Page 117 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

International Trade Procedures and Documentation

Notes

Task 1. Visit Export Inspection Council’s website and learn about the various schemes
that it operates to facilitate pre-shipment inspection in India.
2. Interview a few local exporters and compare the quality control practices
being followed by them.

Self Assessment

Fill in the blanks:

11. ..................... may be defined as the purchasing of exporters receivables at a discount price
by paying cash.
12. Forfeiting business enables the exporters to transfer various risk resulted from ............... .

13. ..................... is defined as the conversion of credit sales into cash.
14. Factoring is a method of ..................... financing.
15. ECGC announced introduction of its ..................... .

5.7 Summary

Pre-shipment finance facilities offer liquidity to the exporter to procure raw materials,
carry out processing, packing, transporting and warehousing of the goods to be exported.
Post-shipment finance provides credit facility from the date of shipment of the goods to
the time export payment is realized.

Pre-shipment finance is generally offered as Packing Credit (PC). The exporter will have
to submit the PC application along with required documents. Bank will satisfy itself with
document scrutiny and physical verification before sanctioning the loan. This facility is
also extended in foreign currency. The outstanding loan amount in a PC account has to be
settled out of the proceeds of the exported goods as soon as the documents drawn for the
same are discounted. At this moment, the pre-shipment loan actually gets converted into
post-shipment credit.

Post-shipment loan runs from the date of extending credit, after shipment of goods to the
date of realization of export proceeds. The options available to the exporter for Post-
shipment credit include Export bills purchase/discounting.
EXIM Bank (Export Import Bank of India) is the principal financial institution in the
country for coordinating working of institutions engaged in financing exports and imports.
The bank provides competitive finance at various stages of the export cycle. The principal
fund-related services of the bank include Lines of Credit, Supplier’s Credit, Overseas
Buyer’s Credit, Loan under FREPEC Programme – Financing Rupee Expenditure for Project
Export Contracts, Pre-Shipment Rupee Credit, Refinance of Export Loans and Forfeiting.

In a forfeiting transaction, the exporter surrenders, without recourse to him, his rights to
claim for payment on goods delivered to an importer, in return for immediate cash
payment from a forfeiter. As a result, an exporter in India can convert a credit sale into a
cash sale, with no recourse to the exporter or his banker. Exim Bank works as a facilitator
between the Indian exporter and the overseas forfeiting agency.

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