Cross-Border Guarantees

Right for you if:

  • You're buying goods and services from abroad
  • You're engaging in international projects

Foreign buyers of goods and services have difficulty in accurately assessing their supplier's ability to either produce goods as ordered or provide reimbursement for any default under a contract. One remedy available to such buyers is a cross-border guarantee issued by a bank.

PLUS:
A standby letter of credit can be issued as an alternative to a guarantee and will satisfy the requirements of the US market.

A cross-border guarantee does not in itself guarantee performance of the underlying contract. It permits the buyer to collect a sum of money from the issuing bank on demand as compensation for any breach of the contract.

They are mainly required in:

  • International projects for the sale of goods and services to foreign buyers, including governments
  • To secure a bank loan in a foreign country, or any other form of international account receivable

Bid/Tender Guarantee
Issued in support of an exporter's bid to supply goods or services. If successful, it ensures compensation in the event that the contract is not signed.

Performance Guarantee
Issued as an undertaking to pay a certain sum to the buyer if the exporter fails to carry out the terms of the contract.

Advance Payment Guarantee
Gives protection to the buyer who has made an advance or progress payment to the exporter before the contract has been completed.

Warranty Guarantee
Provides a financial guarantee to cover the satisfactory quality of goods and services supplied during a maintenance or warranty period.

Retention Guarantee
Guarantees the refund of released retention monies to the buyer, in the event of non-performance of the exporter's obligations. The principal risk of cross-border guarantees is that the buyer could demand payment under the guarantee when not entitled to do so. We can help you assess this risk by obtaining bank reports on the foreign buyer.

In some countries, the provisions of local laws permit claims to be submitted beyond the stated expiry date. If you are a Canadian customer, we can help you access the protection offered by the Export Development Corporation against "wrongful calling" of your guarantee.

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Smooth sailing for your overseas business.