banks to the
minimum. More the number of the banks, more the time in the transmission of the L/C, in
addition to multiplicity of bank charges.
SP
ECIAL NO
TE
Though one may strongly feel that a Letter of Credit is the safest mode of payment, one will
face innumerous practical difficulties in so far as compliance with the terms and conditions of
the L/C. since several documents are involved, there are every possible of discrepancy in the
documents either between different documents or between the document or between the
document and the L/C. the Negotiating bank soft pedal some of the discrepancies which they
feel may not be pointed out by the opening bank as discrepancy to favour its customer. In the
like manner the opening bank, to safeguard the interest of the buyer, would like to ensure that
the document submitted against a Letter of Credit are strictly in full conformity of the L/C.
For mastery of the operation under the Letter of Credit one is advised to completely study the
various articles of the UCP 500 so that one can be clear in his mind as to the various
provisions available under the Documentary Credit which will stand good while negotiating
the documents with the bank. While the articles of UCP 500 come safeguard the interest of
both the buyer and the seller, there are certain elements which may be outside the definition
of the UPC 500. Also there is certain flexibility provisions in the UPC 500 which one might
like to exploit to his favour.
So, in spite of the L/C being the safest method to ensure the payment, unless both the buyer
and the seller follow the business ethics there is every chance that one gets cheated by the
other. As a prudent exporter one should be very careful in selecting his customer apart from
taking other safety measures.
If the customer is too good, and you have been dealing with them for a long time, one may
relax and term the L/C as the best method to receive payment. If the customer turns out to be
unscrupulous then he can play havoc. This is applicable to both the seller and the buyer.
There are books on fraudulent us of the Documentary Credits. Sometimes it may be the buyer
who is at the receiving end and some time it may be the other way.
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A study of such book as above may help one to take adequate care. But, the brain is always
working in multi directions. It will be no surprise if one comes across newer and newer
dubious methods being adopted by the contracting parties.
TOTAL OPERATION UNDER THE LETTER OF CREDIT.
T he Unconfirmed L/C.
y The Buyer makes an application to his bank to open an L/C.
y O pening bank establishes the L/C.
y O pening bank advises the L/C through his associate or through the bank. Nominated
by the beneficiary.
y The Bank in the beneficiary country which receives the L/C sends the Original L/C to
the customer either directly or through the bank Specified in the L/C.
y The buyer complies with the L/C requirements and submits the relevant documents.
To the bank for claiming reimbursement.
y The negotiating bank negotiates and sends the documents to the opening bank or as
Directed. Meantime pays the beneficiary.
y Advises the opening bank or the reimbursement bank the details of his Accounts and
the nominated bank where the proceeds are to be credited.
y Once the credit is received, the nominated bank advises the negotiating bank of the
credit. Thus the negotiating bank gets the credit for the L/C documents.
T he Confirmed L/C.
All the steps from 1to6 as far as the beneficiary are concerned since the payment is made to
the beneficiary without recourse. However, the negotiating bank may have to follow the
subsequent steps since he has to receive his money from the opening bank.
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PREPARATION AND SUBMISSION OF DOCUMENTS FOR
BANK NEGOTTIATION /PURCHASE
Document against exports should normally be realized through an authorized dealer foreignexchange. However payment of export can be received directly from the overseas buyer in
the form of bank draft, pay order, banker¶s cheque, personal cheque foreign currency notes,
foreign currency traveler¶s cheque, etc. Without any monetary limit provided the exporter¶s
track record is good, he is a customer of the authorized dealers through whom documents are
to be negotiated and prima facie the instrument of payment represents export proceeds
realization. Take care to submit various documents in a proper manner and within the
prescribed time schedule. Apply to the R eserve Bank for extension of time in case you feel
there is likely to be a delay in realizing export proceeds.
The following are the steps in realizing export proceeds:
y Approaching a Bank: After dispatch of the goods, either by sea, or by air, the exporter
should approach his bank (authorized dealer) with a formal request to realize sale
proceeds from the foreign buyer. It is obligatory to submit the shipping documents to
an authorized dealer within 21 days of the date of shipment (subject to certain
exceptions). In India, the exporters have to realize the full value of exports within 180
days from the date of shipment, (unless the payment terms offered are ³deferred
payment terms´). Where it is not possible to realize the sale proceeds within the
prescribed period, the exporter should apply for extension in prescribed form ETX (in
duplicate) to R BI.
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y Submission of Documents to the Bank: The exporter should submit the following
documents
o Bill of Exchange
o Full set of Bill of Lading
o Commercial Invoice Copies
o Certificate of Origin
o Insurance Policy
o Inspection Certificate
o Packing List
o GR (duplicate copy to forward it to R BI)
o Bank Certificate
o Other relevant documents.
The above documents need to be submitted in two complete sets, because it is
customary to dispatch two sets of documents, one after the other. This is because, if
one set is misplaced or delayed in transit, the importer can get at least the other set
and clear the goods.
y Verification of Documents: The bank will verify the documents to find
o Whether the required documents are in order.
o Whether the required documents are attested by customs and other
authorities.
y Letter of Indemnity: If the exporter wants immediate payment from his bankers, then
his bankers may provide advance payment only when the exporter signs an indemnity
letter. The implications of an indemnity letter is that in the event of refusal of payment
by the issuing bank in respect of LC, then the negotiating bank can ask the exporter to
pay back the money advanced along with necessary charges.
Common Document Discrepancies
o Credit Expired
o Late shipment
o Presented after permitted time from date of issue of shipping documents
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SHIPMENT THROUGH COURIERS
In addition to the exporter by sea, air, rail or road, exports are also allowed by courier under
the courier imports or exporters (clearance) R egulation Act, 1998.
These regulations shall apply for clearance of goods carried by authorized courier on
outgoing flights on behalf of exports. Consigner for a commercial consideration.
Export Terms & conditions:
Export of any item can be affected by courier, except the following.
y Goods which are subject to cess.
y Goods proposed to be exported with claim of duly drawback.
y Goods proposed to be exported under DEPB, EPCG, AL (Advance License)
y Where the value of goods is more than R s. 25,0000/-
y Goods where weight of individual packet is more than 32 kg.
