The Graham Act's 100% Tariff Trigger: Trade Credit Limits, Contract Clauses and Sanctions Exposure for Indian Exporters to the US

The US House passed the Russia sanctions bill named for Senator Lindsey Graham in mid-September, sending it to President Trump (CNBC, 16 September 2026). The President signed the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 on Friday, 18 September (Forbes India, 21 September 2026).

The provision Indian exporters care about is narrow and specific. The Act allows duties of up to 100 percent ad valorem on goods from the five largest importers of Russian crude or gas, and those duties sit on top of any other duties already in force. Covered countries are assessed 30 days after signing, which puts the first assessment around 18 October, and the list is reviewed every 180 days after that. The law also extends the Iran Sanctions Act of 1996 to 2031.

Three things follow from the text as reported:

• The Act grants authority. "Up to 100 percent" is a ceiling, not a rate, and the rate on any given product is not yet known.
• The first assessment is still ahead of us as of this post. Nobody, including your insurer, knows the outcome, and you should treat any confident forecast with suspicion.
• The 180-day review cycle means the exposure does not resolve once. A country can be assessed in, out, or back in, so contract and credit decisions need to work across several review dates rather than one.

India's position is why this matters. Per Kpler data cited by Forbes India, India was the second-largest buyer of Russian crude in August 2026 at 2.08 million barrels per day, around 45% of its crude purchases. The US was India's largest export market in 2025 at about USD 92.3 billion, led by electrical machinery at roughly USD 25.8 billion. The Ministry of External Affairs said India "remains firmly committed to ensuring energy security for its 1.4 billion people" and "will work closely with Indian trade and industry bodies to deal with the implications of these developments" (ThePrint, 17 September 2026).

Before any policy conversation, map every live US order against two contract terms.

The Incoterm decides the importer of record

On DDP terms the Indian exporter is the importer of record and pays US duty directly. A 100% duty under DDP is a straight hit to your margin with no counterparty between you and the cost, and no insurance product responds to it. On FOB, CIF, CFR or DAP terms the US buyer imports and pays. The duty lands on the buyer's landed cost first, and your exposure is whether the buyer still wants the goods at that cost and can still pay for them.

Most mid-size exporters have both terms live across different customers, often negotiated years apart. The first job is a spreadsheet: buyer, Incoterm, order value, shipment date, payment terms, and which side of a possible effective date each shipment falls on.

The tariff-allocation and change-in-law clauses decide who renegotiates

The second term is what the contract says about new taxes, duties and changes in law. Typical patterns:

1. Fixed price, buyer bears import duties. The buyer carries the duty but may still try to cancel or delay. Your risk shifts to non-acceptance and payment default.
2. Price adjustment on change in law. Either party can reopen price if a new statutory impost exceeds a threshold. Expect US buyers to invoke this quickly.
3. Termination right on change in law or sanctions. One or both parties can exit. Check whether termination covers goods already in production and who pays for work in progress.
4. Silence. The contract says nothing, and governing law decides whether the tariff excuses performance. Under most commercial law regimes a cost increase alone rarely does, but litigation is slow and expensive across borders.

For new contracts, draft deliberately: name the Act or "any US duty imposed on goods by reason of the origin country's energy trade" as a defined change-in-law event, set a sharing ratio or a renegotiation window, cap the buyer's right to cancel goods already cut or made, and require payment for work in progress on termination.

Trade credit insurance indemnifies the seller against non-payment of a valid trade receivable. The standard covered causes of loss are:

• Insolvency of the buyer, evidenced by a formal proceeding such as a US Chapter 7 or Chapter 11 filing, or an equivalent event defined in the policy.
• Protracted default, where the buyer simply does not pay an undisputed debt within the waiting period after due date set out in the policy schedule.
• In some wordings, political risk events that stop payment reaching you, such as transfer restrictions.

A 100% duty does not trigger any of these on its own. It becomes relevant when it pushes a thinly capitalised US distributor or retailer into default months later. That is exactly the scenario trade credit was built for, which is why the cover is worth holding now rather than buying after the first default.

Two points of policy mechanics to check with your broker:

1. Pre-shipment versus post-shipment cover. Most Indian credit policies attach at shipment. If a buyer cancels an order already in production, the loss sits before the policy's risk-attachment point. Some insurers offer pre-shipment or contract-frustration extensions, but they are separately underwritten. Our note on garment export order rejection and non-acceptance works through this gap in detail.
2. Repudiation or non-acceptance. A buyer who refuses goods on arrival is not insolvent and not yet in default. Whether that is covered depends on the wording, and many policies exclude it or limit it to cases where you have obtained a court judgment.

Trade credit insurers price and limit exposure buyer by buyer. A credit limit is the maximum amount the insurer will cover on a named buyer, and the insurer can usually reduce or withdraw it with notice for future shipments. That right matters more than the premium rate in a tariff shock.

