International Trade : International Trade is affected by a number of additional risks because of : A) Buyer & Seller are located in different countries & value of goods moves in opposite directions. B) Currency of the country of the buyer and Currency of the country of the seller have their own values which change frequently, while invoicing may be in third currency. Types of risk that effects international trade operations :- A) Buyer Risk :- Seller faces risks relating to non-acceptability, non-payment, quality acceptance, credit risk, etc. B) Seller Risk :- Buyer faces the risk relating to the seller not shipping the goods after receiving advance payment, may ship poor quality goods and may ship the goods after considerable delay, which may either lead to cancellation or delays in further orders taken by the buyer or even penalties in delays/ non-shipment.Shipping Risk: Includes risks arising due to other intermediaries in the international trade, like shipping companies, handling agents, port authorities, local transporters, or even loaders. Export Credit Insurance In International Trade Export credit insurance, provides protection against losses from political and commercial risk to the exports and financing institutions. In India, export credit is guaranteed by ECGC Ltd which was set up by Government of India. ECGC provides the credit enhancements to augment the credit worthiness of exporters so that they could get more better facilities from banks.ECGC has set objectives for themselves :- A) To encourage and facilitate globalization of India’s trade. B) To assist Indian exporters in managing their credit risks by providing timely information on worthiness of buyers, bankers and countries. C) To protect the Indian exporters against unforeseen losses, which may arise due to failure of the buyer, bank or problems faced by the country of buyer by providing cost effective credit insurance covers in form of Policy. D) To facilitate availability of adequate bank finance to the Indian exporters by providing surety insurance covers for bankers at competitive rates. E) To achieve improved performance in terms of profitability, financial and operational efficiency indicators and achieve optimum return on investmentECGC provides a wide range of credit risk insurance cover to exporters against loss in export of goods and services. It also offers guarantees to banks and financial institutions to enable exports to obtain facilities, credit or otherwise, from banks. They provide credit reports of overseas buyers also. Main policies offered by ECGC to exporters: A) Standard Policies to exporters to protect them against payment risks involved in exports on short-term credit. B) Small Exporters Policy basically a Standard Policy, but incorporating certain improvements in terms of cover to enable to encourage small exporters.Standard Policies cover following risks :- Commercial Risks - covering Insolvency of the Overseas Buyer, Protracted Default by the overseas buyer to pay for goods accepted by him within a specified period usually 4 months from the due date - Buyers’ failure to accept goods subject to certain conditions. Political Risks- covers imposition of restriction on remittance by Government in buyers country or any Government action which may block or delay payment to exporter, war, revolution or civil disturbance in buyers country. Standard policies do not cover following risks: 1) Commercial disputes raised by the buyer. 2) Causes inherent in the nature of goods. 3) Buyer's failure to obtain necessary import or exchange authorization from authorities in his country.4) Default or insolvency of any agent of the exporter or collecting bank. 5) Exchange rate fluctuation risk. 6) Failure of the exporter to fulfill the terms of the export contract or negligence on his part. Small Exporters’ Policy :- :- For the purpose of issuing the Policy, a Small Exporter is defined as an exporter whose anticipated total export turnover for the period of 12 months ahead is not more than Rs. 50 lacs. (Projected Export Turnover) This policy provides cover against Commercial risks, covering insolvency of the buyer, failure of the buyer to make the payment due within 2 months from the due date, buyer’s failure to accept the goods, due to no fault of the exporter, provided that legal action against the buyer is considered to be inadvisable.It also provides cover against Political risks :- (i) imposition of restrictions by the Government of the buyers’ country or any Government action which may block or delay the transfer of payment made by the buyer. (ii) War, civil war, revolution or civil disturbance in the buyers’ country. (iii) New import restrictions or cancellation of a valid import license. (iv) Interruption or diversion of voyage outside India resulting in payment of additional freight or insurance charges which cannot be recovered from the buyer. Small exporters policy does not cover losses arising due to the following risks:- 1) Commercial disputes including quality disputes raised by the buyer, unless the exporter obtains a decree from a competent court of law in the buyers’ country in his favour. 2) Causes inherent in the nature of the goods.3) Buyer's failure to obtain necessary import or exchange authorization from authorities in his country 4) Insolvency or default of any agent of the exporter of the collecting bank. 5) Loss or damage to goods, which can be covered by general insurers. 6) Exchange rate fluctuation. 7) Failure of the exporters to fulfill the terms of the export contract or negligence on his part. 8) Non payment under LC due to any discrepancy pointed out by LC opening bank. This policy is issued for a period of 12 months