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How can the exporter
be protected from unpredictable events?
There are two types of insurance for export. They
are Cargo Insurance operated by private marine
insurance companies and the Export Credit insurance
Scheme operated by a governmental insurance corporation,
Malaysia Export Credit Insurance Berhad (MECIB).
The former is to insure cargo, which is transported
by ship or airplane, against risks such as sinking,
stranding, collision, fire, etc. Usually, the
risks of war and strike are not covered unless
there is a special arrangement. The latter is
to insure against commercial and political risks
such as import restriction and war in the importing
country, and non payment by the buyer.
What is cargo insurance?
If the exporter agrees to trade on CIF or C&I
terms, the risk is borne by the importer at the
point of lading on board the vessel. However,
the exporter has to bear the cost to insure the
goods and send the insurance policy to the buyer
usually through the bank. He has to arrange the
insurance to cover the period from the point of
lading to the point when the goods are safely
unloaded on land (until stored in the warehouse
in most cases) at the port of destination. The
insured amount should be 110% of the CIF value
of goods.
On the other hand, if the exporter sells on FOB
or CFR (C&F) terms, he does not need to arrange
insurance cover beyond the point when goods are
laden on board the vessel. However, following
the sales contract or conditions of L/C, the exporter
may arrange insurance for the importer, while
making the title of insurance transferable to
the buyer. This results in the buyer being insured.
As a general rule, when applying for insurance,
the exporter may apply only when the amount of
goods to be shipped, and the name of the ship
to be laden are determined. If the description
of the goods, date of shipment and the name of
carrier has yet to be determined, the exporter
can first apply to insure on a temporary basis
and change it to be definitive at a later date.
What is Export Credit
Insurance Scheme?
The idea of the Export Credit Insurance Scheme
is to protect the insured exporter for a small
premium against unpredictable or other catastrophic
events beyond their control which prevents the
payment of exports by the buyer. Malaysia Export
Credit Insurance Berhad (MECIB) operates this
schemes.
MECIB is owned by Bank Industri Malaysia Berhad
(BIMB) which is 100% owned by the Malaysian government.
Its main objective is to promote Malaysia's exports
by protecting the exporters from commercial and
political risks and to promote increased participation
from the commercial banks in export financing,
and the mobilization of funds for export purpose.
Three types of policies commonly used are as follows:
- Type one covers the risks of non-payment by
the overseas buyers for goods and commodities
exported on credit terms no longer than 180
days, but where the product involved is such
that longer credit is appropriate, then credit
up to 720 days can be insured. The cover commences
from the date of shipment.
- Type two is for goods specifically produced
under a contract of sale for overseas buyers.
It covers the exporters additionally from the
risks of substantial loses in the event of the
contract being frustrated in the pre-shipment
stages. The cover commences from the date the
contract is signed.
- Type three covers the export of services other
than tangible goods to overseas buyers/clients
e.g. technical professional assistance, refits,
conversion, commissioning, overhauls, repairs
carried out on ships etc. The cover can commence
from the date the contract of services is signed
or services rendered.
What risk can be covered?
- Commercial or Credit/Buyer Risks; for
example, buyer's insolvency, buyer's payment
default and a general unwillingness of the buyer
to pay or accept goods which have already been
shipped/delivered (which is not due to quality
dispute).
- Non-Commercial. Transfer or Economic
and Political Risks; for example, blockage or
delay in the transfer of payment/remittance,
imposition of import restrictions in the buyer
country (after the goods have been shipped/delivered)
cancellation of import license which is beyond
the control of the buyer, cancellation or non-renewal
of export license, war between buyer's country
and Malaysia, revolution and other disturbances
in the buyer's country, default by the government
and other causes of loss outside Malaysia beyond
the exporter's and buyer's control.
Further information is available at MECIB's head
office in KL, Regional Office North in Butterworth
and Regional Office South in Johor Bahru. The
addresses of MECIB's offices are as follows.
Kuala Lumpur head Office
Level 12 Darul Takaful
Jalan Sultan Ismail
P.O. BOX 11048
Tel : 03-2910677
Fax: 03-2910353
Regional Office North
2nd Floor, 53 Taman Selat
12000 Butterworth
Tel : 04-3321862
Fax: 04-3322172
Regional Office South
2nd Floor, 95 Jalan Damai
Jalan Setia off Jalan Stulang Darat
83000 Johor Bahru
Tel : 07-2231191
Fax: 07-2240370
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