Pre-shipment / Packing Credit

Any loan or advance granted or any other credit provided by a bank to an exporter for financing the purchase, processing, manufacturing or packing of goods prior to shipment / working capital expenses towards rendering of services on the basis of letter of credit opened in his favour or in favour of some other person, by an overseas buyer; or a confirmed and irrevocable order for the export of goods / services.

Period of Advance

-The period for which a packing credit advance may be given by a bank will depend upon the circumstances of the individual case, such as the time required for procuring, manufacturing or processing (where necessary) and shipping the relative goods / rendering of services.

If pre-shipment advances are not adjusted by submission of export documents within 360 days from the date of advance, the advances will cease to qualify for prescribed rate of interest for export credit to the exporter ab initio.

Export Credit against proceeds of cheques, drafts, etc. representing advance payment for exports

-Where exporters receive direct remittances from abroad by means of cheques, drafts etc. in payment for exports, banks grant export credit to exporters of good track record till the realisation of proceeds of the cheque, draft etc. received from abroad, after satisfying themselves that it is against an export order.

Post-Shipment Rupee Export Credit

‘Post-shipment Credit' means any loan or advance granted or any other credit provided by a bank to an exporter of goods / services from India from the date of extending credit after shipment of goods / rendering of services to the date of realisation of export proceeds , and includes any loan or advance granted to an exporter, in consideration of, or on the security of any duty drawback allowed by the Government from time to time.

Types of Post-shipment Credits

 Post-shipment advance can mainly take the form of:-

-Export bills purchased/discounted/negotiated

-Advances against bills for collection

-Advances against duty drawback receivable from Government

Liquidation of Post-shipment Credit

-Post-shipment Credit is to be liquidated by the proceeds of export bills received from abroad in respect

  of goods exported / services rendered.

-It can also be repaid / prepaid out of balances in Exchange Earners Foreign Currency Account (EEFC   A/C) as also from proceeds of any other non-financed (collection) bills.

Period of  Post-shipment Export Credit:-

-In the case of demand bills, the period of advance shall be the Normal Transit Period (NTP) as   specified by FEDAI.

-In case of usance bills, credit can be granted for a maximum duration of 365 days from date of   shipment inclusive of Normal Transit Period (NTP) and grace period, if any.

 Normal Transit Period:-

-It means the average period normally involved from the date of negotiation / purchase / discount till the receipt of bill proceeds in the Nostro account.

 An overdue bill:-

-In the case of a demand bill, an overdue bill is a bill which is not paid before the expiry of the normal  transit period.

-In the case of a usance bill, it is a bill which is not paid on the due date.

Export on Consignment Basis:-

-Banks  charge appropriate prescribed rate of interest only up to the notional due date (depending upon the tenor of the bills), subject to a maximum of 365 days.

Export of Goods for Exhibition and Sale:-

-Banks  provide finance to exporters against goods sent for exhibition and sale abroad in the normal course in the first instance, and after the sale is completed, allow the benefit of the prescribed rate of interest on such advances, both at the pre-shipment stage and at the post-shipment stage, up to the stipulated periods, by way of a rebate.

Post-shipment Advances against Duty Drawback Entitlements:-

-Banks grant post-shipment advances to exporters against their duty drawback entitlements and covered by ECGC guarantee as provisionally certified by Customs Authorities pending final sanction and payment.

-The advance against duty drawback receivables can also be made available to exporters against export promotion copy of the shipping bill.

-The financing bank may have its lien noted with the designated bank and arrangements may be made with the designated bank to transfer funds to the financing bank as and when duty drawback is credited by the Customs.

ECGC Whole Turnover Post-shipment Guarantee Scheme:-

-The Whole Turnover Post-shipment Guarantee Scheme of the (ECGC) Ltd provides protection to banks against non-payment of post-shipment credit by exporters. Banks may, in the interest of export promotion, consider opting for the Whole Turnover Post-shipment Policy.

-As the post-shipment guarantee is mainly intended to benefit the banks, the cost of premium in respect of the Whole Turnover Post-shipment Guarantee taken out by banks is absorbed by the banks and not passed on to the exporters.

Export Credit - DTA to SEZ Units:-

-Goods and services going in to Special Economic Zone area (SEZ) from Domestic Tariff Area (DTA) shall be treated as exports.

-Supply of goods and services from DTA to Special Economic Zone area would be eligible for export credit facilities.

Deemed Exports Rupee Export Credit:-

-Banks are permitted to extend  pre-shipment and post-shipment rupee export credit to parties against  orders for supplies in respect of projects aided/financed by bilateral or multilateral agencies/funds  (including World Bank, IBRD, IDA), as notified from time to time by Department of Economic Affairs,   Ministry of Finance under the Chapter "Deemed Exports" in Foreign Trade Policy, which are eligible for  grant of normal export benefits by Government of India.

-Packing Credit provided should be adjusted from free foreign exchange representing payment for the

  suppliers of goods to these agencies. It can also be repaid/prepaid out of balances in Exchange   Earners Foreign Currency account (EEFC A/c), as also from the rupee resources of the exporter to the   extent supplies have actually been made.

-Banks may also extend rupee pre-shipment credit, and post-supply credit (for a maximum period of 30 days or up to the actual date of payment by the receiver of goods, whichever is earlier).