CUSTOM PROCEDURE FOR EXPORT UNDER EDI SYSTEM
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It is brought to the notice of all exporters, importers, CHAs, Trade and General Public that
the computerized processing of Shipping Bills under the Indian Customs EDI (Electronic
Data Interchange) System ± (Exports), will commence w.e.f.1`5-09-2004. The computerized
processing of shipping bills would be in respect of the following categories:
y Duty Free white shipping bills
y Dutiable shipping bills (Cess)
y DEEC Shipping Bills
y EPCG Shipping Bills
y DEPB Shipping Bills
y DFR C Shipping Bills
y 100% EOU Shipping Bills
y R e export, Jobbing Shipping Bills
y Drawback Shipping Bills
y Other NFEI Shipping Bills
The procedure to be followed in respect of filing of shipping bills under the Indian
customs EDI System-Exports at CFS-Mulund shall be as follows:
2. DATA ENTRY FOR SHIPPING BILLS
2.1 Exporters/CHAs are required to register their IE codes, CHAs Licence Nos,
and the Bank A/C No.(for credit of Drawback amount) in the Customs
Computer Systems before an EDI Shipping Bill is filed.
2.2 Exporters/CHAs would be required to submit at the SERVICE CENTR E the
following documents.
y A declaration in the specified format
y SDF declaration
y Quota/Inspection Certificate
y Drawback/DEEC/DFR C/DEPB Declarations etc., as applicable
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2.3 The formats should be duly completed in all respects and should be signed by
the exporter or his authorized CHA . Forms, which are incomplete or
unsigned will not be accepted for data entry
2.4 Initially, data entry for Shipping Bills will be allowed to be made only at the
Service centre. After the exporters/CHAs become conversant with the EDI
procedures, the option of R emote EDI System would also be made available.
In the R emote EDI system (R ES) Exporters/CHAs can electronically file their
shipping bills from their offices.
2.5 The schedule of charges to be levied for data entry at the Service Centre is as
follows:
Charges for S/Bills having up to five items ... R s.60/-
Charges for additional block of five items ... R s.10/-
Amendment fees (for a block of five items) ... R s.10/-
Printing of a S/Bill for R emote EDI System ... R s.20/-
2.6 The Service Centre operators shall carefully enter the data on the basis of
declarations made by the CHAs/Exporters. After completion of data entry, the
checklist will be printed by the Data Entry O perator and shall be handed over
to the Exporters/CHAs for confirmation of the correctness. Thereafter, the
CHA/Exporters will make corrections, if any, in the checklist and return the
same to the operator duly signed. The operator shall make the corresponding
corrections in the date and shall submit the shipping bill. The operator shall
not make any amendment after generation of the checklist and before
submission in the system unless the corrections made by the CHAs/Exporters
are clearly indicated on the checklist against the respective fields and duly
authenticated by CHA/Exporters signature.
2.7 The system automatically generates the S/Bill Number. The operator shall
endorse the same on the checklist in clear and bold figures. It should be noted
that no copy of the S/Bill would be available at this stage.
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2.8 The declarations would be accepted at the service centre from 10.00 hrs to
16.30 hrs. Declarations received up to 16.30 hrs will be entered in the
computer system on the same day.
2.9 The validity of the S/Bill in EDI System is fifteen days only. After expiry of
fifteen days from the date of filing of shipping bill, the exporter has to file the
declaration afresh.
3 PROCEDURE FOR GR-1
3.1 Under the revised EDI procedure there would be no GR -1 Procedure.
Exporters(including CHAs) would be required to file a declaration in the form
SDF. It would be filed at the stage of ³goods arrival´ One copy of the
declaration would be attached to the original copy of the S/Bill generated by
the system and retained by the customs.The second copy would be attached tothe duplicate S/B (the exchange control copy) and surrendered by the exporter
to the authorized dealer for collection/negotiations.
3.2 The exporters are required to obtain a certificate from the bank through which
they would be realizing the export proceeds. If the exporter wishes to operate
through different banks for the purpose, a certificate would have to be
obtained from each of the banks. The certificates would be submitted to
customs and registered in the system. These would have to be submitted once
a year for confirmation or whenever the bank is changed.
3.3 In the declaration form to be filled by the exporters for the electronic
processing of export documents, the exporters would need to mention the
name of the bank and the branch code as mentioned in the certificate from the
bank. The customs will verify the details in the declaration with the
information captured in the system through the certificates registered earlier.
3.4 In the case of S/Bs processed manually, the existing arrangement of filing GR -
1 forms would continue.
y OCTROI PROCEDURES, QUOTA ALLOCATION AND OTHER
CERTIFICATION.
1.1 The processing of S/Bs involving allocation of ready-made garments quota by
the Apparel Export Promotion Council (AEPC) will change with the
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introduction of the system. The quota allocation label will be pasted on the
export invoice instead of S/B. Allocation number of AEPC would be entered
in the system at the time of S/B data entry. The quota certification on export
invoice should be submitted to Customs along with other original documents
at the time of examination of export cargo.
1.2 As a transitional measure, AEPC certification even on S/B form would be
accepted. However, in these cases, S/B number should be indicated on the
invoice when goods are presented for examination. This transitional
facilitation measure will be available for a period of two months i.e., upto 30th
November 2004.
1.3 For determining the validity date of the quota, the relevant date would be the
date on which the full consignment is presented for examination and the date
to recorded in the system.
1.4 The certificate of other agencies, such as, the Cotton Textiles Export
Promotion Council; the Wildlife Inspection Agency under CITES; the
Engineering Export Promotion Council; the Agricultural Produce Export
Development Agency (APEDA), the Central Silk Board and the All India
Handicraft Board should also be obtained on the invoice. Similarly, the no
objection of the Asst. Drug Controller and of the Archaeological of Survey
India would be obtained on the Invoice.
The transitional arrangements would be the same as in the case of AEPC certification.
1.5 The exporters would have to make use of export invoice or such other
documents as required by the Octroi Authorities for the purpose of octroi
exemption.
2. ARRIVAL OF GOODS AT EXPORT EXAMINATION SHEDS IN CFS
2.1 The existing procedure of permitting entry of goods, brought for the purpose
of examination (and subsequent: ³Let export´O
rder) in the CF
S on thestrength of S/B shall be discontinued. The CO NCOR will permit entry of the
goods on the strength of the checklist, the date entry form and the declaration.
The CO NCOR would endorse the quantity of goods entering the CFS on the
reverse of the checklist
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through the Service Centre or, in case of EDI connectivity, through terminals
of the Exporter / CHA. After all the queries have been satisfactorily replied to,
AC / DC will pass the S/B
4. CUSTOMS EXAMINATION OF EXPORT CARGO
4.1 On receipt of the goods in the Export Shed in the CFS, the exporter will
contact the system examining officer (SEO)and present the checklist with the
endorsement of CO NCOR on the declaration, along with all original
documents such as Invoice, Packing List, AR E-1(AR -4)etc. He will also
present additional particulars in the prescribed form.
