You can file your claim when you are aware of any adverse information which may affect the payment of your invoices related to credit insured sales. Our Claim and Recovery Department will provide all assistance to you to file a claim and recommend appropriate measures to minimize your losses.
What action should be taken by the exporter in case the buyer requests for extension of date of payment?
If a buyer who is not in a position to make payment on the due date of the export bill and requests additional time to settle the amount, the exporter should make good commercial judgment on the request of the buyer based on facts and circumstances of the case. If the exporter is convinced that extending the due date of the bill is the proper course of action, then the exporter should seek the approval from Credit Oman of Oman giving in details the reasons justifying such extension.
If the buyer raises any disputes regarding quality of goods exported, the claim for the resultant loss will be considered once the disputes are settled amicably by the exporter with the buyer or the exporter obtains judgment in his favour from the court of law in the buyer country.
Where payments are not realized due to exchange transfer delay, claims can be filed with the Agency after six months from the date on which the buyer has, after making the payment in local currency, completed exchange control formalities necessary for the transfer of funds to Oman. Where the Agency has stipulated a longer waiting period, claims can be filed only after completion of such period.
Credit Insurance – Exports and Domestic
Credit Oman will not cover disputes between the buyer and the exporter regarding the supply e.g. quantity, quality, packing, etc., unless the policyholder gets a court ruling in his favour in buyer’s country. Also, it does not cover causes inherent in the nature of goods, default of any agent of the exporter or of the collecting bank, and fluctuation in the exchange rate.
On an average, 40% of company’s assets are tied up in the form of commercial debt. All it takes for an otherwise well-run business to become insolvent is for one major customer not to meet its payments. Even smaller debts can have a destructive effect. For example, if your profit margin is 5% and your client’s debt is just RO.10000, your company will have to achieve additional sales of RO.100000 just to make up for the loss. A credit insurance policy from Credit Oman can protect from the consequences of such an event.
Why is that exporters sometimes do not get larger credit limits on certain buyers or Credit Oman refuses or reduces cover on a buyer?
Credit Oman may restrict or refuse cover on certain buyers for various reasons. For example, it could happen if the buyer is not sufficiently credit worthy based on their financial standing or if his total commitment with other suppliers are already too high in relation to its size and financial capability or we may have recorded or received adverse payment experience or disputes with those buyers. Thus Credit Oman is of the view that such restriction of cover on buyers will safeguard the interest of the exporters against possible losses. However, Credit Oman always tries to decide on cover as objectively and pragmatically as we can in order to promote and enhance Omani exports while evaluating the risks on buyers.
The exporter should ensure that the approved buyer whose name and address is shown on the credit limit is the same party with which he/she has entered into the contract of sales. A slight variation in the name of a company can mean another separate legal entity. Should you wish to trade with the buyer’s parent or associate or subsidiary companies, it is necessary for you to send in separate Credit Limit Application (CLA) since members of the buyer’s group of companies are different legal entities. You should also pay particular attention to the amount, the payment terms, the expiry date (if any) as well as any specific conditions shown on it, e.g. the credit limit covers specific shipment only or you must report overdues to Credit Oman immediately or any other endorsement attached to the credit limit approval.
Is it necessary to limit the value of my export contract to the value of the credit limit agreed by the Agency?
Not necessary. Shipments could be effected over a period of time so that the amount outstanding for goods exported is, at any one time, within the approved limit. In other words an exporter can undertake contracts of a value greater than that given of your credit limit, since it is revolving.
A credit limit does not have expiry date and it remains in force during the validity of the policy as it operates on revolving basis unless any credit limit is canceled and advised by Credit Oman due to adverse information on the buyer or due to unutilization for specific period.
A-It minimizes the credit risks and maximize opportunities by exporting goods abroad
C. – You can derive better credit control by keeping tabs on the buyers and credit limits as approved by Credit Oman.
D. – You can assign your export Credit Policy as additional collateral to a bank in order to obtain additional financing at better terms
E. – You can discount export bills as with Banks
F. – It provides greater financial liquidity and flexibility administering foreign receivables portfolio.
As it is a violation of a specified term of the Policy, Credit Oman of Oman, as the insurer, has the right to refuse the business declaration after the stipulated time. Thus, the sales already made will be off cover. Hence, it is highly important that all your sales, whether it is domestic or exports, are declared on time.
