ALL FRONTIER GLOBAL NEXUS — FAQ SUPPLEMENT

ECGC EXPORT CREDIT INSURANCE

Export Credit Guarantee Corporation of India — Frequently Asked Questions

This FAQ answers the most commonly asked questions about ECGC (Export Credit Guarantee Corporation of India) — covering what it covers, how to obtain policies, how to claim, and how ECGC enables Indian exporters to offer competitive open account credit terms to EU buyers.

SECTION 1 — WHAT ECGC COVERS

Q1. What is ECGC and what does it do?

ECGC Limited (formerly Export Credit Guarantee Corporation of India Limited) is a Government of India enterprise under the Ministry of Commerce and Industry. It provides export credit insurance to Indian exporters and their banks — protecting them against the risk of non-payment by overseas buyers (commercial risk) and the risk of non-payment due to political events in the buyer's country (political risk). ECGC is not a lending institution — it does not provide finance directly. It provides insurance that enables Indian exporters to extend credit terms to overseas buyers with confidence, and enables Indian banks to provide export credit to exporters knowing the loan is backed by insurance. ECGC operates through two broad categories of products: exporter-facing policies (covering the exporter's credit risk exposure to the buyer); and bank-facing policies (covering the bank's exposure to the exporter on export credit facilities).

Q2. What specific risks does ECGC cover?

ECGC covers two categories of risk. Commercial risks — risks arising from the buyer's default: insolvency of the buyer (formal insolvency, liquidation, or bankruptcy); protracted default by the buyer (failure to pay within a specified period — typically 4–6 months after the due date — without a formal insolvency event); refusal of goods without justifiable reason by the buyer. Political risks — risks arising from events in the buyer's country: war, civil war, or revolution in the buyer's country preventing payment; government action in the buyer's country preventing transfer of funds to India; import restrictions or cancellation of import licences by the buyer's country's government; insolvency of a government buyer. In India-EU trade, political risk is very low — the EU is a stable, highly creditworthy trading partner. The primary benefit of ECGC for India-EU exporters is commercial risk coverage against buyer insolvency or protracted default.

Q3. What does ECGC NOT cover?

ECGC does not cover: disputes between the buyer and seller about the quality, quantity, or specification of the goods — a buyer refusing to pay because they claim the goods were defective is a contractual dispute, not an insured risk; losses arising from the exporter's own non-performance (late shipment, wrong product, defective goods); losses caused by the exporter's fraud or misrepresentation; losses on transactions where the exporter has not complied with the ECGC policy conditions (e.g. failure to report overdue payments within the required period); losses on transactions in currencies or to buyers excluded from the policy; interest on overdue payments (principal only is covered, not interest accrued after the due date).

SECTION 2 — ECGC POLICIES FOR EXPORTERS

Q4. What is the Standard Policy (Whole Turnover Policy) and who should use it?

The Standard Policy (also called the Whole Turnover Export Credit Insurance Policy) is ECGC's flagship product for exporters. It covers all of an exporter's eligible export transactions with all eligible buyers under a single umbrella policy — the exporter does not need to declare individual buyers or transactions in advance. Key features: covers commercial and political risks; typically provides 85–90% of the invoice value (the insured percentage — the exporter retains 10–15% as the uninsured portion); the exporter pays a premium based on their total annual export turnover and the payment terms offered to buyers; buyers are pre-approved through ECGC's Buyer Exposure Limit (BEL) system. The Standard Policy is appropriate for: exporters with a diversified buyer base; regular exporters with annual turnover above approximately INR 1 crore; exporters offering open account credit terms to EU buyers.

Q5. What is the Small Exporter Policy and who qualifies?

The Small Exporter Policy is designed for exporters with an annual export turnover of up to INR 1 crore. It offers: simplified documentation and application process; lower premium rates than the Standard Policy; the same basic commercial and political risk coverage. It is the entry-level ECGC product for new or small exporters wanting to establish credit insurance cover before scaling up. For first-time India-EU exporters approaching EU buyers who want open account credit terms, the Small Exporter Policy is the practical starting point.

Q6. What is the Buyer Exposure Limit (BEL) and how do I get one for my EU buyer?

The Buyer Exposure Limit (BEL) is a pre-approved credit limit set by ECGC for a specific overseas buyer — defining the maximum amount of credit exposure to that buyer that ECGC will cover under the exporter's policy. To obtain a BEL for your EU buyer: submit a BEL application to ECGC (online at ecgc.in) providing: the EU buyer's full legal name and registered address; country; the proposed credit terms (payment period); the annual estimated export value to this buyer; the EU buyer's most recent financial statements (if available) or a trade reference; ECGC's assessment: ECGC assesses the EU buyer's creditworthiness using its international credit information network (Euler Hermes, Coface, and other EU credit agencies provide buyer credit data to ECGC). If the buyer is creditworthy, ECGC approves a BEL — typically within 5–10 working days. The BEL is the maximum outstanding amount (not annual turnover) that ECGC will cover at any one time for that buyer.