4.2 SEO will verify the quantity of the goods actually received against that entered
in the system. He will enter the particulars in the system. The system would
identify the Examining Officer (if more than one are available)who would be
carrying out physical examination of goods. The system would also indicate
the packages(the quantity and the serial numbers) to be subjected to
examination. SEO would write this information on the checklist and hand it
over to the exporter. He would hand over the original documents to the
Examining Officer. No examination order shall be given unless the goods have
been physically received in the Export Shed. It may, however, be clarified that
Customs may examine all the packages/goods in case of any discrepancy.
4.3 The Examining Officer may inspect and/or examine the shipment, as per
instructions contained in the checklist and enter the examination report in the
system. There will be no written examination report. He will then mark the
Electronic S/B and forward the checklist along with the original documents to
the Appraiser/Supdt. in Charge. If the Appraiser/Supdt. is satisfied that the
particulars entered in the system conform to the description given in the
original documents (including AEPC quota and other certifications) and the
;physical examination, he will proceed to give ³:Let Export´ order for the
shipment and inform the exporter. The Appraiser/Supdt. would retain the
checklist, the declaration and all original documents with him.
4.4 In case of any variation between the declaration in S/B and the documents or
physical examination report, the Appraiser/Supdt. will mark the electronic S/B
to AC/DC Exports. He will also forward the documents to AC/DC and advise
the exporters to meet the AC/DC for further action regarding settlement of
dispute. In case the Exporter agrees with the views of theDepartment, the S/B
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would be processed finally. Where the exporter disputes the views of the
Department, the case would be adjudicated following the principles of natural
justice.
5. GENERATION OF SHIPPING BILLS
5.1 As soon as the Shed Appraiser/Supdt.gives ³Let Export´ order, the system
would print 6 copies of the S/B in case of Free and scheme S/B. In case of
DEPB there are 7 S/B. If the S/B (DEPB) is assessed provisionally, then EP
copy will be generated only after AC/DC finalises the assessment. On the
examination report the Appraiser/Shed Supt.will sign. On all the copies, the
Appraiser/Shed Supdt., Examination Offer as well as exporter¶s
representative/CHA will sign. Name and ID Card number of the Exporters
representative/CHA should be clearly mentioned below his signature.
5.2 The distribution of S/Bills is as follows:
DEPB Scheme S/Bills Other Scheme S/Bills
y 1. Exporter¶s copy 1. Exporters copy
y 2. Custom¶s Copy 2. Customs copy
y 3. Exchange Control Copy 3. ExchangeControl Copy
y 4. Scheme Bill Copy 4. E.P.Copy
y 5. E.P.Copy 5. TR -1. TR -2 Copiesy 6. TR -1, TR -2 Copies
5.3 The original AEPC quota and other certificates will be retained with the
S/Bills and recorded in the Export Shed.
6. PAYMENT OF MERCHANT OVERTIME (MOT)
6.1 For the time being the present manual system for payment of Merchant
Overtime (MOT) charges will continue.
6.2 MOT charges will be required to be paid by exporter when the goods are
examined by Customs for allowing ³Let Export´ beyond the normal office
hours. No charges would be required to be paid on normal working days
when the examination itself is being done for ³Let Export´ upto 05.oo PM. In
addition, no charges would be required to be paid if the exporter wants the
goods to be entered in CO NCOR (CFS) only for meeting the quota deadlines.
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7. DRAWAL OF SAMPLES
7.1 Where the Appraiser of Customs orders for samples to be drawn and tested,
the Examining Officers will proceed to draw two samples from the
consignment and enter the particulars thereof along with name of the testing
agency in the system. No registers will be maintained for recording dates of
samples drawn. Three copies of the test memo will be sprepared and signed by
the Examining Officer, the Appraiser and Exporter. The disposal of the three
copies would be as follows:
y Original to be sent along with the sample to the testing agency
y Duplicate copy to be retained with the second sample
y Triplicate to be handed over to the exporter.
7.2 AC/DC may, if he deems necessary, order for sample to be drawn for purposes
other than testing such as visual inspection and verification of description,
market value enquiry etc.
11 QUERIES11.1 With the discontinuation of the assessment of S/B in the Export Department,
there should not be any queries. The exporter, during examination, can clarify
doubts, if any. In case where the need arises for the detailed answer from the
exporter, a query can be raised in the system buy the Appraiser, but would
need prior approval of AC/DC (Exports) The S/B will remain pending and
cannot be printed till the exporter replies to the query to the satisfaction of the
Assistant Commissioner/Dy. Commissioner
12 AMENDMENTS:
12.1 Corrections/amendments in the checklist can be made at the service centre
provided the system has not generated the S/B number. Where corrections are
required to be made after the generation of the S/B No. or, after the goods
have been brought in the docks/CFS, amendments will be carried out in the
following manner.
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y If the goods have not yet been allowed ³Let Export´, Assistant Commissioner/Dy.
Commissioner may allow the amendment.
y Where the ³Let Export´ order has been given, the Addl./Joint Commissioner
(Exports) would allow the amendments
12.2 In both the cases, after the permission for amendments has been granted, the
Asstt./Dy. Commissioner(Exports) will approve the amendments on the system.
Where the print out of the S/B has already been granted, the exporter will
surrender all copies of the S/Bill to the Appraiser for cancellation before
amendment is approved in the system.
13. SHORT SHIPMENTS, SHUT OUT, CANCELLATION AND BACK TO
TOWN PERMISSIONS.
13.1 AC/DE (Export) will give permission for issue of short shipment certificate,
shut out or cancellation of S/B, on the basis of an application made by the
exporter. The S/B particulars would need to be cancelled /modified in the
system before granting such permission. AC/DC should check the status of the
goods, before granting permission.
14. AMENDMENT OF FREIGHT AMOUNT
14.1 If the freight/insurance amount undergoes a change before ³Let Exports´ is
given, corresponding changes would also need to be made in the S/B with the
approval of AC/DC Exports. But if the change has taken place after the ³Let
Exports´ Order, approval of Additional/Jt.Commissioner would be required.
Non-intimation of such changes would amount to mis-declaration and may
attract penal action under Customs Act 1962.
15. RECONSTRUCTION OF LOST DOCUMENTS:
15.1 Duplicate print out of EDI S/B cannot be allowed to be generated if it is lost,
since extra copies of S/B are liable to be misused. However, a certificate can
be issued by the Customs stating that ³Let Exports´ order has been passed in
the system to enable the goods to be accepted by the Shipping Line, for export.
