Difference between EPCG and ECGC
What is the difference between ECGC and EPCG? Both terms are not co related, but both the terms are used in Export Import business in India. Let us find out what is EPCG and how EPCG works. Also let us know what ECGC is and how ECGC works.
What is EPCG?
EPCG means, Export Promotion Capital Goods. You (exporter) are a manufacturer exporter; you would like to import machineries in your factory from foreign country. As I have explained previously, government supports exporters who earn foreign currency in various levels of financial assistance, exemption of import duty etc. In this case, the machineries you are importing is used for manufacturing of goods which are required to be exporter where in you earn foreign exchange. However, you need to pay good amount at a time and you will get benefit of the imported machineries in coming years only. Apart from much other financial assistance for exporters, you can get exemption of 100% import duty amount while importing such machineries. While obtaining EPCG license from government, you guarantee that you will export required amount or quantity of goods for next 5 years.
The importer has to approach for EPCG license from licensing authority – Director General of Foreign Trade (DGFT). Application for EPCG with necessary supporting documents is filed with DGFT and based the value of machineries the value addition is fixed up and export obligation has to be fulfilled accordingly. If you could not complete the export obligation in time specified by licensing authority, you can request them to get extended the export obligation period. However, if you have already finished export obligation, you can sell the goods locally also in domestic tariff area (DTA).
What is ECGC? How ECGC works?
ECGC acts as an Insurance firm who covers credit risk against overseas buyers. ECGC guarantees payment on default of any overseas buyer in an export trade once after covering an insurance policy against the said buyers with ECGC.
Once after finalizing the order, the buyer execute a purchase order to the seller with the terms and conditions as agreed by both. The purchase order should contain full details of buyer and buyer’s bank account details. The exporter approaches Export Guarantee Corporation to get approval on the buyer with amount of limit. Here, the ECGC with their available contact with overseas network finds out the credit worthiness of the said buyer and arrives a figure of creditworthiness and inform the maximum limit of amount can be shipped at any point of time. Export Credit Guarantee Corporation collects premium on the amount of approval and issue insurance policy accordingly.
The exporter can apply with ECGC for insurance on shipment wise order as specific insurance policy, or at lump sum as comprehensive policy. If an exporter obtains a specific policy, the contract of insurance is only for that particular shipment. You as an exporter has to pay premium only against the said shipment. If you prefer to obtain a comprehensive policy against any buyer, you can get approval from ECGC, the amount of credit worthiness of the said buyer. Also read -
Also read How to get export order from foreign buyers? ECGC Claim – Is it a Hurdle? What does ECGC do on default of payment of any overseas buyer?
How the comprehensive policy of ECGC works for exporters? What is ECGC and how does ECGC protect exporters?
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