    
   
Export Pre-shipment Policy
Administration Guide - Credit Limits
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What is a credit limit?
It is the maximum amount covered in terms of the policy on a particular buyer for any cause of loss as covered in your policy. This maximum amount could be confirmed to you by way of a credit limit annexure issued by us, or a limit of discretion by you in terms of your policy.
Why are credit limits required?
Since we are taking over from you most of the payment risk, it is not unreasonable that we should be able to exercise some control over the amount of credit you give to individual buyers.
It also protects your own interests because you carry the balance of the risk.
What is a "limit of discretion"?
A limit of discretion is the maximum amount of credit that you may grant an individual buyer without first obtaining our approval.
Once properly established the limit of discretion is a credit limit as if it were issued by us.
A limit may not be established under your limit of discretion where we have issued a 'nil' limit with comment E and, where we have issued a credit limit lower than your limit of discretion, the limit we issued will be the limit in force.
You may not use your limit of discretion in respect of a government buyer.
The limit of discretion that you enjoy is shown in the schedule to your policy.
Why does a policy have a limit of discretion?
It would be very time-consuming, both for you and for us, if in terms of the policy you had to apply to use for the approval of credit granted to each and every buyer regardless of the level of credit required. The limit of discretion therefore reduces the administration required.
What Safeguards must I follow in granting credit under the limit of discretion?
The level of credit must be justified by -
- your favourable experience with the customer in question during the preceding 12 months, evidence by a satisfactory payment record involving at least four separate insurable transactions, or
- a written bank or information bureau report (not older than six months at the date of shipment) commencing favourably on the buyer and the amount of the limit established
What is the difference between a limit of discretion and an ordinary credit limit?
When the policy lays down a limit of discretion, it means that we will be on risk for outstanding accounts falling within that limit without having received an application for a credit limit ad without having approved a specific credit limit.
When the maximum amount outstanding plus any orders on hand is likely to exceed your limit of discretion, you must apply to use us in the normal way for the issue of a specific credit limit for the full amount required.
How do I obtain a credit limit?
In one of two ways:
- If the credit requested is not higher than your limit of discretion shown in the schedule of your policy, you may grant the credit limit yourself without our approval.
- Where the credit request is higher than your limit of discretion, you must apply on a credit limit form (see link below).
 Click here to view the form (Sample)
What do I do when I need a credit limit decision urgently?
Use our paid response system to obtain an urgent credit limit decision. The rapid response system can only work properly if you give us the full details (including trading styles) of the buyer and his bankers. Applications should be faxed to use, clearly marked "urgent". Unmarked applications will be treated as normal (i.e. non-urgent).
Is there a charge for using the rapid response service?
For each decision faxed to you within five working days, a once-off standard nominal fee is debited to your account at the end of the month.
Unless you have been advised of any increase, the fee is the one advised to you in your covering letter at the time of the issue of your policy.
|
