I (Meaning and importance of Exports) Unit Structure

3) Insurance Problem 
 
 
 
The letter of credit may indicate a brad coverage of marine 
risk where as under writers may view them as less risky. Hence 
underwriters may like to go for limited coverage of risk. 
4) Packing Material Consideration 
When the importer places an order, he specifies in the letter 
of credit the type of packing material that the exporter should 
provide. If the exporter uses some other packing materials without 
the permission, of exporter can take objection. 
5) Luck of Safety 
In case of revocable L/C opening bank can cancel or modify 
the L/C without prior permission of the beneficiary. This creates the 
problem of safe of payment. 
6) Delayed Payments 
 
 
The exporter collects payments from the negotiating bank no 
sooner he submits the documents. When payment is delayed by 
the opening bank, the exporter has to pay heavy interest on the 
advances. 

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7) Problem of discrepancy 
 
 
If the exporter does not submit the documents as demanded 
by the importer, it is called discrepancy in documents. Because of 
discrepancy the importer either can delay or with hold payment. 
11.13 SUMMARY 
Exporters need finance at both the steps i.e. at pre-shipment 
and at post-shipment. Pre-shipment finance is an advance credit 
facility contained by an exporter from a bank or financial institution.
Post-shipment Finance is needed after making the shipment 
and before realization of payment from overseas buyers. Post-
shipment finance is provided to meet working capital requirements 
after the actual shipment of goods. 
Commercial banks provide financial assistance both at pre-
shipment as well as post-shipment levels to exporters not only on 
priority basis but also on liberal terms. Commercial banks services 
are divided into: Fund Based Assistance (Financial Services) and 
Non-Fund Based Assistance (Non-Financial Assistance). 
The EXIM bank of India was established by an act of 
parliament, for the purpose of financing, facilitating and promoting 
foreign trade. This bank was mainly created for the purpose of 
financing medium and long term loans to exporters there by 
promoting the country‟s foreign trade. 
The main objectives of SIDBI are: to serve as the principal 
financial institution for promotion, financing and development of 
small scale sector and to coordinate the functions of the institutions 
engaged in promoting, financing of developing small scale sector. 
The Export Risk Insurance Corporation (ERIC) which is now 
known as ECGC of India ltd., was introduced to provide export 
credit and insurance support to Indian exporters. 
Forfeiting 
means “Surrender of rights”. In a forfeiting 
transaction, the exporter surrenders, without recourse to him, his 
right to claim payment of goods delivered to the importer.
There are different methods of payment in export trade such 
as: Open account, Advance payment, Payment against shipment 
on consignment, Documentary bill, and Letter of credit. 
Credit terms are decided after taking into consideration the 
factors like: nature of product, credit worthiness of the buyer, 
economic situation in the country of importer, size of order, 

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