Export Credits Guarantee Scheme Rules 1962

Export Credits Guarantee Scheme Rules 1962

[Gazette of Pakistan, Extraordinary, 4th May 1962]

S. R. O. 17 (R).—In exercise of the powers conferred by section 45 of the Pakistan Insurance Corporation Act, 1952 (XXXVIII of 1952), the Central Government is pleased to make the following rules, namely :

1. Short title and commencement.—(1)These rules may be called the Export Credits Guarantee Scheme Rules, 1962.

(2) They shall come into force at once.

2. Definitions.---In these rules unless there is anything repugnant in the subject or the context,----

(a) "Act" means the Pakistan Insurance Corporation Act, 1952 (XXXVIII of 1952) ;

(b) "Board" means the Board of Directors of theCorporation ;

(c) "Corporation" means the Corporation established under the Act ;

(d) "Scheme" means the Export Credits Guarantee Scheme introduced under the Act.

3. Validity of the Scheme.—The Scheme shall remain in force for a period of three years in the first instance.

4. Guarantees.----(1) The Corporation shall provide credit guarantees under the Scheme by means of insurance policies or guarantees framed by the Board against the losses that may be sustained in connection with the export of goods under contracts of sale with buyers in foreign countries on account of the causes of loss specified in rule 6.

(2) The form of insurance policies or guarantees to be issued by the Corporation under the Scheme shall be drawn up by the board and shall have provisions to the following effect among others, namely :---

(a) the proposal and declaration thereto shall be incorporated within the policy as the basis thereof and if any of the statements contained in the proposal or declaration be found untrue or incorrect in any respect, the policy shall be void, but the Corporation may retain any premium that has been paid ;

(b) due performance and observance of each and every stipulation contained therein and in the proposal and declaration thereto shall be a condition precedent to any liability of the Scheme.

(3) Notwithstanding anything contained in this rule, the Corporation shall have the right, subject to such directions as the Central Government may issue to it from time to time,

(a) to limit or withdraw cover for future exportations to foreign markets ;

(b) to limit the maximum amount up to which the goods exported to a particular buyer would be covered by the insurance or guarantee provided under the Scheme ;

(c) to determine the maximum amount to which insurance or guarantee provided under the Scheme would apply in respect of goods in the course of transit to a particular buyer from the date of shipment ;

(d) to suspend or altogether stop further insurance cover or guarantees if the circumstances so warrant any time.

5. Goods and sales covered by the Scheme.—The Scheme,--

(a) will be applicable to all classes of goods produced, manufactured or processed inPakistan as well as to exports to all foreign countries ;

(b) shall insure the total exports of an exporter during a period of twelve months :

Provided that the Central Government may by notification in the official Gazette, exempt from the operation of this rule any goods or any exports which are made against Confirmed Irrevocable Letter of Credit or against which payment is due before exportation.

6. Types of risks guaranteed.—(1) TheCorporation shall provide under the Scheme comprehensive cover for all the following risks at the same time provided that the causes of loss occur after the goods have been shipped from Pakistan, namely :-----

(a) Commercial risks :-------

(i) Insolvency risk caused by the buyer having been declared insolvent ;

(ii) Default risk caused by the failure of the buyer to pay the exporter within six months after due date of payment the invoice value of goods delivered to, and accepted by, the buyer.

(b) Political risks :--

(i) Transfer risk caused by the operation of any law which prevents or restricts the transfer of payment from the buyer's country to Pakistanprovided the buyer has made as irrevocable deposit in an approved bank of local currency equal to the amount due for payment ;

(ii) Import control risk caused by the operation of any law which prevents the import of goods into the buyer's country, or by cancellation of previously issued and currently valid authority to import the goods ;

(iii) War and civil war risk caused by the occurrence of war between the buyer's country and Pakistan, or the occurrence of war, hostilities, civil war, rebellion, revolution, insurrection or other disturbance in the buyer's country ;

(iv) Diversion risk caused by incurring in respect of goods exported from Pakistan of any additional handling transport or insurance charges which are occasioned by interruption or diversion of voyage outside Pakistan and which it is impracticable to recover from the buyer ; and

(v) Omnibus risk occasioned by any other cause not being within the control of the exporter or of the buyer, which arises from events occurring outside Pakistan, caused by government action or legislation or force majeure or all these causes combined.

(2) The Corporation shall also provide, under the Scheme, cover for the loss occasioned by the failure or refusal on the part of the buyer to fulfilthe terms of the contract provided that such failure or refusal does not arise from any breach of contract or warranty on the part of the exporter nor from any cause within the control of the exporter and that the buyer is an overseas government.

