/ Foreign Exchange Management Act

SPECIFIC POLICY FOR SUPPLY CONTRACTS

SPECIFIC POLICY FOR SUPPLY CONTRACTS 

The Standard Policy is a whole turnover policy designed to provide a continuing insurance for the regular flow of an exporter’s shipments for which credit period does not exceed 180 days. Contracts for export of capital goods or turnkey projects or construction works or rendering services abroad are not of a repetitive nature and they involve medium/long-term credits. Such transactions are, therefore, insured by ECGC on a case-to-case basis under Specific Contract Policies.

1. Formalities to be completed before applying for specific policies for contracts:

All contracts for export on deferred payment terms and contracts for turnkey projects and construction works abroad require prior clearance of Authorized Dealers, EXIM Bank or the Working Group in terms of powers delegated to them as per exchange control regulations. Applications for the purpose are to be submitted to the Authorized Dealer (the financing bank), which will forward applications beyond its delegated powers to the EXIM Bank. Proposals for Specific Policy are to be made to ECGC after the contract has been cleared by the Authorized Dealer, EXIM Bank or the Working Group, as the case may be.

 2. Risk Covered:

  • Commercial,
  • Insolvency of buyer,
  • Protracted default of buyer,
  • Buyer’s failure to accept goods,
  • Political,
  • War, Civil War, Revolutions in buyer’s country,
  • New Import restrictions,
  • Transfer delays,
  • L/C Opening Bank Risks,
  • Insolvency and
  • Default.

3. Loss Coverage: 90%

4. Important Obligations:

  • Obtain indicative premium rate at bid stage.
  • Seek post awarded approval from AD/WG on award of contract.
  • Obtain in-principle approval.
  • Seek cover after payment of premium.
  • Advise progress of project in accordance with PEM guidelines.
  • Declaration of overdue payments.
  • Filing of claim within 12 months from due date and
  • Sharing of recovery.

5. Highlights:

  • Cover can be either for political or comprehensive risks.
  • Add on pre-shipment risk cover can also be obtained.
  • Cover for full insurable value including retention portion.
  • Cover for third country exports as well.
  • Premium can be paid in installments.
  • Reduced premium for projects funded by Multi-lateral agencies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances; Hope the information will assist you in your Professional endeavors. For query or help, contact: info@caindelhiindia.com or call at 011-233 433 33

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