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EXPORT FINANCE Businessmen, industrialists and others require finance for their day-to-day activities.

In export business also finance plays an important role. Export finance starts as soon as the exporter gets an order to export. An exporter needs finance for processing or manufacturing or assembling or procuring or packing the goods for export, Pre- shipment finance is provided to the exporter to meet such requirements. After the shipment is made exporter will have to give credit the exporter has to wait till the documents reach the importer and he makes the payment. It will take some more time before the advice of payment is finally, communicated to the exporter. Post-shipment finance is therefore provided to the exporter to meet his needs for funds during the intervening period between the shipment of the goods and the receipt of payment therefore. 1. PRE-SHIPMENT CREDIT OR PACKING CREDIT Export packing credit is a loan or any other credit given by a bank to an exporter for financing (a) procuring raw materials and components to manufacture the product or (b) processing or assembling or packing the goods for export. The banks on the basis of the following give the packing credit. A letter of Credit (L/C) opened in favour of the exporter by the importer's bank: A confirmed or irrevocable order for the export of goods from India having been placed on the exporter, or Any other evidence of an order for exports of goods from India having been placed on the exporter or Relevant policy issued by the ECGC; or Personal bond in the case of party's already known to the exporter.

COSTS COVERED BY PRE-SHIPMENT FINANCE Pre-shipment finance would normally cover the following costs; Cost of purchase or production (ii) Discounting of bills drawn against shipment of goods-discounting of usance bills (D/A Bills ) drawn against shipment of goods- discounting of bills is usually done under limits sanctioned to different customers, and

Extension of long term export credit has become an accepted export market strategy and therefore. The bill of exchange accepted by the importer is surrendered to the forfeiting agency which pays him in cash after deducting a fee. (iii) Long term: Long term loans are provided in the case of sale of capital goods complete plants and turnkey jobs. Banks enjoy certain benefits for advancing loans to exporters. TYPES OF POST -SHIPMENT CREDIT Post shipment credit may be of three types: (i) Short term: The short term credit is usually for 6 months and provided by banks. FORFAITING Forfaiting enable an exporter to convert an overseas credit sale into a cash sale through the process of discounting of export receivables.(iii) An advance against bills under collection. The understanding is that the agency will collect the dues from the importer on expiry of the said period. These loans are also provided by commercial banks in collaboration with EXIM Bank of India. Banks usually charge a commission according to the rates prescribed by the Foreign Exchange Dealer's Association of India. Medium term loans are provided for in the case of durable consumer goods and light capital goods. 4. (ii) Guarantees provided by ECGC where a substantial part of the risk is covered by the ECGC. (i) Refinance by EXIM Bank of India. .FINANCE FOR EXPORTS ON DEFERRED PAYMENT TERMS Our exchange control regulations stipulate that exporter should realize the foreign exchange for their exports within 180 days from the date of shipment. Contracts for export of goods against payment to be received fully or partly after the expiry of the stipulated period for the realization of export proceeds are treated as deferred payment export contract. (ii)Medium term: Medium term loans are offered for a period beyond 6 months and up to 5 years. The rate of interest on post-shipment credit is also charged at concessional rate. 3. They are as follows. provision has been made for the extension of medium and long term credit to finance the sale of Indian capital goods and related services. The period of credit is usually more than 5 years.

Entitlement for EPZ Units: Each of the zones provides basic infrastructure such as developed land for construction of factory sheds. Foreign equity up to 100% is permissible in the case of EPZ units Procurement of raw materials. India has seven EPZ at different parts of our country. . engineering items. components and consumables and export of finished products shall be exempt from central levies. roads. plastics and rubber products. This enables the products of EPZ to be competitive. EPZ operating units broadly under the product groups of electronics. power. in the international market.FREE TRADE ZONE (EXPORT PROCESSING ZONES) These are also referred to as Export Processing Zones. standard design factory buildings. are set up with the intension of providing an internationally competitive duty free environment for export production. customs and shipping agent's charges Freight and insurance charges if the contract is either CIF contract or C&F contract and Export duty or tax. 4. To contribute to the overall development of the economy. water supply and drainage. garments. 3. To earn foreign exchange To generate employment opportunities To facilitate transfer of technology by foreign investment and other means. Exemption from industrial licensing for manufacture of items reserved for SSI sector Packing including any special packing for export Costs of special inspection or tests required by the importer Internal transport costs Port. both quality wise and price wise. textiles. if any. In addition customs clearance is arranged within the zone at no extra charge. gems and jewellery. at low cost. chemicals and allied products. Provision is made for locating banking\post office facilities and offices of clearing agents in the service centers located in each of the zones. 2. The objectives of these units are: 1.

2. The banks normally finance the post-shipment credit in one the following ways: (i) Negotiating export bills under letter of credit .POST SHIPMENT CREDIT Post-shipment finance is required by the exporters to bridge the gap between the time of shipment of goods and the actual payment for the goods exported. Post .shipment credits are given by commercial banks Against the security of approved shipping documents tendered against-letters of credit or otherwise. It is also provided at concessional rate of Interest.