What are the credit risks covered and not covered under Standard Policies under Import and Exports

 The information provided here is part of Import Export course online


What are the credit risks covered and not covered under Standard Policies in International Business

how to solve credit risks in international businessNow let us discuss about the risks covered and not covered under standard policies issued by Export Credit Guarantee Corporation.

Risks covered by Standard Policies fall into two categories – Commercial Risks and Political Risks.

Commercial Risks which includes Insolvency of the buyer, Protracted default in payment ( Importer has to pay within four months of due date) and Under special circumstances specified in the policy, buyer’s failure to accept the goods though there is no fault on the part of exporter.

Political Risks

What are the clauses included in Political Risks under policies issued by ECGC?

There are mainly 6 types of covers included under political risks policies under ECGC.

 

(i) Imposition of restrictions in buyer’s country by the Government for remittance sale proceeds which may block or delay the payment to the exporter;

(ii) War, revolution or civil disturbances in the buyer’s country;

(iii) New import restrictions in the buyer’s country of cancellation of valid import license after the date of shipment or contract, as applicable;

(iv) Cancellation of valid export license or imposition of new licensing restrictions after the date of contract, applicable under Contracts Policy;

(v) Payment of additional transportation and insurance charges occasioned by interruption or diversion of voyage which can not be recovered from the buyer and

(vi) Any other loss that has occurred in buyer’s country, which is not covered under general insurance and beyond the control of exporter and / or the buyer.

In case, where the buyer happens to be foreign Government or Government department and it refuses to pay, the default will fall under the category of political risks.

 


What are the risks not covered under standard policies of Export Credit Guarantee Corporation ECGC?

1. Commercial disputes including the quality disputes raised by the buyer, unless the exporter obtains a decree from a competent court in the importer’s country in his favor;

2. Causes inherent in the nature of the goods;

3. Buyer’s failure to obtain import license or exchange authorization in his country;

4. Insolvency or default of an agent of the exporter or the collecting banks;

5. Losses or damages which can be covered by commercial insurers; and

6. Foreign Exchange fluctuations.

ECGC does not cover those risks that are covered by the commercial insurers. Exporter can take comprehensive policy that covers both commercial and political risks. If the exporter wants, he can take only policy that covers political risks, depending on the requirements. However, it is important to note ECGC does not issue the policy covering only commercial risks.

If the goods are confiscated by the customs on charges of smuggling, then insurance does not cover.

 

 

Also Read:     Commercial risks and solutions under Export Business   Political risks in International Trade    Risks arising out of foreign laws in Import Export Business   Types of Policies to cover credit risks in Import Export Trade   Causes influencing price of export goods in Export TradeCredit risks and solutions under International Business  Foreign exchange fluctuations risks and solutions in import export Business    How to overcome the credit risk in an export business?    Does exchange rate of currency effect export business?    Marine Insurance policies    Risks and solutions in Export Business

 

I hope you got a clear idea about credit risk covered and credit risks not covered under standard policies issued by Export Credit Guarantee Corporation. If you like to share your experience in handling risk policies to cover credit risks by any other credit covering insurance companies, you can add below.

   

Share your experience in handling your credit risks with service providers who issue risk covering policies and your experience minimizing credit risks of your export import business transitions.

 

The above information is a part of Online Export Import course 

 

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Comments


G RAVI KUMAR: in 40' ft or 20' containers, how much height, breadth, we can load. regards G RAVIKUMAR CELL: 96772 80455

Admin: Hi Ravi kumar, Pl read dimension of containers http://www.howtoexportimport.com/Dimension-of-Cargo-Containers-994.aspx

Daniel Lazar : i want to know as to how do I know the most wanted need of a particular country? in terms of product, and in case that product is not self-sufficiently produced in that country and I am willing to export those kind of products. For that what should do?

vasanthivasan: Pl. advise us while exporter and importer is having IE code, should the high sea purchaser have IE code.Also , in the case of Food product eg. Olive cooking oil, should the high sea purchaser have Licence under FSSAI?

Dr.A.Mohamed Ajmal: I am currently in UAE, and I am looking forward to start an export import business India<->UAE .I would like to know the products which are exempted for Taxes - if they are imported from UAE, or also the products which are most commonly imported from UAE ie which are profitable.

Anoop kg: I need some information on advance import payment.Suppose a person makes advance payment for import and overseas seller does not send the goods ,what is the way forward for the importer?

Sanjay : IS THERE ANY INSURANCE COMPANY APART FORM ECGC IN INDIA WHO WILL COVER OVERSEAS BUYER RISK COVERAGE POLICY FOR EXPORT SHIPMENT.

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