Q7. How long does it take to get ECGC coverage in place?

The typical timeline for establishing ECGC coverage for India-EU trade: Standard Policy application: 2–4 weeks from application to policy issuance. BEL for a specific EU buyer (once policy is in place): 5–10 working days. Total from first enquiry to first covered shipment: 3–5 weeks typically. Start the ECGC application before the first shipment to the EU buyer — do not wait until an order is received. Once the policy and BEL are in place, subsequent shipments are covered automatically up to the BEL amount without additional approval per shipment.

SECTION 3 — CLAIMS AND RECOVERY

Q8. How do I make an ECGC claim?

If a buyer defaults — either through insolvency or protracted default — the claim process is as follows: Report overdue: Notify ECGC in writing within the period specified in the policy (typically within 30 days of the payment becoming overdue by more than 30 days). Failure to report within the specified period may prejudice your claim. Continue recovery efforts: ECGC expects the exporter to take reasonable steps to recover the payment — demand letters, legal action initiation (if cost-effective). File a formal claim: After the waiting period (typically 4–6 months from the payment due date for protracted default; immediately on formal insolvency), file a formal claim with ECGC providing: the original invoices; proof of shipment (B/L, Shipping Bill); demand letters sent to the buyer; any response from the buyer; evidence of the buyer's default (insolvency notice, or confirmation of protracted default). Settlement: ECGC settles the claim at the insured percentage (85–90%) within approximately 30–60 days of a complete claim being filed. The uninsured 10–15% is an irrecoverable commercial loss for the exporter.

Q9. Does ECGC pursue recovery from the buyer after settling my claim?

Yes — after ECGC settles your claim, it is subrogated to your rights against the defaulting buyer. ECGC will pursue recovery from the buyer through its international legal network. If ECGC recovers amounts from the buyer after paying your claim, the recovered amount is shared between ECGC (for the insured portion it paid) and you (for the uninsured portion retained). This recovery process can take years — particularly for buyers in jurisdictions with complex insolvency proceedings. In practice, recovery from EU buyers in formal insolvency follows EU insolvency law, and ECGC participates as an unsecured creditor in the insolvency estate.

Q10. How does ECGC interact with the bank's export credit facilities?

ECGC's bank-facing products (WTPCGS — Whole Turnover Packing Credit Guarantee Scheme; and Export Finance Insurance Policy — EFIP) cover the bank's exposure to the exporter on packing credit and post-shipment credit. From the exporter's perspective, the practical effect is: (a) the bank is more willing to extend pre-shipment packing credit and post-shipment credit to exporters holding ECGC coverage, because the bank's own risk is covered by ECGC's bank policy; (b) advance rates (the percentage of invoice value the bank will advance) may be higher — up to 90% vs. 75–80% without ECGC backing; (c) interest rates on export credit may be lower because the bank's risk is reduced. This is the "double benefit" of ECGC: it protects the exporter against buyer default AND it improves the exporter's access to and cost of export credit from their bank.

SECTION 4 — ECGC IN INDIA-EU TRADE SPECIFICALLY

Q11. Is ECGC coverage commonly used for exports to EU buyers?

ECGC coverage for EU buyers is less universally used than for buyers in emerging markets — because EU buyers are generally highly creditworthy and the commercial risk of non-payment is lower than in markets such as Africa, the Middle East, or some Asian markets. However, ECGC coverage for EU buyers is valuable in the following specific circumstances: new buyer relationship — before trust and payment track record are established; large first orders where the invoice value is significant relative to the exporter's balance sheet; buyers in EU sectors facing structural difficulties (retail, construction, certain manufacturing); buyers who have requested extended credit terms (90–120 days) that extend the payment risk window; and where the Indian exporter's bank requires ECGC backing as a condition of advancing export credit. Once a two-to-three year payment track record with an EU buyer is established, exporters often reduce their reliance on ECGC and move to self-insuring the EU buyer exposure.

Q12. Can I get ECGC coverage for EU buyers requesting 90-day or longer credit terms?

Yes — ECGC covers credit terms of up to 180 days for standard goods exports. For extended payment terms beyond 60 days, the BEL application for the EU buyer should specify the credit period. ECGC's risk assessment of the buyer will include the extended payment period — a longer credit term means a longer period of exposure, which may affect the BEL amount approved. Note: EU buyers in certain sectors (retail, food, construction) commonly request 60–90 day payment terms as standard commercial practice. Indian exporters who cannot offer competitive credit terms lose orders to competitors from other origins. ECGC coverage enables Indian exporters to offer these terms commercially — knowing the risk of default is substantially covered.

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Doc 108 — FAQ Supplement: ECGC Export Credit Insurance — All Frontier Global Nexus