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Drawback will be sanctioned on the basis of the ³Let Export´ order already
recorded on the system.
16 RE-PRINT OF SHIPPING BILL:
16.1 Similarly, reprints can be allowed where there is a system failure, as a result of
which the print out(after the ³Let Export´ order) has not been generated or
there is a misprint. Permission of AC/DC (exports) would be necessary for the
purpose. The misprint copy shall be cancelled before such permission is
granted
17 EXPORT OF GOODS UNDER CESS
17.1 For export items, which are subject to export cess the corresponding serialnumber of the Cess Schedule should be clearly mentioned. A printed challan
generated by the system would be handed over to the exporter. The cess
amount indicated should be paid in the Bank of India, Extension Branch of
CFS, under a receipt.
18. EXPORT OF GOODS UNDER CLAIM FOR DRAWBACK
18.1 The scheme of computerized processing of drawback claims under the Indian
Customs EDI system-Exports will be applicable for all exports through CFS.
18.2 In respect of goods to be exported under claim for drawback, the exporters
will file declaration in the form. The declaration in the form would also be
required to be filed when the export goods are presented at the Export Shed for
examination & ³Let Export´
18.3 The exporters who intend to export the goods through CFS under claim for
drawback are advised to open their account with the Bank of India branch
situated at CFS-Mulund. This is required to be done to enable direct credit of
the drawback amount to the exporters account, obviating the need for issue of
separate cheque by post. The exporters are required to indicate their account
number opened with the Bank of India branch at CFS-Mulund. It would not be
possible to accept any shipment for export under claim for drawback in case
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the account number of the exporter in the bank is not indicated in the
declaration form.
18.4 The exporters are also required to give their account number along with the
details of the bank through which the export proceeds are to be realized.
18.5 Export declarations involving a drawback amount of more than rupees one
lakh will be processed on screen by the AC/DC before the goods can be
brought for examination and for allowing ³Let Export´:
18.6 The drawback claims are sanctioned subject to the provisions of the Customs
Act 1962, the Customs and Central Excise duties drawback rules 1995 and
conditions prescribed under different sub-headings of the All Industry rates as
per notification number 26/2003-Cus(NT) dated 1.4.2003 as amended by
notification number 12/2004-Cus(NT) dated 29-01-04.
18.7 After actual export of the goods, the drawback claims will be processed
through EDI system by the officers of drawback branch on first come first
serve basis. There is no need for filing separate drawback claim. The claims
will be processed, based on the Train Summary/Inward way bill, submitted by
CO NCOR . The status of the S/Bill and sanction of drawback claim can be
ascertained from the ³query counter´ set up at the service centre. If any query
has been raised or deficiency noticed, the same will be shown on the terminal
and a printout of the query/deficiency may be obtained by the authorized
person or the exporter from the service centre. The exporters are advised to
reply to such queries expeditiously and such replies shall be got entered in the
EDI system at the service centre . The claim comes in queue of the EDI
system after reply to queries/deficiencies is entered by the service centre.
18.8 Shipping Bills in respect of goods under claim for drawback against brand
rates would also be processed in the same manner, except that drawback
would be sanctioned only after the original band rate letter is produced before
the designated customs officer in the office of Asstt/Dy. Commissioner
(Export) and is entered in the system. The exporter should specify the SS No.
of drawback as 98.01 for provisional drawback.
18.9 All the claims sanctioned in a particular day will be enumerated in a scroll and
transferred to the Bank through EDI. The bank will credit the drawback
amount in the Account of the exporter on the next day and will handle
accounts of the exporters as per their instructions. Bank will also send a
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fortnightly statement to the exporters about the payments of their drawback
claims.
19. EXPORT OF GOODS UNDER DEPB
19.1 W
hile filing information as per the format, exporters are required to ensurethat correct Group Code No. of the goods being exported and the item No. of
relevant Group is clearly mentioned (item-wise details). The exporters/CHAs
are advised to fill Item No, in the same manner as given in the Public Notices
issued by DGFT.
19.2 DEPB Credit in respect of items like formulations, injections etc. of group
code No.62 (Chemicals) are at a specific percentage of credit rate for the
relevant bulk drug. For proper calculations of DEPB rate, exporters/CHAs are
advised to claim export under the specific Sl.No. if they are exportinginjections and thereafter mention Sl.No. of Group Code 62 of the bulk drug of
which such injections have been made. The system will calculate the said
specific percentage of the DEPB rate of such bulk drugs, formulations of
which are being exported.
19.3 All the DEPB S/Bills having FOB value less than R s.5 lakhs and/or DEPB
rates less than 20% will be assessed by Appraiser/Supdt. (DEPB Cell)
However, the S/Bill having FOB value more than R s.5 lakhs and/or credit rate
20% or more will be assessed by AC/DC (Export) . Any query at the time
assessing by Appraiser (DEPB cell) or AC/DC (Export) may be obtained from
the service centre and reply to the query has to be furnished through service
centre.
19.4 If the group code No., Item No. and FOB value declared is accepted by the
Appraiser/Supdt (DEPB Cell) or Asstt./Dy. Commissioner(Export), goods
may be brought and entered in the system. The examining officer will feed the
examination report and ³Let Export´ order will be given by Appraiser/Supdt.
in the EDI system. Seven copies of S/Bill will be printed for the purposes
mentioned against each as under :
Customs Copy For record of Customs
Exporter¶s copy For record of Exporters
E.P.Copy For office of DGFT
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DPB copy For use in the import cell of ICD Bangalore for registration of licence.
Exchange Control Copy For negotiating the export documents in bank
TR -1TR -2 copies
19.5 There is a provision for changing the Group Code No./Item No./Value for
DEPB credit purposes and such changes will be reflected in the print out of the
S/Bill. Such charges may be done by Appraiser/Supdt. (DEPB Cell)
AC/DC(Export) as well as by Appraiser/Supdt.(Exam.) The credit will be
allowed by the DGFT at the rate/value (for credit purposes only) as approved
by Customs. The EP copy of the shipping bill shall be used by the Exporters to
obtain DEPB licence from DGFT.
19.6 In case, for credit purposes, the exporter accepts the lower value as determined
by customs, such lower value will be entered by Appraiser (DEPB Cell)
AC/DC (Export) or by Appraiser (Exam) for each item(s) Printout of S/Bill at
item level will indicate for FOB value as well value for DEPB credit purposes.