If a buyer who is unable to make payment on of the due date and requests for more time to pay the amount, the exporter should make a good commercial judgment on the request based on facts and circumstances of the case. If it appears that extending the due date of the bill is the proper course of action, then the exporter should seek the approval of the insurer (Credit Oman), detailing the reasons justifying such action.
An Irrevocable Letter of Credit provides guarantee / security for receiving your payment of export bills provided the terms and conditions of the letter of credit are strictly complied with. However, certain events of political nature in the buyer’s country could prevent performance of sales contract or transfer of funds. In such circumstances, the Export Credit Policy of Credit Oman provides you protection against such losses.
Why does Credit Oman charge premium on total business declared, even when it exceeds the credit limit amount?
According to the policy, the premium is payable on actual export and domestic sales made to various buyers on whom credit limit have been issued and not on the credit limit amount. However, the Agency charges premium on sales declared by the policyholder in excess of credit limit due to the fact that those export sales made in excess of credit limit also be automatically covered once previous shipments are paid. If no premium is charged on those sales, it is off cover in accordance with the terms of the Policy in the event of non-payment by the buyer.
The credit insurer issues a credit limit for every buyer with whom the policyholder trades. The level of the limit is set at the maximum amount that can be owed by the buyer at any given time. The granted credit limit is the maximum insured credit line for a specific buyer that operates on revolving basis and the policyholder can trade within the approved credit limit throughout the policy period without further reference to the Insurer.
Credit Insurance Policy is a risk management tool that helps the exporter to stabilize his/her cash flow and protect his/her trade receivables in the ever-changing competitive and economic business climate. The exporter can also enhance his/her borrowing power from financial institutions.
Firstly, the amount of the credit limit application should be realistic and close to the credit insured by exporter’s probable requirements in the foreseeable future.
Second, the policyholder should provide (Credit Oman) with full and correct details of the buyer’s trading style, address and the name and address of his banker.
Third, it is important that the policyholder gives full and actual details of previous trading experience with the buyer.
Fourth, if the policyholder has up to date credit information on the buyer he can attach such reports together with any other additional information to the application.
Export Credit Insurance provides risks protection to the exporter who sells on credit terms against non-payment by his buyers. Non-payment may be due to buyer’s insolvency, protracted default, non-acceptance of goods or economic and political conditions that are out of the control of the exporter and buyer.
What are the benefits of bills discounting to eligible credit insured exporter under the Credit Oman’s Post-shipment Financing Scheme?
The post-shipment financing allows the exporters to improve on their liquidity or cash flow position as they get necessary funding from commercial banks through bills discounting of their export receivables and at a concessional interest rate as agreed between the Export Credit Guarantee Agency and the commercial banks in the country.
What can Credit Oman do if the exporter faces difficulties in discounting export bills with the commercial banks for which the Agency has entered MOU?
Upon receipt of intimation from the exporter to this effect, Credit Oman would contact the concerned bank to ascertain the reasons for not discounting the export bills which are credit insured under the Policy and endeavor to assist the exporter. Sometimes, the banks may have some restriction in extending further credit facilities due to past due facilities with them, or with the other banks which are under litigation.
How can Banks play a greater role in the process of enhancing the services that the Agency provides to exporters?
Export Credit Guarantee Agency of Oman has signed MOUs with most commercial banks operating in Oman under the post-shipment financing program whereby credit insured exporters can discount their export bills with commercial banks against preferential interest rates, thus reducing their post-shipment financing cost. Credit Oman can also issue pre-shipment export credit guarantees whereby banks are able to provide financing at a pre-shipment stage for working capital needs of exporters. In addition, the Agency launched a new product during the first half of 2014 titled “Documentary Credit Insurance Policy” whereby the commercial banks in Oman add their confirmation on irrevocable letters of credit after obtaining the Agency’s guarantee in order to protect them against the risk of non-payment of an irrevocable letter of credit issued by the importer’s bank. Therefore, these products offered to commercial banks in the Sultanate of Oman will play a great role in the process of encouraging and promoting export insurance.
