Describe the different types of export credits. Or, Describe the purposes and the types pre-shipment and Post- shipment export credit.

 Exporter needs finance at two stages: pre-shipment and post-shipment stages. Pre- shipment  finance  is  required  for  procurement  of  goods,  processing  the  raw materials, packing,  baling  and  storage, transporting the goods  to  the port  of shipment, freight, inspection and other charges and export duty, if any.

After the shipment, while he waits for the money from the buyer, he needs money to get ready for executing future orders. What he can do is selling or discounting the export bills with his bank to generate funds. It is what call post-shipment credit. Pre-shipment Export Credit:

1. O/D (Hypothecation): Under this arrangement, limit is sanctioned against firm export contract/ irrevocable LC on hyphenation of raw materials or finished goods meant for export.

2. O/O (Pledge): This type facility offer to  the customer, integrity is beyond doubted as it intended for procuring, processing, packing etc. of exportable merchandise, which can’t be conveniently taken to bank’s custody.

3. Packing Credit: It is sanctioned against security of R/R, B/R, truck receipt, etc. evidencing transportation of goods from up-country to the port for shipment. PACKING CREDIT is 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, on the basis of letter of credit opened in his favor or in favor of some other person, by an overseas buyer or a confirmed and irrevocable order for the export of goods from the producing country or any

other evidence of an order for export from that country having been placed on

the exporter or some other person, unless lodgment of export orders or letter of credit with the bank has been waived.

4. Advance against Red Clause LC

5. Advance against Green Clause LC

 

 Post-shipment Export Credit:

1. Negotiation/ Purchase of Documents

2. Advance against export bills

3. DA/DP/Sight bills

4. Noting/ Protesting

5. Advising fate of the bill

6. Realization of collection charges, Interest etc.

7. Case in Need

8. Clearance, storage, Insurance etc. at destination

9. Mode of Presentation of the bill

10.Finance of export documents of collection basis (FDBC)

11.Discounting of Usance bills (DA Bills)