Exporters are required to apply for the DEPB Licence at the B value accepted
by Customs and not the value declared by them. However, as DEPB is issued
on the basis of exchange rate applicable on the date of Let Export, exporters
are advised to apply for DEPB Licence at the value accepted by Customs at
the time of export multiplied by exchange rate on the date of Let Export(LEO)
(As per para 4.43 of EXIM Policy 2003 edition)
19.7 In case the exporter does not accept the value determined by the customs, the
exports will be allowed provisionally after taking samples µfor market enquiry.
The words ³NOT VALID FOR DEPB´ will be printed on all the copies of
S/Bill and the exporters will be not be eligible for DEPB licence against
provisionally assessed S/Bills. In such cases, EP copy of S/Bill will not be
printed and only 6 copies will be printed. However, market enquiries about
value will be conducted in such cases and either after issue of the Show Cause
Notice the market value will be determined or may be accepted by the
Exporters on his own. In such cases where samples are drawn subject to
market enquiry the copy of the S/Bill for claiming DEPB will be generated
after determination of value on the basis of market enquiry and handed over to
the exporters duly signed by Appraiser/Supdt. of Customs. In such cases
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wherever market value has been found to be less than twice the credit claimed,
the market value will be mentioned in the EP copy of S/Bill as under :
³Market value of the goods is R s«««..and credit not to exceed 50% of the
market value´
Sample may also be drawn for the other purposes such as Chemical test,.
DEPB entitlement etc. The procedure of Provisional Assessment shall be
applicable mutates mutandis to above cases as well and the cases will be
finalized after necessary reports etc. arte received and unprinted copy of S/Bill
meant for DEPB Licence shall be released thereafter for printing.
19.8 R egistration of DEPB Licence:
The DEPB Licence in respect of exports made from this customs station will
be required to be registered at the same station. Before registration, the
concerned officer will verify the S/Bill(s) in the Licence from the computer
ensure that exports have been affected and value mentioned is as determined
by customs at the time of export. In cases of S/Bills assessed provisionally, the
verification will not be possible because S/Bill will not be in the verification
queue. The exporters are advised to obtain licences for the items exported un
DEPB scheme and not for non-DEPB items. If the lower value for credit
purposes has been accepted at the time of export, the licenses shall be obtained
only for such lower value and not for FOB value declared in S/Bill or as per
Bank realisation certificate. Similarly in cases where market value of the
goods is less than twice the credit availed, the licence shall be obtained for
50% of the present market value of the goods. The computer at the time of
registration of licence will calculate admissible credit on the basis of exchange
rate on the date of realisation of export proceeds (as per bank realisation
certificate) for DEPB items only and at customs approved value at the time of
export. If the amount of licence is more than the amount of credit calculated
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by the system, it will not be possible to register a licence and reference will be
made to DGFT for correction of amount of credit. If the amount of credit as
per customs computer matches with the credit as per DEPB licence, computer
will generate printout regarding verification of the exports giving details like
S/Bill No. date , rate of credit, FOB value as approved by customs and amount
of credit etc. DEPB licence will be registered on the basis of printout of
verification report duly signed by AC/DC (Export). If a DEPB Licence is
having S/Bills exported from other ports in the same city the exporters can get
the licence registered at any of the ports from where he intends to import the
goods in the city after verification about exports from other ports from where
exports were affected. The same procedure will be followed for DFR C
Licences also.
20. EXPORT OF GOODS UNDER 100% EOU SCHEME
20.1 The exporters can get the export goods examined by Central
Excise/Customs Officer at the factory even prior to filling of S/Bill. Self
sealing facility is also available. He shall obtain the examination report in the
form to this Public Notice duty signed and stamped by the examining officer
and supervision officer at the factory. The export invoice shall also be signed
and stamped by both the officers at the factory. Thereafter the goods shall be
brought to the concerned customs warehouse for the purpose of clearance
and subsequent ³Let Export´. The exporters/CHA shall present the goods for
registration along with Examination R eport, AR E-1, Export Invoice duly
signed by the Examining Officer and supervising officer at the factory, check
list, declaration in form and other documents such as document of
transportation, AR E-1, etc., to the examiner in the concerned shed. After
registration of goods, the shipping bill will be marked to an examiner for
verification of documents and seal. If seal is found intact the S/Bill will berecommended for LEO, which will be given by the shed appraiser. However if
seal is not found intact, the goods will be marked for examination and LEO
will be given if the goods are found in order.
21. EXPORT OF GOODS UNDER EPCG SCHEME
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21.1 All the exporters intending to file shipping bills under the EPCG scheme should first
get their EPCG licence registered with the Export section. For registration of EPCG licence,
the exporter/CHA shall produce the Xerox copy of EPCG licence to the service centre for
data entry. A printout of the relevant particulars entered will be given to the exporter/CHA
for his confirmation. After verifying the correctness of the particulars entered, the said
printout will be signed by the exporter. Thereafter, the original EPCG licence along with the
attested copy of the licence and the signed printout of the particulars shall be presented to the
Appraiser/Supt (EPCG Cell)The Appraiser/Supdt. (EPCG Cell) would verify the particulars
entered in the computer with original licence and register the same in EDI system. The
registration number of the EPCG Licence would be furnished to the exporters/CHA, who
shall note the same carefully for future reference. The said registration number would need to
be mentioned against respective item on the declaration form filed for data entry of the s/bill,
at the time of export of goods. All the EPCG S/Bill would be processed on screen by the
Appraiser/Supdt.(EPCG Cell) and the AC/DC (Export). After processing of the EPCG S/Bill
by the Appraiser EPCG Cell and AC/DC Export, the goods can be presented at the Customs
warehouse for registration, examination and ³Let Export´ as in the case of other export
goods. After train summary is submitted to CO NCOR , the S/Bill will be put to Appraiser
queue for logging/printing of ledger. After logging/printing of ledger, the EPCG bill will be
moved to history tables.
22 EXPORT OF GOODS UNDER THE DEEC SCHEME
22.1 Only shipping bills pertaining to DEEC books issued on or after 1.4.95 will be
processed on the EDI system.
22.2 All the exporters intending to file s/bills under the DEEC scheme including those
under the claim for drawback should first get their DEEC Book registered with the CFS
Mulund. The registration can be done in the service centre.