When an origin-specific duty of this scale becomes possible, an underwriter looking at a US buyer whose business model depends on Indian-origin goods will ask simple questions: can this buyer pass a large duty on to its customers, switch supply, or absorb it? A buyer that cannot do any of the three is a worse risk the day the duty takes effect than the day before. Insurers may respond by trimming limits on such buyers, asking for updated financials, shortening maximum credit periods, or moving buyers onto a referral basis. None of this requires a claim.

How to prepare

• Pull your current limit schedule now and match it against the order book. Know which buyers are carrying exposure above their approved limit.
• Request limit increases before the assessment date, not after. Underwriters decide faster on a buyer file with recent accounts and a clear payment history.
• Read the limit-withdrawal clause. Most policies protect shipments made before the effective date of a limit reduction. Confirm the notice period and how "shipment" is defined.
• Do not ship beyond limit on hope. Uncovered exposure above the limit sits entirely on your balance sheet.

Concentration amplifies all of this. If a large share of your receivables sits with a handful of US buyers, a single limit cut can reshape working capital. Our analysis of US export concentration as a correlated credit risk sets out how to structure the book so one market decision does not hit every buyer at once.

The Graham Act is a sanctions statute as well as a tariff statute. That brings a second set of wordings into play: the sanctions limitation and exclusion clause found in most marine cargo, hull and trade credit policies placed with international reinsurance capacity.

A typical clause says the insurer shall not provide cover, pay a claim or provide any benefit to the extent that doing so would expose the insurer or its reinsurers to a sanction, prohibition or restriction under UN resolutions or the trade or economic sanctions laws of named jurisdictions, which usually include the United States, the EU and the UK. Because Indian commercial programmes are frequently reinsured abroad, a clause referencing US sanctions can bite on an Indian policy even where the Indian insurer itself is under no direct obligation.

For an exporter selling electrical machinery or textiles to the US, the tariff risk and the sanctions risk usually sit with different counterparties. Watch for these overlaps:

• Your own supply chain. If any input, vessel, bank or intermediary in a transaction is a designated party, a marine or credit claim can be refused regardless of what caused the loss.
• Group exposure. If another entity in your group trades in energy or related products, check whether that activity could affect the group's standing with insurers and reinsurers.
• Change during the policy year. A clause applies at the time of claim, not only at inception. A counterparty designated mid-voyage can turn a valid claim into an unpayable one.

Our explainer on the sanctions limitation clause in marine and trade credit policies covers how the wording works, which jurisdictions to check, and what to ask at renewal. For marine cargo declarations under an open cover, the practical step is screening each counterparty and vessel before shipment and keeping that record.

The Act's structure gives exporters a calendar. The first assessment falls around 18 October and reviews follow every 180 days. Plan in three tiers.

Before the first assessment

1. Complete the Incoterm and clause map for every US order in production or afloat.
2. Request updated credit limits on your top US buyers with current financials attached.
3. Ask your broker in writing whether your credit policy has a pre-shipment or contract-frustration extension, and what a non-acceptance loss would need to qualify.
4. Screen counterparties, vessels and banks in your US trade flows against sanctions lists, and record the result.

If India is assessed as a covered country

1. Hold shipments under DDP terms until price is reset or the order is renegotiated.
2. Invoke change-in-law clauses in writing, within any contractual notice window, so the record is clean if the buyer later disputes the debt.
3. Tighten payment terms on new orders: shorter credit periods, partial advance payment, or letters of credit for buyers whose limits have been cut.
4. Report any overdue to the insurer within the policy's notification period. Late notification is a common reason credit claims fail.

If India is not assessed in the first round, the review cycle still continues. Use the window to renegotiate contracts with explicit tariff-sharing terms and to diversify buyers, so the next review is a smaller event.

Keep a single dated file per US buyer: contract, Incoterm, credit limit history, correspondence on tariff allocation, and sanctions screening. If a claim arises a year from now, that file is what the insurer and loss adjuster will ask for.

It is worth being blunt about the limits.

• No policy pays the tariff. Neither trade credit, marine cargo nor any property line indemnifies a lawful duty imposed by a government.
• Lost margin is not a credit loss. If a buyer pays in full but at a lower renegotiated price, there is no claim.
• Lost future orders are not covered. Trade credit protects receivables you have already earned, not sales you might have made.
• Disputed debts are deferred. Expect a credit insurer to wait until a pricing dispute is resolved before paying.

The protection for these exposures is commercial: contract drafting, pricing discipline, buyer diversification, and the working-capital headroom to absorb a renegotiation. Insurance sits behind those defences and catches what they cannot, chiefly a US buyer that fails outright.

Indian exporters who hold credit cover through ECGC or a private credit insurer should treat this period as a reason to engage early. Underwriters have more room to help with limit planning before a decision than after one, and a well-documented file improves the odds that a later claim is paid without argument.