What is export packing credit?

Answer 1

Export Packing Credit.

industry used term - EPC RATES

This is a fluctuating rates linked with LIBOR (London Inter Bank offered Rates)

In international trading, both the parties are not aware of each other, hence, they employ a world-renowned bank (globally) because they do not trust each other & deal through that bank instead.

Export Packing Credit are of 2 forms

1. Pre-shipment Credit (Packing Credit)

2. Post-Shipment Credit

These are available to the exporters, for financing purchase, processing, manufacturing or packing of goods prior to shipment.

This would mean any loan or advance extended to you by the bank on the basis of:

a) Letter of Credit opened in your favor or in favor of some other person, by an overseas buyer;

b) a confirmed and irrevocable order for the export of goods from India;

c) any other evidence of an order or export from India having been placed on the exporter or some other person, unless lodgement of export order or Letter of Credit with the bank has been waived.

Packing Credit is granted for a period depending upon the circumstances of the individual case, such as the time required for procuring, manufacturing or processing (where necessary) and shipping the relative goods. Packing credit is released in one lump sum or in stages, as per the requirement for executing the orders/LC.

The pre-shipment / packing credit granted has to be liquidated out of the proceeds of the bill dawn for the exported commodities, once the bill is purchased/discounted etc., thereby converting pre-shipment credit into post-shipment credit.

Post Shipment Packing Credit

It runs from the date of extending credit, after shipment of goods to the date of realization of export proceeds and includes any loan / advance granted on the security of any duty drawback allowed by the Govt. from time to time. Post-shipment credit has to be liquidated by the proceeds of export bills received from abroad in respect of goods exported.

The exporter has the following options at post-shipment stage:

i. To get export bills purchased /discounted / negotiated;

ii. To get advances against bills for collection;

iii. To receive advances against duty drawback receivable from Govt.

The exporter has the option to avail of pre-shipment and post-shipment credit either in rupee or in foreign currency. However, if the pre-shipment credit has been availed in foreign currency, the post-shipment credit has necessarily to be under EBR Scheme since foreign currency pre-shipment credit has to be liquidated in foreign currency. The details of pre-shipment and post-shipment credit in foreign currency are mentioned below.