Guarantee to an exporter that the importer of his goods

In today’s competitive global trading environment, overseas importers are increasingly insistent that UK exporters underpin their contractual obligations by means of Bonds and Guarantees. A Bond or Guarantee – which can be treated as synonymous for the purposes of this guide – give the importer the security of a financial guarantee in the event of the exporter’s failure to meet the obligations of a contract. It is issued by the guarantor – usually a bank – on behalf of the exporter. If you, the exporter, fail to deliver the goods or services as described in the contract with the importer, the latter can “call” the Bond and receive financial compensation from the bank. Under a counter indemnity, the bank has recourse to you for the full amount including costs and interest. Types of Bonds and Guarantees • Bid or Tender Bonds • Performance Bonds • Advance Payment and Progress Payment Guarantees • Retention Bonds • Warranty Bonds • Overdraft Guarantees • Standby Letters of Credit. Bonds and Guarantees fall into two classes: On Demand This is often the only class of Bond acceptable to an overseas buyer. It can be called at the buyer’s sole discretion without contest, even if called “unfairly”. Banks cannot enter into contractual disputes between trading partners. Conditional A Bond of this class gives greater protection to exporters, as it requires substantiation, e.g. a certificate of award from an independent arbitrator. However, it is unacceptable to many overseas buyers. Wi...

In international trade transactions, An importer generally needs a bill of lading and a few other shipping documents to collect goods from the destination port. The bill of lading is issued by the shipping company to the exporter once the shipping company has inspected the goods. The exporter sends out the BL and other documents to the importer as presentation of these documents is a prerequisite for collection of the goods. Sometimes, there might be a delay in delivering the documents to the importer, or the documents could get lost in transit. In such cases, the importer can approach a bank to secure a Shipping guarantee to help them receive the goods and move them out of the port. What Is a Shipping Guarantee? A shipping guarantee is a facility that helps importers obtain goods that arrive at the port before the original documents do. When the vessel carrying the goods arrives earlier than the shipping documents, the importer will have to wait for the shipping documents to clear custom duties and other formalities. Importers incur To avoid demurrage charges, importers can approach a bank for a shipping guarantee. The bank issues the shipping guarantee to the importer against a What Are the Benefits of a Shipping Guarantee? • Reduce unnecessary demurrage costs Using a shipping guarantee, importers can move the goods out of the port and complete • Avoid delays and missed business opportunities Importers do not have to wait for • Improve cash flow As the shipping guarantee...

When drawing up a contract for a trade deal, it is best to work in a set of guarantees to ensure the deal meets the requirements of all invested parties. A guarantee is an instrument by which a guarantor, usually a bank, will agree to pay a sum of money, if the exporter doesn’t fulfill its obligations to the importer. A guarantee is sometimes an unconditional instrument, meaning the beneficiary, usually the importer, can obtain 1) Bid Guarantee International public tenders often require all bidders provide cash deposits or an irrevocable guarantee for between two and 10 percent of the total contract amount. Issuing such tenders is a complex and costly process. As a result, the prospective importer only wants serious candidates to submit bids. A bid guarantee is usually valid for the tender period which, on average, is up to six months. By making a bid bond a condition of submitting a proposal, the importer ensures serious bids are made and each bidding company intends to carry through on its undertakings. In the case of an international tender, the bid guarantee can only be called if the exporter fails to follow through after being awarded the contract. If that happens, the guarantee compensates the foreign importer for the costs of having to find another company to complete the contract. If the contract is awarded to another company, the bid guarantee is usually returned for cancellation. In several countries, the contracting party will require the guarantee to be issued ...

In today’s competitive global trading environment, overseas importers are increasingly insistent that UK exporters underpin their contractual obligations by means of Bonds and Guarantees. A Bond or Guarantee – which can be treated as synonymous for the purposes of this guide – give the importer the security of a financial guarantee in the event of the exporter’s failure to meet the obligations of a contract. It is issued by the guarantor – usually a bank – on behalf of the exporter. If you, the exporter, fail to deliver the goods or services as described in the contract with the importer, the latter can “call” the Bond and receive financial compensation from the bank. Under a counter indemnity, the bank has recourse to you for the full amount including costs and interest. Types of Bonds and Guarantees • Bid or Tender Bonds • Performance Bonds • Advance Payment and Progress Payment Guarantees • Retention Bonds • Warranty Bonds • Overdraft Guarantees • Standby Letters of Credit. Bonds and Guarantees fall into two classes: On Demand This is often the only class of Bond acceptable to an overseas buyer. It can be called at the buyer’s sole discretion without contest, even if called “unfairly”. Banks cannot enter into contractual disputes between trading partners. Conditional A Bond of this class gives greater protection to exporters, as it requires substantiation, e.g. a certificate of award from an independent arbitrator. However, it is unacceptable to many overseas buyers. Wi...

In international trade transactions, An importer generally needs a bill of lading and a few other shipping documents to collect goods from the destination port. The bill of lading is issued by the shipping company to the exporter once the shipping company has inspected the goods. The exporter sends out the BL and other documents to the importer as presentation of these documents is a prerequisite for collection of the goods. Sometimes, there might be a delay in delivering the documents to the importer, or the documents could get lost in transit. In such cases, the importer can approach a bank to secure a Shipping guarantee to help them receive the goods and move them out of the port. What Is a Shipping Guarantee? A shipping guarantee is a facility that helps importers obtain goods that arrive at the port before the original documents do. When the vessel carrying the goods arrives earlier than the shipping documents, the importer will have to wait for the shipping documents to clear custom duties and other formalities. Importers incur To avoid demurrage charges, importers can approach a bank for a shipping guarantee. The bank issues the shipping guarantee to the importer against a What Are the Benefits of a Shipping Guarantee? • Reduce unnecessary demurrage costs Using a shipping guarantee, importers can move the goods out of the port and complete • Avoid delays and missed business opportunities Importers do not have to wait for • Improve cash flow As the shipping guarantee...

When drawing up a contract for a trade deal, it is best to work in a set of guarantees to ensure the deal meets the requirements of all invested parties. A guarantee is an instrument by which a guarantor, usually a bank, will agree to pay a sum of money, if the exporter doesn’t fulfill its obligations to the importer. A guarantee is sometimes an unconditional instrument, meaning the beneficiary, usually the importer, can obtain 1) Bid Guarantee International public tenders often require all bidders provide cash deposits or an irrevocable guarantee for between two and 10 percent of the total contract amount. Issuing such tenders is a complex and costly process. As a result, the prospective importer only wants serious candidates to submit bids. A bid guarantee is usually valid for the tender period which, on average, is up to six months. By making a bid bond a condition of submitting a proposal, the importer ensures serious bids are made and each bidding company intends to carry through on its undertakings. In the case of an international tender, the bid guarantee can only be called if the exporter fails to follow through after being awarded the contract. If that happens, the guarantee compensates the foreign importer for the costs of having to find another company to complete the contract. If the contract is awarded to another company, the bid guarantee is usually returned for cancellation. In several countries, the contracting party will require the guarantee to be issued ...