(1) You must use all reasonable and usual care and skill and take all practical measures, including any measures which may be required by us, to prevent or minimize loss and we shall not be liable for loss if you fail to take all such practicable measures to prevent or minimize loss within a reasonable time after you have learned of the occurrence of a cause of loss or of any event likely to cause loss;
(2) You must promptly notify Credit Oman in writing when you become aware of the occurrence of any cause of loss, or of any event likely to cause loss, or that the Issuing Bank is unable to pay its debts as and when they fall due or that the Issuing Bank is in financial difficulties.
(3) You must provide us with all information and documents that we may require.
The Export Credit Policy is normally recognized by the commercial banks as a valuable form of an additional security. If necessary, the exporter can assign the benefits of the Policy to his financing bank which allows Credit Oman to pay claims directly to the Bank. Consequently, the credit insured exporter can enjoy improved financial facilities through relatively lower interest rates.
Why does Credit Oman issue pre-shipment credit guarantees on behalf of credit insured exporters to commercial banks?
The Agency issues pre-shipment credit guarantee to commercial banks in order to assist the exporters in obtaining pre-shipment financing for the purpose of purchasing raw materials, processing/manufacturing and packing of goods to be exported.
The guarantee fills the security gap needed especially for small sized exporters who are in need of such financing but lack necessary collateral.
As a credit insured exporter to Credit Oman how can I obtain cover for pre-shipment as well as post-shipment periods?
Export credit indemnity cover is available prior to shipment if your company is carrying any risk of loss. A contract policy can be issued by Credit Oman to the exporter for such shipment. The extent of pre-shipment risk will depend upon the type of goods produced. Cover will be given for If non-standard or made to individual specification are to be exported . Otherwise, cover is given only for post shipment. The interest rate subsidy will be available from date of export only.
The exporter should first obtain export credit insurance cover against the buyer to whom shipments are to be made under the Policy in order to be eligible for pre shipment financing. Then, the eligible exporter who wishes to avail pre shipment financing facilities should contact his bank who in turn would apply to Credit Oman for guarantee to provide such financing. Credit Oman is not involved in providing such financing directly to the policyholder.
After payment of a claim, Credit Oman has the right to take over the debt, but while it does exercise this right in some instances, it will normally require the policyholder to continue recovery action along the path already agreed with Credit Oman subject to any further requirements it may have.
Yes, the Agency will reimburse the policyholder the legal fees paid to lawyers in the buyer’s country up to the proportion in which liability for the debt has been admitted by Credit Oman. Also, the policyholder should obtain concurrence form the Agency to initiate legal action for recovery.
After payment of a claim, Credit Oman has the right to take over the debt, but normally Credit Oman requires the policyholder to proceed with the recovery action along the path already advised and agreed by Credit Oman considering the insured being the contractual party with the buyer for the export sales made.
The exporter should keep the Agency informed of all actions taken to recover amounts in default. The Agency also will assist the exporter towards recovery action and suggest certain course of action based on the development against the action already taken by the exporter. The exporter is required to act on the basis of such advice provided by the Agency in accordance with the terms of the Export Credit Policy.
Apart from indemnifying the exporters for losses, does Credit Oman contribute towards recovery costs? If so, what nature of costs incurred by the exporter?
Yes. Credit Oman normally reimburses the legal fees paid to the appointed lawyer and the court, in the buyer’s country in the proportion of its liability to the total outstanding debt provided the claim for loss is admitted by Credit Oman. It does not contribute other expenses such as travel expenses, auditor’s fees, translation charges and any overhead expenses, etc. However, Credit Oman is not obliged to share recovery costs, as per the policy. Also, being an insured, you should inform Credit Oman, on the legal fees agreed upon in advance.
The exporter has a prime responsibility as per the Policy to vigorously pursue recovery action and to keep the Agency informed of such action from time to time. As and when any amount is recovered, the amount will have to be shared with the Agency in the ratio in which the loss was borne.
In case of recovery expenses, documentary evidence of recovery expenses inquired by the exporter with the approval of the Agency should be furnished to the Agency to reimburse the recovery expenses in the same proportion in which losses were apportioned between the Agency and the exporter.