7. Period for which risks can be covered.—The Scheme shall cover risks for the maximum periods specified below :---

(a) in the case of export of raw materials or commodities—not more than three months from the date of shipment ;

(b) in the case of export of manufactured consumer goods—not more than four months from the date of shipment ;

(c) in the case of export of capital goods—not more than two years from the date of shipment ; and

(d)  in the case of all exports to India—not more than two months from the date of shipment or export :

Provided that the Central Government may, by notification in the official Gazette, extend the periods specified in this rule, and the Corporation shall relax the limitation of these periods by endorsing the exporter's normal short-term policy extending the period for which the risk is covered.

8. Date for payment of losses.—The payment of losses under the Scheme shall be made after they have been ascertained and established in the following manner, namely : —

(a) in the case of insolvency, immediately after the occurrence of the insolvency ;

(b) in the case of default, immediately after the period of six months from the due date of payment ;

(c) in the case of transfer, six months after the due date of payment by
the buyer or, if the buyer has made an irrevocable deposit for transfer to the exporter, six months after the making of such deposit if the expiry of this period is latter ; and

(d) in all other cases, six months after the occurrence of the event which is the cause of loss.

9. Percentage of loss payable.—TheCorporation shall pay, under the Scheme, 75 per cent of losses on account of the commercial risks and 85 per cent of the losses on account of the political .risks, enumerated in sub-rule (1), and 8: per cent. of the losses on account of the cause of loss stated in sub-rule (2) of rule 6.

10. Currency of Payment. —All claims shall be payable 'under the guarantees issued under the Scheme in Pakistan currency and where a contract between an exporter and foreign buyer of goods is expressed in foreign currency, the rate of exchange shall, for the purpose of calculating the amount of the loss in respect of any particular goods, be the authorised dealers' buying rate ruling on the date of shipment of goods.

Explanation.—"Authorised dealer" shall have the same meaning as assigned to it in the Foreign Exchange Regulation Act, 1947 (VII of 1947).

11. Recoveries.—Any sums recovered from the buyer after a claim has been paid under the Scheme shall be divided between the exporter of goods and the Corporation in the same proportion in which the loss was borne by them respectively.

12. Premium.—(1) The Board shall fix the rates of premium payable by' the exhorter and may modify it from time to time provided that the modified rates shall be applicable to the export of goods made after such modification.

(2) in the event of modification in the rates of premium, the exporter shall have the option of carrying the risk on further business outside the insurance cover or guarantee provided by the Scheme.

(3) The rates of premium shall be fixed on an assessment by the Board of the risk involved and shall be based mainly on the factors specified here-under: —

(a) the types of risks guaranteed;

(b) the economic strength and stability of the buyer's country;

(c) the type of goods exported;

(d) the period for which the the risks are covered;

(e) the spread of risks offered by the exporter for insurance; and

(f) the expenses of management.

(4) Declaration of shipments shall be made and the premium shall be payable by the exporter by the tenth day of every month following that in which the guarantee is issued. Provided that the Corporation may charge a minimum premium to be paid before acceptance of risk by the guarantors and that the exporter shall be entitled to refund upon the expiry of the guarantee of a sum equal to the premium due and paid under declarations to the guarantee or the minimum premium whichever shall be the lesser or in the event of renewal the minimum premium shall be carried forward.

(5) The Corporation may allow under the Scheme such rebate on premiums as the Board may determine from time to time.

13. Obligations of the exporter under theScheme.—It shall be obligatory for the exporter,

(a) to furnish the following returns to the Corporation and such addi­tional information as the Corporation may require from time to time:

(i) a return declaring in a form framed by the Corporation the value of all exports made by him during the previous month, the date of each ship­ment and the date by which payment against such exports is due, supported by such documents as may be required by the Corporation and the return shall include for each exportation the number and date of the export declaration form lodged with the Exchange Control Authorities; and

(ii)a monthly return giving details of all amounts which at the end of the previous month remained unpaid for more than three months from the original due date of payment by the buyer;

(b) to undertake that all discussions and correspondence in connection with hisproposal to the Corporation and, the insurance policy or guarantee arising under the Scheme or any details thereof shall not be disclosed by him either to the buyer abroad or to any other person or concern except, in confidence, to his bankers, without prior consent of the Corporation; and

(c) to take all practicable measures to minimize the loss and all possible steps including legal action, if necessary, to effect recoveries from the buyer even after payment of his claim by the Corporation.