The original DEEC book would need to be produced at the service centre for data entry. A
print out of the relevant particulars entered will be given to the exporter/CHA. The DEEC
Book would need to be presented to the Appraiser/Supdt., DEEC Cell, who would verify the
particulars entered in the computer with the original DEEC and register the same in the EDI
system. The registration No. of the DEEC Book would be furnished to the exporter/CHA,
which would need to be mentioned on the declaration forms at the CFS for export of goods It
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would not be necessary thereafter for the exporter/CHA to produce the original DEEC book
for processing of the export declarations
22.3 Each book will be allotted a R egistration No. should be indicated on the shipping bills
in the relevant columns.22.4 Exporters/CHAs that will be filling S/Bills for export of goods under the DEEC
Scheme would be required to file additional declarations regarding availment/non-
availment of MODVAT or regarding observance/non-observance of specified
procedures prescribed in the Central Excise 1944 in the form. The declaration should
be supported by necessary certificates (AR E-1 or for non-availment of MODVAT)
issued by the jurisdiction Central Excise authorities. ³Let Export´ would be allowed
only after verification of all these certificates at the time of examination of goods. The
fact that the prescribed DEEC declaration is being made should be clearly stated at theappropriate place in the declaration being filled in the service centre or through R ES-
Mode.
22.5 All the export declarations for DEEC would be processed on screen by the
Appraiser/Supdt., Export Department and the AC/DC Exports. The said processing
would be akin to the processing of Bill of Entry on the EDI System with provisions
for query/reply. After the declarations have been so processed and accepted, the goods
can be presented at the Export Shed along with DEEC Books registered in the4 EDI
System so that the export declarations are processed expeditiously.
22.6 Further, exporters availing of DEEC benefits in terms of various notifications should
file the relevant declarations.
22.7 It is further clarified as follows:
y While giving details relating to DEEC operations in the form the exporters/CHAs
should indicate the S.No. of the goods being exported in the column titled ³ITEM
S.NO.IN DEEC BOOK PAR T E´
y If inputs mentioned in DEEC Import book only have been used in the manufacture of the goods under export, in column titled ³Item Sr.No. in DEEC Book Part C´ the
exporters/CHAs are required to give S.No. of inputs in Part-C of the DEEC Book and
Exporters need not fill up column titled ³DESCR IPTIO N OF R AW MATER IALS´
y If some inputs which are not in Part-C of the DEEC Book have been used in the
manufacture of the goods under export and the exporter wants to declare such inputs,
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he shall give the description of such inputs in column titled ³DESCR IPTIO N OF
R AW MATER IALS´
y In the Col. ³IND/IMP´, the exporters are required to write ³N´, if the inputs used are
indigenous and ³M´. if the inputs used are imported.
y In column titled ³Cess Schedule Sl.No.´ the relevant Sl.No. of the Schedule relating
to Cess should be mentioned.
23. EXPORT OF GOODS UNDER DFRC SCHEME:
The details pertaining to export products i.e. input materials utilized as per SIO N should be
clearly mentioned in the declaration mentioned at Annexure A at the time of filing.
24. EXPORT GENERAL MANIFEST:
24.1 All the steamer agents shall furnish the Export General Manifest, House Bill of
Landing wise, t the Customs electronically. In the beginning, the steamer agents are
required to enter the manifest in the Customs Computer System through the Service
Centre on payment of the prescribed fee. (In due course, arrangements will be made
for the electronic delivery of Export General Manifest through EDI Service
Providers. Till such time, all the EGMs will have to be entered at the Customs
Computer System only.)
25. GRIEVANCE HANDLING
25.1 The Asstt. Commissioner/ Dy. Commissioner of Customs, CFS-Mulund may be
approached by exporters or their CHAs for settlement of any problems faced at any
stage of the export clearance.
THE ECGC COVER
The abbreviated form for Export Credit and Guarantee Corporation is ECGC. As the
name indicates this is a sort of guarantee or a sort of cover for the exporter. Let us now see
what this is all about.
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Needless to say that an exporter before entering into a contract with the overseas buyer for
making any supply, takes care to ensure that the customer with whom he is dealing have
some credit worthiness. This he may be able to do either through the local agent who is in a
better position to know about the customer or through a bank or through any of the exporter¶s
associates if happens to be in the area of the customer etc., But, in a business things may
change. The financial status of a customer may take drastic turn and an established customer
may go bankrupt within a short period of time.
Moreover, the buyer may be willing to make the payment, but there are other environment
which prevents him from effecting the transfer of funds through the bank. For e.g., there
could be break out of war, the balance of payment position of the country may become
unfavourable, there may be some coup of the government etc., and all transactions could be
sealed.
These are the risk factors for the exporters. What is the guarantee that he will get paid for the
supplies he has made?
With a view to provide support to Indian exporters, the Govt. of India set up the Export R isk
Insurance Corporation (ER IC) in 1957. This was transformed into Export Credit & Guarantee
Corporation Ltd. in 1964. In order to give the Indian identity a sharper focus the name was
again changed to Export Credit & Guarantee Corporation of India Ltd., in 1983. This is a
company wholly owned by the Govt. of India and functions under the administrative control
of the Ministry of Commerce and managed by the Board of Directors representing
Government, Banking, Insurance, Trade, Industry etc.
Though one may insist for a Letter of Credit, still there could be some elements of risk which
we will study later here. Except getting an advance payment for the full value of the supplies,
any other mode of payment will have some risk.
Take the case of an exporter who has made supplies and before the payment is received the buyer goes bankrupt or there comes some new provision or policy of Government of the
importing country preventing repatriation of the funds to other countries what recourse the
exporter has to recover his dues. The litigation procedure might be time consuming and the
exporter can never be sure of getting his full payment. An ECGC cover a safeguard his
interest to a great extent.
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An exporter can either agree for sight payment or can made shipment on credit terms for say
60 days, 90 days etc., In project exports the period of payment may extend to some years.
Longer the period of cre3dit given to the customer, more will be the risk factor for the
exporter.
In respect of sight bill, there is almost no risk because the customer has to make payment first
before he retires the documents. Therefore, before the title of the goods is passed on to the
customer, the importer makes the3 payment. However, in respect of usance bill (credit bills)
the buyer retires the documents by accepting the usance draft and takes delivery of the goods.
In case the customer goes bankrupt or become insolvent, before the due date of payment, the
exporter is totally at a loss. While big units may be able to absorb the one time loss, small
exporters will get broke even with one such transaction. Here the ECGC comes into picture.
It takes up the responsibility of paying the funds to the exporter and makes all effortsincluding legal proceedings to recover the dues from the customer, provided the exporter has
taken an ECGC cover.
W HAT ECGC OFFERS FOR PROTECTION OF EXPORTER¶S INTEREST ?
