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Pre Shipment FINANCE
Pre Shipment FINANCE
Pre Shipment FINANCE
ELIGIBLE EXPORTERS:
• Country with which our prospective exporter wants to trade should not be
under the list of trade barrier.
As Per E.C.G.C. Guidelines:
Exporter should not be on Specific Approval List of E.C.G.C.
• Country with which our prospective exporter wants to trade should not be
under the Restrictive Cover Countries (R.C.C.).
Limit proposed to be sanctioned should be within the discretionary limit prescribed by ECGC per
borrower.
GENERAL:
Exporter should have received confirmed Export Order / Letter of Credit
In case of New Exporters bank should confirm Country profile / Commodity profile / Status
report of Buyer through E.C.G.C/ Dun & Bradstreet
QUANTUM:
No specific guidelines for amount of advance to be sanctioned. However it shoul be need based
and should be fixed on the F.O.B. value of the contract or L/C or on the domestic value of the
goods whichever is lower. Normally Insurance & Freight charges need not be considered for
finance at the initial stage.
If the contract or L/C is on C.I.F. basis, the F.O.B. value will be arrived at by deducting 15%
from the C.I.F. value if dispatch is through sea and around 25% if the dispatch is by air. After
arriving at the F.O.B. value the suitable margin is to be deducted to arrive at the amount of
finance.
Normally it should not exceed F.O.B. value or market value of goods whichever is lower but in
certain cases it can be allowed to exceed value of Export Order subject to the excess amount is
payable within a period of 30 days.
If granted for oil the ‘De-oiled cake’ will be the by-product and excess amount should be repaid
by the sale proceeds of the by-product.
Advance sanctioned against the duty receivable from the Govt.
PERIOD:
It is short-term advance normally for 180 days i.e. the time required for procuring,
manufacturing, processing and shipping the relative goods. Bank has to decide the period
depending upon the various relevant circumstances but it should be sufficient to enable the
exporter to ship the goods.
If, for reasons beyond the control of the exporter the shipment could not be made within 180
days from the date of advance then a further extension of 90 days can be granted making the total
period up to 270 days. But such extension can be granted if the amendment is made in the L/C
permitting the extension and the reasons representing for the extension should be genuine.
If the exporter could not submit the relative export documents within the stipulated period then
he will loose the concession in rate of interest for the period not extended officially.
Extension of any packing credit beyond 360 days requires ECGC’s prior approval. Separate A/C
is opened for each export contract
SUB-SUPPLIERS:-
The packing credit can also be shared between the Export Order Holder
and the manufacturer of the goods on the basis of disclaimer issued by the EOH to the effect that
he has not availed / He will not be availing any credit facility against that portion of the order.
The banker of EOH should normally countersign this letter of disclaimer.
Main exporter (E.O.H.) will have to open Inland L/C with his banker specifying the goods to be
supplied by the sub-supplier’s apart of the export transaction. On the basis of such L/C the sub-
supplier’s bank may grant packing credit to the sub-supplier. On supply of the goods the L/C
opening bank will pay to the sub-supplier’s bank against the inland documents received on the
basis of inland L/C opened. This payment will now become the packing credit advance of Export
Order Holder.
Normally the total period will be computed from the date of first drawal of packing credit by any
one (Sub-supplier or EOH) to the date of submission of export documents by E.O.H.
Since sub-suppliers will not be liable for any penal provisions for the delay by EOH, the
financing bank of the sub-supplier before extending the facility, should make the discreet
enquiries about the track record of E.O.H. Bank should however ensure that there is no double
financing.
CONSULTANCY SERVICES:
In the case of Consultancy services export will not involve the physical movement of goods out
of Indian Customs Territory. In such cases it can be granted to the exporters to enable them to
undertake preliminary arrangements such as mobilizing technical and other staff and training
them.
DEEMED EXPORT:
It can also be extended for Deemed Export. In deemed export the goods do not leave the country.
Deemed export involves supplies made to ADB/IRD/any “Multilateral funds-aided Project &
Programmes” undr orders secured through global tenders for which payments will be made in
free foreign exchange.
DOCUMENTATION
The following documents are required to be obtained:
D.P.Note , L – 447, L – 478
Export Trust Receipt
Deed of Hypothecation
Guarantee
Insurance
E.C.G.C. Cover
Proper periodical physical inspection of stock / submission of stock statement is very necessary
as the advance is on concessional rate of interest
Payment of premium on monthly average debit products should be remitted to E.C.G.C. to the
debit of exporter’s account. E.C.G.C. provides the cover under W.T.P.C.G for all pre-shipment
credits except the following: -
-Advances / Cash Receivables
-Export to Restricted Cover Countries
-Exporters under Specific Approved List
Report of Default
If the pre-shipment advance is not liquidated within four months from the due date then report of
default should be made to E.C.G.C. within one month and the Claim should be lodged within 6
months from Report of default.
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