14. Additional transactions or risks to be covered under the Scheme.—(1) The Scheme may cover such additional business transactions or risks, subject to such conditions, as the Central Government may decide from time to time.

(2) The insurance cover or guarantee under sub-rule (1) may, where necessary, be provided by means of an endorsement to an existing policy.

15. Assignment of policies or guarantees issued under the Scheme, to banks.-(1) Where a bank is providing finance to an exporter against the security of a policy or guarantee issued under the Scheme, the exporter may authorise the Corporation to pay to such bank directly any amounts payable to the exporter under rule 9 in respect of individual transactions, or all transactions with a foreign country, or all business covered by the policy, and such bank shall be responsible for notifying the Corporation of all shipments in respect of which it has provided finance.

(2) The exporter may also authorise the Corporation to send all informationsregarding credit limits and changes in credit limits directly to the bank concerned.

16. Working capital and the extent of risk covered.-(1) The Corpora­tion shall restrict its total liability under the Scheme at any time in respect of the insurance policies issued or guarantees given to a total of ten times the aggregate of the amount standing to its credit in the working capital and in the surplus funds of the Scheme.

(Z) If at any time the maximum amount of the total liability under the Scheme is likely to exceed beyond the limit fixed in sub-rule (1), the Corporation shall suspend the issue of new insurance policies or guarantees until it restricts its liabilities to the limit specified in sub-rule (1).

17. Investment of funds.—--The Corporation may invest the funds of the Scheme in such securities or in such other manner as it deem fit.

18. Exports Credits Guarantee Wing of the Corporation.—The Corpora­tion shall, subject to any direction issued by the Central Government from time to time,

(a) establish a separate wing in it to be called the "Export Credits Guarantee wing" for the purpose of conducting the business of the Scheme; and

(b) conduct all business relating to the Scheme under the general direc­tion and administration of the Board assisted by the Executive Committee and the Managing Director appointed under the Act.

19. Advisory Committee.—(1) There shall be an Advisory Committee to advise the Central Government and to assist the Board and the Managing Director of the Corporation on all aspects of the working of the Scheme,

(2) The Advisory Committee shall comprise the following, namely :—

           

Officials

Managing 'Director of the Corporation                          Chairman

Deputy Financial Adviser, Ministry of                            Member

Commerce of the Central Government.

The Foreign expert appointed in the Export                   Member

Credits Guarantee Wing of the Corpora‑

tion.

A representative of the Department of Trade                 Member

Promotion and Commercial Intelli‑

gence of the Central Government.

A representative of the Corporation and                                    Member

Marketing Department of the Central

Government.

Non-officials

Four representatives, nominated every year                   Members

by the Managing Committee of the Federation

 of Chambers of Commerce and Industry

registered under the Trade Organizations

Ordinance, 1961 (XLV of 1961).

One representative, nominated every year by                 Member

the executive committee of the Pakistan Small

Industries Association registered under the Trade

Organizations Ordi­nance, 1961 (XLV of 1961).

(3) The non-official Members of the Advisory Committee appointed under the sub-rule (2) shall hold office during the pleasure of the Central Government, and any, casual vacancy in their offices shall remain unfilled until the next yearly nom nation by the Managing Committee of the Federa­tion of Chambers of Commerce and Industry or the executive committee of the Pakistan Small Industries Association, as the case may be.

(4) The Chairman of the Advisory Committee shall have power to co-opt as Members up to five non-official persons for the transaction any particular business provided that such co-option will, as far as possible, be confined to the Associations concerned with the particular business and organised on AllPakistan basis to represent specific trades or industries or both, under the Trade Organizations Ordinance, 1961 (XLV of 1961).

(5) The non-official Members of the Advisory Committee shall be paid out of the funds of the Scheme such fees for attending the meetings of the said Committee as may be laid down by the Board.           .

(6) The meetings of the Advisory Committee shall be convened by its Chairman at least once every four months and shall be conducted in such manner as he considers appropriate.

(7) No proceedings of the Advisory Committee shall be deemed invalid merely on the ground of the existence of any vacancy in, or any defect in the constitution of, the Committee.

20. Submission of returns.—TheCorporation shall furnish to the Central Government,

(a) such reports, : returns and statements in respect of the working of the Scheme, at such intervals, as the Central Government may, from time to time, require; and

(b) an audited Balance Sheet as at the close of the year together with a profit and loss account for the year within six months of the close of the financial year;

and copies of the annual report, balance-sheet and profit and loss account shall be published in the official Gazette and laid before the Central Legislature.