General
Product Description
Exporters seeking to win overseas contracts that are put out to
tender may have to provide bid and / or performance guarantees as part of the
tendering process. In other circumstances Exporters may have to provide advance
payment guarantees to secure an Importer who has prepaid part of a sales
contract.
The Exporters bank will issue, or request one of
their correspondent banks to issue, a guarantee in
favour of the Importer. Usually these guarantees are payable on demand and will
relate to the circumstance for which the guarantee was originally issued. Bid guarantees will be used to reimburse the Importer in
cases where the Exporters bid is accepted but the Exporter then fails to sign
the contract. Performance guarantees will reimburse the Importer if the
Exporter fails to fulfil their obligations under the contract. An Advance
Payment Guarantee will reimburse the Importer for any advance made to the
Exporter, when the Exporter has failed to fulfil the contract.
General
Product Benefits
- Facilitates Exporters in securing overseas contracts that are
put out to tender.
- The Exporter's bank can arrange the issuance of a local bank
guarantee. Importers, in certain countries, may only be permitted to accept
local bank guarantees.
- The Exporter's bank will provide advice on structuring
guarantees to protect the Exporter's interests.
Bid Bond / Guarantee
Product
Description
The
purpose of the Bid Bond is to ensure that Exporters submit realistic bids and
to protect the Importer against any loss that might occur if the Exporter fails
to sign the contract (e.g. accepting the next highest bid or putting the
contract out to tender again). Bid Bonds are usually issued for between 2 - 5%
of the tender amount.
In certain countries especially the Middle East it is quite common
for the Importer to request a guarantee from a local bank in support of the
Bid, indeed it may even be a legal requirement for contracts put out to tender
by state entities. If the Importer is satisfied with the Exporters Bid he or
she will award the contract and hold the Bid Bond pending signing of the
contract and the issue by the Exporter of a performance bond.
Product
Benefits
- Facilitates acceptance of the Exporters bid by the Importer.
- Enhances both the performance reputation and creditstanding of the Exporter.
Performance Bond / Guarantee
Product
Description
The
Performance Bond guarantees the performance of the contract by the Exporter to
the Importer. Performance Bonds are usually for between 5 - 10% of the contract
amount. In certain countries especially the Middle East it is quite common for
the Importer to request a guarantee from a local bank in support of the Bid,
indeed it may even be a legal requirement for contracts issued by state
entities. If the Importer states that performance is not in accordance with the contract they can claim
under the bond.
Product Benefits
- Indicates that the Exporter is committed to performing the
contract.
- Enhances both the performance reputation and credit standing of
the Exporter.
Advance
Payment Guarantee
Product
Description
In
certain contracts, the Exporter may require the Importer to advance them funds
in order to facilitate the completion of the contract. The Exporter, as part of
the contract, negotiates an advance payment from the Importer prior to the
performing of the Exporter's obligations under the contract. All prudent
Importers will insist on receiving a guarantee that any funds advanced in such
circumstances will be refunded in the event that the Exporter fails to complete
his or her commitment under the contract. In such circumstances an Advance
Payment Guarantee is required from the Exporter. These guarantees can cover any
amount of the contract but are usually for 10 - 30% of the contract price.
Product
Benefits
- Provides the Exporter with access to funds to proceed with the
execution of the contract.
- Enhances both the performance reputation and creditstanding of
the Exporter.
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