Types of Export Credit Insurance and Company Declaration Methods

Export credit insurance is a non-profit policy insurance business with insurance reserves provided by the state to promote the country's export trade and protect the export enterprises' security of foreign exchange receipts.

1. Short-term export credit (specific method) insurance policy: Applicable to export contracts with a credit period not exceeding 180 days and, at most, not exceeding one year. Coverage is under a specific method, meaning one policy per contract. Only insures electromechanical product exports.

2. Short-term export credit (comprehensive) insurance policy: Usually applicable to export contracts with a credit period not exceeding 180 days and, at most, not exceeding one year, settled by D/P, D/A, and O/A. Coverage is under a "blanket" method, meaning the insured must include all exports within the scope specified in the policy and is not allowed to make "adverse selection".

3. Medium and long-term export credit (deferred payment contract) insurance policy: Usually applicable to exports of capital goods, covering losses incurred by export enterprises due to the buyer's inability or failure to pay on time under deferred payment terms (credit period exceeding one year). under a specific method, meaning one policy per contract.

4. Buyer's breach of contract insurance policy: Primarily covers pre-shipment risks, i.e., losses incurred by the exporter due to the buyer's unilateral termination of the contract before or during product shipment. Commonly used for insuring export shipbuilding contracts. Post-shipment risks can also be covered under this policy.

How enterprises apply for export credit insurance
Export credit insurance is a policy insurance type designed by the state to encourage and promote the country's export trade, shielding numerous export enterprises from exchange receipt losses caused by political risks in the importing country (including war, foreign exchange controls, import restrictions, orders for deferred payment, etc.) and commercial risks by the importer (including bankruptcy, default, and rejection of goods). After ten years of continuous exploration and practice, the People's Insurance Company of China now offers various insurance types including short-term comprehensive insurance, buyer's and seller's credit insurance for medium and long-term exports, overseas investment insurance, and guarantee insurance.

For foreign trade companies insuring export credit, the following points deserve concrete attention during operation:

1. Points to note when applying for limits:
1. Once a contract is signed, immediately apply to the insurance company for the limit. Surveying credit status takes some time, encompassing internal processing and commissioning foreign credit agencies, sometimes taking as long as one month.

2. If the contract changes before the limit is approved, contact the insurance company in time.

3. If the contract is on L/C, D/P, or D/A terms but is shipped via air or by consigning or releasing the bill of lading directly, the associated risk is equivalent to O/A risk, so apply for a limit on O/A terms.
　
4. As the insurance company only assumes risks for export exchange receipts covered under the approved buyer's credit limit conditions, it will not bear compensation liability if exports deviate from the approved buyer's credit limit conditions, e.g., shipment date earlier than the limit's effective date, or contract's payment terms differing from the limit's payment terms.

2. Points to note when handling export reports:
1. When dispatching exported goods, promptly fill in the "Export Credit Insurance Report Form", submit it to the insurance company, and pay the insurance premium.
　
2. Reports must not be omitted or falsified as per Article 18 of the export credit insurance clauses.

3. How to handle claims:
Complete the standard "Claim Application Form" and provide the following documents:

1. A written report providing a detailed account of incident occurrence and processing measures undertaken.

2. Evidence material certifying the insured subject, including: trade contract, bill of lading, customs clearance declarations (original), invoice, packing list, draft, D/P or D/A collection order, and under D/A terms, the document of acceptance (this is a vital self-protection tool for Chinese export enterprises used internationally when interests are harmed, and serves as a pivotal legal basis for overseas recovery proceedings).
　
4. Evidence material proving loss causes and amount, including:
1. Documentary proof of the buyer's bankruptcy or insolvency.

2. Proof of dishonour or non-payment from the bank or relevant institution.
　
3. Correspondence between buyer and seller.

4. Documents showing export under claim was insured with your company, including the policy (with schedule and premium rate table), "Credit Limit Approval Form", and the export declaration form.
　
5. The Insured has the duty to fully and truthfully provide other relevant material.

6. Matters to be aware of when processing the claim:
1. If the buyer's creditworthiness becomes suspect and payment is not made within 15 days after the due date, promptly submit a "Notice of Potential Loss" to the insurance company, and take all possible measures to reduce losses.

2. For losses caused by the buyer’s insolvency, notify the insurance company no later than one month from when the buyer declares bankruptcy or is adjudged incapable of paying debts.

3. For losses caused by other reasons, file your claim no later than two months after the indemnity waiting period stipulated in the policy expires; failure to do so may lead the insurance company to deem the intended rights of the complaining exporter as forfeited and warrant rejections accordingly. In short, complete and adequate documentation must be provided when claims are made to the insurance company, otherwise to the peril of the exporter's bottom line and haply to that of state interests suffered as well.