Basic Principles of ECGC Operations: Export Credit Guarantee Corporation of India works on two basic principles as detailed below:
1. Spread of Risk
2. An exporter is a Co-insurer
1. Spread of Risk: All exporters are required to insure all the shipments that are likely to be done by loan during the next two years. To avoid undue difficulty to the exporters certain exceptions as under have been made against.
i advance payment
ii irrevocable letter of credit confirmed by banks in India.
Shipments made to agents and associates may also be excluded.
When an exporter handles and deals in different categories and types of goods he may exclude those items that are not allied to the main export items. The idea is not to allow an exporter to pick and choose only the bad risks for reduction of the premium he has to pay to obtain the policy. When everything is in general way than the premium is little low. However, the exporter is take political cover for transactions to under this clause.
An Exporter is a Co-insurer
Export Credit Guarantee Corporations only reimburses losses suffered by an exporter who has obtained its policy maximum upto 90% of the losses on account of political or commercial risk. In the event of loss due to repudition of contractual obligation by the buyer ECGC indemnifies the exporter upto 90 percent of the loss. In such situations a final and enforceable degree against the overseas buyer is obtained in a competent court of law in the buyer’s country. The corporation at its discretion may waive such legal action worthwhile against the buyer if that thinks that such a costly action is not exporter and in such cases losses to the exporter are indemnified upto 90 percent, the balance loss will have to be born by the insurer exporter. This is necessary to ensure that the exporter acts more prudently as under:
i) The exporter also takes necessary precaution in selecting the parties to which he may decide to export.
ii) He may not over extend the credit.
iii) He may take all possible care to minimize the risk involved.

Apart from these two basic principles, ECGC being a insurer in insurance business, also follows three basic principles of insurance as under:
i) Export Guarantee Corporation Contracts are contracts of good faith which means that non-disclosure of a material fact will render the contract void. In other words the exporter is bound to disclose every material fact within his knowledge to the ECGC which may adversly affect the ECGC. Again any material alteration of the risk arising between the date of the proposal and the issue of the policy must be disclosed to the ECGC.
ii) The insurer is duty bound to minimise the loss. He should conduct his business with ordinary prudence and deligence and act as uninsured. The action that needs to be taken depend on the facts and circumstances of the case.
iii) Under the principles of subrogation ECGC steps into the shoes of the exporter. If recoveries are made after the payment of claim by ECGC, they are shared with the ECGC in the same proportion in which the loss was borne.

Procedure for Making a Claim
All claims arising out of loss, or non-payment have to lodged with the ECGC for payment of the claim amount as per the terms of the insurance policy. A claim will arise when any of the risks insured under the policy materializes. If an overseas buyer goes insolvent the exporter becomes eligible to lodge a claim with ECGC after one month and if his claim is admitted by ECGC to rank against the insolvent’s estate it will be paid after one month or after four months of the due date of payment whichever is earlier.
Claims in respect of additional handling, transport or insurance charges incurred by the exporter because of interruption or diversion of voyage outside India are payable after the proof of loss or submitted to the ECGC with supporting documents, it shall be paid on verification after four months from the date of the event causing loss.
In exports to countries where long delays are experienced ECGC may extend the waiting period and the claims for such losses due to shipment of goods shall be payable only after the extended period is over.
When a buyer refuses to accept goods shipped to or refuses payment because of differences over fulfilment of the terms of contract by the exporter, counter claims or set of. In such cases ECGC considers the claim preferred on it but considers these claims after the dispute between the parties is resolved and the amount payable is established by obtaining a case in a court of law in the country of the buyer.
This condition is waived off in cases where the corporation is satisfied that the exporter is not at fault and that no useful purpose would be served by proceeding against the buyer.
Procedural Formalities: The ECGC has preseribed three types of claim forms as given under:
Form No. 501 for claims arising out due to non-payment of goods accepted by the buyer.
Form No. 502 for claims arising because of the non-acceptance of goods/document by the buyer.
Form No. 503 for claims on account of delay in transfer of funds to India.
Other kind of claims can be fitted by means of a letter giving full particulars of the cause and extent of loss. The claim forms have to be sent through the bank and only to the ECGC office which issued the policy. No claim
will be entertained by the ECGC if it is not filed with in a period of 24 months from the date of the concerned bills.

Documents in Support of Claims
Every claim has to be filed in the prescribed appropriate form and supported by documents as listed below:
a) Certified copy of the export order.
b) Certified copies of Invoices.
c) Certified copies of bills of lading.
d) Copies of the correspondence with the buyer.
e) In case of insolvency of the buyer copy of the letter from the official receiver/liquidator admitting the claim.
f) In case of protracted default.
i) Protest note
ii) Original unpaid bills
iii) advice of non-payment received from the bank. A copy of the plaintiff if a such has been files.
g) In case of transfer delays, certified copy payment advice received from the collecting bankers indicating the date on which payment was made by the buyer.

Obligation of the Policy Holder of ECGC Policy
ECGC policy holder of ECGC insurance policies are under obligation to the ECGC on the following:
1. Declaration of Shipment: An exporter who has taken a shipment policy has to send till the fifteenth of every month a declaration of shipments in the previous month in the prescribed form No.203. An exporter who obtains a contract policy has to send a declaration of all outstanding contract immediately after the policy is issued. Thereafter he shall send a monthly declaration of contracts concluded and shipments made by him during the previous month. Premium has to be paid along with the declaration at rates shown in the schedule attached to the policy.
2. Fixation of Credit Limit to Each Buyer: Under the ECGC policy the commercial risks are covered subject to a limit of a buyer as fixed by ECGC credit limit is the limit up to which a claim can be made or paid under the policy for losses on account of commercial risks, in the absence of credit limit such claims are not covered by the ECGC. A policy holder for sanction of credit limit in case of each individual buyer separately in form No. 144, before making shipments to the buyer. If necessary information requiring the buyer and the forms of contract are provided it will be easier for the ECGC to fix the credit limit for a buyer in time. ECGC obtains credit worthiness information about the buyers through banks and credit rating agencies. If the policy holder has credit raiting information about the buyer, he should pass on this information to ECGC so as to have an early fixation of credit limit of the buyer. If for some reasons the exporter requires an enhancement in buyer’s credit limit he should provid necessary information in form 144A.
3. Recording Default: A Policy holder needs take to a very prompt action in case non-payment by a buyer on due date or on presentation of Bill of Exchange. He has to submitt a monthly declaration of all bills which remain unpaid for more than 30 days in the prescribed form No. 205, indicating action taken by the policy holder in regard to collecting the payment. The policy holder with the prior approval of ECGC can grant extension of time for payment or converting bills from Drawn Against Payment DP) to Drawn Against Acceptance DA.