ECGC offers various types of insurance cover to protect the exporter¶s interest. For each type
of cover an exporter has to take Policy specific to the respective requirements. The Policy
that is most commonly taken by the exporters is the Standard Policy or otherwise called the
Shipments (Comprehensive R isks) Policy.
SHIPMENTS (COMPREHENSIVE RISKS) POLICY also called STANDARD POLICY
For exporters with an annual export turnover in excess of R s.50 lakhs, the Shipments
(ComprehensiveR isks) Policy is the one intended for covering shipments on cash basis or on
short-term credit basis. (Credits not exceeding 180 days)
The risks covered this Policy is as follows effective from the date of shipment.:
Commercial Risks
y Insolvency of the buyer
y Failure of the buyer to make payment within a specified period.
y Buyer¶s failure to accept the goods subject to certain conditions.
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Political Risks
y Imposition of restrictions by the Govt. of the buyer¶s country or any government
action which may block or delay the transfer of payment made by the buyer.
y War, civil war, revolution or civil disturbances in the buyer¶s country
y New import restrictions or cancellation of a valid import licence
y Interruption or diversion of voyage outside India resulting in payment of
additional freight or insurance charges which cannot be recovered from the buyer.
y Any other cause of loss neither occurring outside India nor normally insured by
general insurers and beyond the control of both the e porters and the buyer.
Risks not covered under the Policy
The Standard Policy does not cover losses on account of following risks:
y Commercial disputes including quality disputes raised by the buyer unless the
exporter obtains a decree from a competent court of law in the buyer¶s country
in his favour
y Causes inherent in the nature of the goods
y Buyer¶s failure to obtain necessary import or exchange control clearance from
authorities concerned
y Insolvency or default of the agent of the exporter or of the collecting bank
y Loss or damage to goods which can be covered by general insurers.
y Exchange rate fluctuations
y Failure of the exporter to fulfill the terms of the export contract or negligence on
his part.
Shipments Covered
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The Standard Policy is meant to cover all the shipments that may be made by an exporter
during a period of 24 months ahead. The policy cannot be issued for selected shipments,
selected buyer or selected markets. For specific requirements an exporter can opt for different
policy from the various services offered by the corporation
Exclusions:
Shipments made against advance payments received or shipments against confirmed letters of
credit which has the confirmation from the bank in India may be excluded.
However, shipments against confirmed L/C may be covered for political risks only. The
premium for cover under political risks will be less than that under the comprehensive policy.
ECGC may also agree to exclude certain items if the exporter is dealingt in different distinct
products.
Shipments to Associates:
Shipments to buyers i.e. the foreign buyers in whose business the exporter has financial
interest, are normally excluded from the Policy. However such shipments can be covered
against political risks.
Shipments on Consignment basis :
Shipments on consignment basis can be covered only against political risks.
Shipments by Air
Since the buyer is able to take delivery of the goods even without retiring the bank
documents, shipments by air are not covered under the policy. However, the exporter may
cover such shipments for payments under open terms. The exporter can have cover for such
shipments, if he has obtained Credit Limit on such buyers on open delivery terms and also
pays the premium at rates applicable to open delivery terms.
HOW TO GET ECGC COVER
Step 1. Open Policy:
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An exporter desiring to get the ECGC cover has to approach the office of the ECGC making
a Proposal. He must make his home work and be clear as to what will be his total turnover
during a year ad what will be the maximum amount he expects to be outstanding from
various buyers at a given point of time.Once this is clear he can apply for an O pen Policy for
the maximum amount that he expects to be outstanding at a given point of time. Suppose, he
expects that at any given time his outstanding will be say R s.50/- lakhs then he can apply for
a policy for this amount. After verification of the details of the exporter, the ECGC
may issue a open policy for R s.50 lakhs with a validity of say 2 years. This is the first step.
Step 2. - Credit Limit on Individual Buyer
Once the open policy is taken, as a next step the exporter must make out the list of the
customers to whom he expects to make shipment. For each and every customer he has to
apply to the ECGC to have a limit of liability fixed. That is to say, he has to declare the
maximum amount of bills he expects to be outstanding from each customer at a given point
of time. Based on the value of business dealing, suppose the exporter expects that from
customer A the outstanding may be R s.10 lakhs. Then the exporter has to apply to ECGC in
the prescribed form for getting limit fixed for the customer. On receipt of the application,
ECGC will check for the credit worthiness of the customer either through their own net work
of offices globally, or through the customer¶s bank or through some reputed independent
agency. Based on the credit report, ECGC will determine the limit that can be fixed for the
customer. If it feels that a limit of R s.10 lakhs is in order, it will advise the exporter of the
same. Similarly, the exporter can have the limit fixed to all his customers.
Once the limit is taken from ECGC, the exporter is free to make his shipments to the various
customers. If shipment for any customer is made before getting the limit fixed by ECGC, no
risk will be covered for that shipment.
Step 3 ± Payment of Premium and filing of monthly returns
For the risk the ECGC takes, it charges a premium on the value of the shipments actually
made. This is calculated as per the table to be supplied by ECGC which shows the premium
per R s.100 of exports.
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covering only the political risk since under L/C, the bank stands as a guarantor and there is no
commercial risk.
An exporter must cover all his exports under ECGC, including bills on sight basis, and are
NO
T under L/C. He cannot be selective to certain countries or certain buyer. The cover is onwhole turnover basis.
For all shipments under L/C, the buyer may take a separate policy to cover the political risks.
The premium for L/C shipments will be relatively less than that on comprehensive policy.
Note: ECGC cover is not for non-payment on account of dispute on quality, damages to the
goods, theft, pilferage etc.
The cover is only when the party goes insolvent or there are some political risk due to whichthe exporter is not in a position to get the payment immediately or on due date. This cover
must be distinguished from the general insurance.
VARIOUS POLICIES OFFERED BY ECGC:
1. STANDARD POLICY
An exporter whose annual export turnover is more than R s.50 lakhs is eligible for this
policy
Period of the Policy: 24 Months
Exclusions permitted: Export to Associates
Letters of Credit
Consignment Exports
Risk Covered: Commercial R isks
Political R isks
LC O pening Bank R isks
Percentage of Cover: 90%
Minimum Premium: R s.10, 000/- adjustable
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Minimum Premium : R s.2, 000 adjustable
Important Obligations of the Exporter:
y O btaining valid credit limit on buyers and banks
y Quarterly Declaration of shipment and payment of premium.
y Declaration of payment overdue by more than 30 days
y Filing of claim within 24 months
y Sharing of recovery.
