It will be advisable for exporters to estimate the maximum outstanding payments due from overseas buyers at any one time during the policy period, and to obtain the policy with maximum liability for such a value. The maximum liability fixed under the Policy can be enhanced subsequently, if necessary.
Credit Limits on Buyers:
Commercial risks covered are subjected to a Credit Limit approved by the Corporation on each buyer to whom shipments are made on credit terms. The exporter has therefore, to apply for a suitable Credit Limit on each buyer.
On the basis of its own judgement of the credit worthiness of the buyer, as ascertained from credit reports obtained from banks and specialised agencies abroad, the Corporation will approve a Credit Limit which is the limit upto which it will pay claim on account of losses arising from commercial risks.
The Credit Limit is a revolving limit and once approved it will hold good for all shipments to the buyers as long as there is no gap of more than 12 months between two shipments.
Credit limit is a limit on the Corporation’s exposure on the buyer for commercial risks, and not a limit on the value of shipment that may be made to him.
Premium has therefore, to be paid on the full value of each shipment even where the value of the shipment of the total value of the bills outstanding for payment is in excess of the Credit Limit.
As the Credit Limit is indicative of the safe limit of credit that can be extended to the buyer, it will be advisable for exporters to see that the total value of the bills outstanding with the buyer at any one time is not out of proportion to the Credit Limit.
In cases where the Credit Limit that the Corporation is prepared to grant is far lower than the value of outstanding, exporters should discuss the problem with the Corporation.
Credit limits need not be obtained if a shipment is made on DP or CAD terms, and if the value of the shipment does not exceed Rs 5 lakhs.
Political as well as commercial risks will stand automatically covered for such shipments, the only qualification being that the claims will not be paid on more than two buyers during the Policy period under this provision.
Restricted Cover Countries:
For a large majority of countries, the Corporation places no limit for covering political risks. However, in the case of certain countries where the political risks are very high, which are around 57 at present, cover for political as well as commercial risk is granted on a restricted basis.
Policy holders intending to export to such countries are required to obtain specific approval of the Corporation for each shipment or contract in advance, preferably before concluding the contract.
Where Specific Approval is granted, it may be subjected to certain special conditions and in some cases, subjected to payment of a Specific Approval Fee in the range of 0.5% to 2% of the contract value. Specific Approval Fee is payable in addition to the premium on the shipments.
A portion of the Specific Approval Fee is refundable in the event of shipments not taking place, or if the payments are received before the expiry of the waiting period for claims.
Time for Payment of Claim:
A claim will arise when any of the risks insured under the Policy materialises. If an overseas buyer becomes insolvent, the exporter becomes eligible for a claim one month after his loss is admitted to rank against the insolvent’s estate, or after four months from the due date, whichever is earlier.
In case of protracted default, the claim is payable after four months from the due date. Claims in respect of additional handling, transport or insurance charges incurred by the exporter because of interruption or diversion of voyage outside India are payable after proof of loss is furnished. In all other cases, claim is payable after four months from the date of the event causing loss.
However, in case of exports to countries where long transfer delays are experienced, ECGC may extend the waiting period and claim for such shipments are payable after the expiry of such an extended period.
Where the buyer does not accept goods or pay for them because of disputes over fulfilment of the terms of contract by the exporter, counter claims or set-off, ECGC will consider claims after the dispute between the parties is resolved and the amount payable is established, by obtaining a decree in a court of law in the country of the buyer.
This condition is waived in cases where the Corporation is satisfied that the exporter is not at fault and that no useful purpose would be served by proceeding against the buyer.