Page 270 - International Marketing

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272 International Marketing BRILLIANT'S

5. Advance against Red Clauses Letter of Credit: If the exporter
desires to obtain packing credit then he should request the importer, to
open red clause letter of credit . Red Clauses Letter of Credit authorizes
the local banks to grant advances to exporters to meet working capital
requirement for the processing of export order. The issuing bank guaran-
tees such advances.
6. Pre-Shipment Credit in Foreign Currency(PCFC): EXIM bank
has introduced a scheme for Indian exporters to enable them to avail pre-
shipment credit in foreign currencies to finance the cost of imported in-
puts for manufacture of export order. The credit period for an advance
under PCFC cannot exceed 180 days.
7. Advances against Back to Back Letter of credit: Back Letter
of credit is one which can be opened up in favour of the local suppliers for
the supply of raw-materials for the processing of export order. Such Letter
of credit authorizes the local suppliers to get the packing credit, if the
exporter has not obtained one.
8. Advances against Export Incentives: Generally pre-shipment
advance is not granted against export incentives. However, under certain
circumstances such as when the value of materials required exceeds the
FOB value of the goods to be exported, such advances are granted at pre-
shipment stage.
2. Post-shipment Finance
Post-shipment finance is provided to meet working capital require-
ments after the actual shipment of goods. It bridges the financial gap
between the date of shipment and actual receipt of payment from over-
seas buyer there of, the finance provided after shipment of goods is called
post-shipment finance. It is given for exports on deferred payment terms
for the period of over one year.
Importance
Post-Shipment Finance is generally granted for the following purposes:
1. To provide working capital so as to fill up the gap between the
shipment of goods and the realization of sales proceeds.
2. To pay insurance charges for insuring goods against perils of sea.
3. To pay ECGC premium for insuring commercial and political risks.
4. To pay commission and brokerage to overseas agents and dis-
tributors.
5. To undertake export promotion activities and advertising.
6. To pay customs duties, port charges and export duty, if any.