trade related guarantees - BNP Paribas Corporate & Investment

TRADE RELATED
GUARANTEES
Whether you are an importer or an exporter, trade related guarantees will
help you to:
• Secure the steps of your commercial contract from the submission of the
tender to final acceptance,
• Reduce the risks linked to performance and/or payment of your
international transactions.
Principle
In commercial contracts (export/import), some
milestones require a third party, typically a financial
institution, to provide a guarantee, which is a form of
surety against a possible default of the other party.
THE CALL FOR TENDERS
Submission
of tenders
Tenders
opening
THE CONTRACT
Last
delivery
Contract
signature
Last
deliveries
provisional
acceptance
Final
acceptance
BID BOND
ADVANCE PAYMENT BOND
A bank guarantee is an irrevocable bank commitment by
signature, by order of one of its customers (the applicant),
to pay a certain sum of money to a beneficiary, upon
receipt of a complying demand from him informing the
bank that the customer failed to fulfil their contractual
obligations.
In other words, the bank guarantee is a security given
by the bank to protect the beneficiary against the
applicant’s default. The bank only commits to pay,
in whole or in part, in one or in several drawings, the
amount stated in the guarantee. This means that the
bank will not, and is not liable to deliver the goods or to
assume responsibility for carrying out a project.
Depending on the country or applicable laws,
guarantees, standby letters of credit (SBLC) or other
types of text may be used.
PERFORMANCE BOND
RETENTION
MONEY BOND
Types of guarantees
n Bid Guarantee/Bond
This type of bond is intended to guarantee the genuineness
of the bidder. The purchaser/importer will be indemnified:
if the bidder withdraws their bid during its validity; if a
successful bidder refuses to sign a contract or upon
signature of the contract; If after signing the contract, the
bidder does not provide the guarantees required by the
purchaser in the invitation to tender.
n Advance Payment Guarantee/Bond
This is a guarantee for the purchaser/importer covering
the reimbursement of the down payment(s) paid by the
latter in case the supplier/exporter would not respect his
delivery or performance obligations and would refuse
to reimburse the down payment(s). One guarantee may
cover progress payments.
n Performance Guarantee/Bond
This type of guarantee is aimed to reassure the purchaser
about the technical capacity of the supplier to fulfil their
contractual obligations. The bank commits to pay to the
purchaser a certain sum of money, if the exporter fails to
perform or performs imperfectly.
n Retention Money Guarantee/Bond
This guarantee is designed to avoid deduction by the
purchaser/importer of the last term of payment in
a contract in case the equipment delivered or work
performed does not conform to the contract specifications.
This Guarantee enables the seller/exporter to receive full
payment before final acceptance.
n Payment Guarantee
With this type of undertaking acting on the importer’s
order, the issuing bank guarantees the payments made
by the importer to the exporter under the terms of the
contract.
A payment guarantee can cover either the partial or full
amount of a single transaction or business flow.
Our trade experts will assist and advise you in adapting the
right solution to your needs.
Standby Letter of Credit (SBLC)
The Standby Letter of Credit is a bank guarantee, payable on
first demand against presentation of specified documents.
The SBLC simply requires a declaration from the beneficiary
stating the applicant’s default by virtue of the underlying
transaction.
1. Commercial
Like any other bank guarantee, the Standby Letter of
Credit may have multiple purposes: tender guarantee,
advance payment guarantee, performance guarantee,
retention money guarantee or payment guarantee.
SBLCs can be made subject to two different sets of rules
approved by the International Chamber of Commerce
(ICC):
lthe Uniform Customs and Practices for Documentary
Credits, 2007 revision, ICC Publication N° 600 (“UCP
600”);
l the International Standby Practices, ICC Publication
N° 590 (“ISP 98”).
Both publications co-exist with each other and have the
advantage of providing a common understanding in the
different countries where Standby Letters of Credit are
used.
Key Advantages of Our Offer
nBNP Paribas` strength as a global player.
nCommitments are guaranteed by the BNP Paribas
Group’s signature.
nSubmission of the undertakings to universally
recognised rules ensures that the documents are
objectively examined should a default arises.
nSupport from our Trade experts when drafting
and negotiating your commitments ensures that your
interests are protected throughout all stages of the
contract.
nThrough our dedicated e-platform Connexis
Trade, you will be able to manage the issuance of your
guarantees online in real time.
contract
IMPORTER /
EXPORTER
EXPORTER /
IMPORTER
2. Request of
SBLC opening
Our experts will help you make the best choices for
your transactions.
4. SBLC
notification
ISSUING
BANK
ADVISING /
CONFIRMING
BANK
For further additional information, please contact:
Your BNP Paribas Trade Center
3. SBLC issuance
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