Highlights
y Highest coverage/compensation
y Lowest premium rate
y NCB of 5% every year
y Discrepancy cover for LC
y Automatic approval for resale/shipment upto 25% of GIV
y Increased discretionary limit
3. SPECIFIC SHIPMENT POLICIES ± SHORT TERM (SSP-ST)
These policies can be availed of by exporters who do not hold our Standard Policy or byexporters having standard policy, in respect of shipment permitted to be excluded from the
purview of the standard policy. Exporters can pick and choose the contract/shipment to be
covered and indicate the type of cover required.
Period of Policy :
The policy would be valid for shipment(s) made from the date of the policy upto last date
allowed under the relevant contract for shipment.
Risk Covered:
y Commercial R isks
y Political risks
y LC O pening Bank R isk
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Important Obligation of the Exporters:
1. Deposit Premium on Quarterly in advance
2. Submission of shipment declaration quarterly
3. D
eclaration of payment overdue for more than 30 days4. Filing of the within 12 months from due date
5. Sharing of recovery
Highlights:
1 Selective buyer can be insured
2 O ption to exclude LC exports
3 Premium rate can be reduced proportionately
5 . EXPORTS TURNOVER POLICY
Turnover Policy is for the benefit of large exporters who contribute not less than R s.10 lakhs
per annum towards premium. The policy envisages projection of the export turnover of the
policyholder for a year and the initial determination on the premium payable on that basis,
subject to adjustment at the end of the year based on actual.
Period of the Policy : 12 Months
Risk covered: Commercial R isks
Political R isks
LC O pening Bank R isks
Percentage of Cover: 90%
Important Obligation of the Exporter
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1. Premium will be payable in four equal quarterly installments in
advance
2. Submission of quarterly statement of shipments
3. Declaration of overdue payments
4. Filling of claim within 24 months from due date
5. Sharing of recovery
Highlights:
1. Simplified procedure for payment of premium
2. 10% of projected premium is waived when exports increase beyond
projection
3. Increased discretionary limit
6 . BUYER EXPOSURE POLICY :
The Buyer Exposure Policy is to insure the exporters having large number of shipments with
simplified procedure and rationalized premium. An exporters can chose to obtain exposure
based cover on the selected buyer. The cover would be cover against commercial and
political risk. The option to exclude LC shipment is available. If the exporter has opted for
commercial and political risks cover, failure of LC opening bank with World R ank up to
25,000 as per latest Bankers Almanac is available. If exporters opts for only political risks for
LC exports premium at a less rate is offered
Period of the Policy: 12 months
Risk covered: Buyer R isk
LC O pening Bank R isks
Political R isks
Percentage of Cover: 90% for Standard policyholder and 80% for others
Important Obligations of the Exporter:
1 Premium Payable in advance
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Risks covered:
y Commercial R isks on stockholding agent and/or ultimate buyer
y Political R isks
Percentage of Cover: 90% for Standard Policyholders and 80% for others
Important obligations of Exporters:
y Advance deposit of premium in advance on quarterly or monthly basis
y O btaining credit limit on ultimate buyers beyond the discretionary limit
y Quarterly/Monthly statement of actual exports
y Overdue declaration
y Filing of claim
y Sharing of recovery
Highlights:
y Covers only the consignments exports
y R ationalized premium for 360 days
y Automatic cover for ultimate buyers upto discretionary limit
y Commercial risks on agents coveredy Extended period for realization upto 360 days
9 CONSIGNMENT EXPORTS POLICY (GLOBAL ENTITY)
A method adopted by India exporters is consignment exports where goods are shipped to
their own branch office overseas ready for sale to overseas buyers, as and when orders are
received. Thus separate credit insurance policy is introduce to cover exclusively shipments by
the exporters to their branches overseas on consignment basis taking into account their
special features, providing adequate incentives and simplifying the procedures considerably.
Period of the Policy: 12Months
Risks covered:
y Commercial R isks on overseas branch on conditions
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Percentage of Cover: 90% for Standard Policyholders and 80% for others
Important obligations of Exporters:
y Advance deposit of premium in advance on quarterly or monthly basis
y O btaining credit limit on ultimate buyers beyond the discretionary limit
y Quarterly/Monthly statement of actual exports
y Overdue declaration
y Filing of claim
y Sharing of recovery
Highlights:
y Covers only the consignments exports
y R ationalized premium for 360 days
y Automatic cover for ultimate buyers upto discretionary limit
y Commercial risks on agents covered
y Extended period for realization upto 360 days
10 . SERVICES POLICIES
Services Policies offer protection to Indian firms against payments risks involved inrendering services to foreign parties. A wide range of services, hiring or leasing can be
covered under these policies. The exporters can opt for whole Turnover Services Policy or
for Specific Services Policy depending on the nature of services provided. The premium rates
applicable. To standard policy will be applied for whole turnover services policy and specific
shipment policy (SSP-ST) premium rates will be applied for Specific Service Policy.
Period of the Policy: 12/24 Months
Risks covered:
y Commercial R isks on ultimate buyers
y Political R isks
y LC O pening Bank R isks
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Percentage of Cover: 90% for Standard Policyholders and 80% for others
Important obligations of Exporters:
y Advance deposit of premium in advance to cover premium
y O btaining credit limit on services receiver
y Monthly statement of actual service provided
y Overdue declaration
y Filing of claim
y Sharing of recovery
Highlights:
y O ption to select the type of cover.
8 . MATURITY FACTORING
The Maturity Factoring scheme, as designed by ECGC has unique features and does not
exactly fit into the conventional mould of maturity factoring. The changes devised are
intended to give the clients the benefits of full factoring services through the maturity
factoring scheme, thus effectively addressing the needs of exporters to avail of pre- finance
(advance) on the receivable, for their working capital requirements. One important feature is
the very role and special benefits envisaged for banks under the scheme.
Benefits:
y 100% credit guarantee protection against had debts
y Sales register maintenance in respects of factored transaction
y R egular monitoring of outstanding credits, facilitating collection of receivable on due
date, recovery, at its own cost, of all recoverable had debts
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Setting up Charges and Factoring Charges
y The factoring application fee payable initially is R s.10,000/- For setting up permitted
limits on each of the overseas customers, the exporter will have to pay a processing
fee equal to 0.05% of the permitted limit sought subject to minimum of R
s.2000/-after of this, the factoring charges payable as and when an exports bill is to be
factored depends on the country to which the exports is made and the credit period.
Exporters Obligations:
y R egistration and obtaining permitted limit on the buyer
y Payment of factoring charges with statement of exports made
Inform developments