Pre Shipment Finance & Post Shipment Finance

Actually Pre-shipment finance refers to the credit extended to exporters prior to the shipment of goods for the execution of export order. ... It, refers to any loan granted to an exporter or financing the purchase, processing manufacturing or packing of goods as defined by the Reserve Bank of any country.

Pre Shipment Document

• Commercial Invoice (and the invoice prescribed by the importer)
• Packing list.
• Certificate of Inspection.
• Certificate of Insurance/Insurance Policy.
• Bill of Lading/Airway bill/Combined Transport Documents.
• Certificate of Origin.
• Bill of Exchange.
• Shipment Advice.

INTRODUCTION

1. Export finance is a short term, working capital finance allowed to an exporter. An exporter may avail financial assistance from any bank provided following two requirements are satisfied:
2. Timely availability of credit
3. Cost of the funds should be affordable

EXPORT FINANCE – Guidelines

• RBI
• Trade Control Regulations
• ICC
• ECGC of India Ltd
• FEDAI guidelines and rules

STAGES OF EXPORT FINANCE

1. Pre-shipment Finance

Financial assistance extended for execution of an export order from the date of receipt of an export order till the date of shipment.

2. Post-shipment Finance

Financial assistance from the date of shipment to the date of realization.

Types of Pre-shipment Finance

• Packing Credit (Merchant Exporter/Manufacturer)
• Advance against Cheques/Drafts representing Advance Payment

Types of Post shipment finance 

• Export Bills N/P/D
• Advances against bills sent on collection basis
• Advances against exports on consignment basis
• Advances against undrawn balances
• Advances against Duty Drawback receivable from Govt.

Packing Credit Loan 

• I.E. Code
• SAL of ECGC
• RBI Caution List
• Sanctioned Limits
• Confirmed Order/L.C.
• Tenor
• INCO Terms
• Quantum of Loan

Packing Credit Loan

• Goods must be freely exportable (should not be banned/canalised/ restricted)
• Foreign Trade Policy, ITC(HS), BTN
• Destination country
• Period of Advance
• Disbursement of PCL

Packing Credit Loan

• Liquidation
• Bye products
• Partial domestic sale
• Export of deoiled/defatted cakes
• Running Account Facility
• Substitution of Buyer
• Telescopic Rate of Interest

Export of Services

Pre-shipment and post-shipment finance may be provided to exporters of all the 161 tradable services covered under the General Agreement on trade in Services where payment for such services is received in free foreign exchange as stated at Chapter 3 of

All provisions of this circular shall apply mutates mutants to export of services as they apply to export of goods unless otherwise specified.

Post Shipment Export Credit

 Ø     Appropriate Sanctioned Limit

Ø     Liquidation of Post-shipment credit

Ø     Normal Transit Period (NTP) (Iraq – 60 days)

Ø     Usance Bills

Ø     Fixed Due Date

Post Shipment Export Credit

 Ø     TT reimbursement under L.C.

Ø     Overdue Bills

Ø     Extension of time limit

Ø     Crystallisation

Ø     Payment of compensation to exporters in r/o delayed credit

Export Credit in Foreign Currency

  

Ø     Finance in Foreign Currency at competitive rates

Ø     Interest linked to LIBOR/EURIBOR

Ø     Choice of currency (USD/GBP/JPY/EUR)

Ø     Exports to ACU countries are also covered

Ø     Source of Funds for Banks

Export Credit Guarantee Corporation of India Ltd.

  

1.                 Export credit insurance

2.                 Covers issued by ECGC

  

D.                Policies to Exporters

E.                 Guarantees to Banks

Export Credit Guarantee Corporation of India Ltd.

1.                 Whole Turnover Packing Credit Guarantee

2.                 Whole Turnover Post-Shipment Guarantee

3.                 Individual Post-Shipment Guarantee

Software Exports 

The guidelines issued by RBI classifies software and I.T. into four categories.

Ø      Software Services

Ø      Project Services

Ø      Software Products & Packages

Ø      IT related services

Software Exports

1.                 More than 65% of Indian exports are from Software Industry

2.                 More than 60% of software exports are to USA and around 25% to Europe

3.                 India has a large pool of trained scientific manpower, who are mainly English speaking

4.                 World Software industry is dominated by the English as the main language