A Demand Guarantee refers to a written commitment to a beneficiary, issued by CEXIM on request of an applicant (our customer), undertaking that the applicant will fulfill the obligations of contract entered in with the beneficiary.
Demand guarantees have a variety of uses covering goods, services, technology trades, project contracting, declaration of the imported and exported goods, financing from financial institutions or financial markets, leasing of large and complete sets of equipment, litigation preservation, performance of contractual obligation, and etc.
According to the locations of involved parties, demand guarantees can be divided into:
An International Guarantee refers to an undertaking issued by CEXIM (the guarantor) in favor of a foreign beneficiary, in form of guarantee (including standby letter of credit), to fulfill the obligation under the guarantee if a foreign or domestic debtor fails to fulfill the obligation under a contract. International guarantees can also be used if the beneficiary is a domestic party while the applicant is a foreign party.
A Domestic Guarantee refers to an undertaking issued by CEXIM (the guarantor) in favor of a domestic beneficiary, in form of guarantee (including standby letter of credit), to fulfill the obligation under the guarantee if a domestic debtor fails to fulfill the obligation under a contract.
According to the content of undertakings, demand guarantees can be divided into:
A Financial Guarantee secures the obligation in a financial underlying contract such as, but not limited to, financing activities including obtaining loans, issuing bonds and financial leasing.
A Non-financial Guarantee secures the obligation other than financial obligations, including, but not limited to tender guarantee, performance guarantee, advance payment guarantee, warranty guarantee, customs guarantee, marine guarantee, maintenance guarantee and deferred payment guarantee.
Benefits for Applicants (our customers)
Bank credit is in place of commercial credit, reflecting the high credit standing of the company and enhancing the chance to sign the contract;
The applicant’s proper rights can be protected if uniform banking rules and standard procedures are followed and professional review of terms and clauses is given;
The applicant does not have to pay a full cash collateral if a credit line is granted, thus accelerating the applicant's cash flow;
The issuance procedure is simple and the guarantee format is flexible, thus satisfying different requirements.
Categories of Guarantee
A written commitment to the bid inviting party, issued by CEXIM at the request of the bidder (our customer), undertaking that the bidder will not withdraw or amend its bid nor change its bid conditions during the validity of the bid, and will sign the contract or submit performance guarantee within the specified period once awarded the contract.
A written commitment to the buyer or the project owner, issued by CEXIM at the request of the supplier or the contractor (our customer), undertaking that the supplier will deliver the goods or the contractor will complete the project according to the contract.
Advance Payment Guarantee
A written commitment to the buyer or the project owner, issued by CEXIM at the request of the supplier or the contractor (our customer), undertaking that the supplier or the contractor will strictly fulfill the contractual obligation upon its receipt of advance payment.
A written commitment to the buyer or the project owner, issued by CEXIM at the request of the supplier or the contractor (our customer), undertaking that the quality of the goods or the project will meet the contract requirements.
A written commitment to the customs authority, issued by CEXIM at the request of the importer (our customer), undertaking that the importer will pay the duty.
A written commitment to the buyer or the project owner, issued by CEXIM at the request of the supplier or the contractor (our customer), undertaking that the supplier or the contractor will perform its contractual obligation throughout the warranty period.
Deferred Payment Guarantee
A written commitment to the seller, issued by CEXIM at the request of the buyer (our customer), undertaking that the buyer will pay the full amount of deferred payment or forward payment contract and the interest resulting from the deferred payment within the specified period.
A written commitment to the creditor, issued by CEXIM at the request of the debtor (our customer), undertaking that the debtor will repay the principal and interest within due date.
A written commitment to the lessor, issued by CEXIM at the request of the lessee (our customer), undertaking that lessee will pay the rent on schedule.
Compensation Trade Guarantee
A written commitment to the supplier of the equipment or technology, issued by CEXIM at the request of the buyer (our customer), undertaking that the buyer will fulfill the contract obligation and offset the price and interest of the imported equipment or technology by manufactured goods or sales revenues.
Other guarantees include payment guarantee, retention money guarantee, marine guarantee, court guarantee and etc.
Financial Guarantee for Overseas Investment
At the request of a domestic parent company, CEXIM issues a financial guarantee (or standby letters of credit) in favor of the overseas debtor or beneficiary which provides finance to an overseas company (the applicant) wholly or partly owned by the domestic parent company, to guarantee that CEXIM will fulfill the obligations of repayment if the overseas company fails to repay the funds.
With a sovereign rating, CEXIM enables the applicant to obtain low-cost funds abroad.
Payment Guarantee on Behalf of Shipowner Abroad
Under the export of vessels from China, the foreign shipowner often needs to issue a payment guarantee against the domestic exporter’s advance payment guarantee, to undertake the payment obligations at each stage of shipbuilding before delivery of the vessel. If banks in China plan to provide buyers' credit facility for the export of vessels, the issue of foreign shipowner’s payment guarantee is generally one of the conditions to make the credit agreement effective. We can issue the payment guarantee for the overseas shipowner under the export buyers' credit, thus facilitating the successful performance of ship export contract and the punctual loan granting.
Other Services for Demand Guarantee
Advice of Demand Guarantee
CEXIM, as the advising bank, can verify the authenticity of a guarantee and advise the original version to the beneficiary on time.
Demanding for Customers
We can make a claim by mail or telegraph and related enquiry, collection and settlement on behalf of our customers.
Re-issue and Confirmation of Guarantee
Besides an application for issuing guarantee, CEXIM also accepts a beneficiary’s application to reissue or confirm other banks’ guarantees, thereby protecting the beneficiary’s rights and increasing its business opportunities.
Letter of Intent to Issue Guarantees
To satisfy the demand of bidding and business negotiation, a letter of intent is available by us for qualified companies and projects according to the requirements in the bidding document or other valid documents.
According to the Chinese foreign exchange regulations, we only provide non-financial guarantee service when at least one side of the applicant (or its overseas subsidiary company) and the beneficiary is a legal person registered domestically or a foreign entity established, held or indirectly held by a domestic entity;
Except utilizing collateral-free credit facility, please provide us with your security to issue a guarantee, and forms of security include third-party indemnity, mortgage, pledge, cash collateral and etc. A combination of these forms of security is allowed;
Guarantees issued by us should be re-issued by other banks (as is shown in the flowchart) under some circumstances (e.g. some local laws may require that guarantees must be issued by a local bank). Re-issued guarantees should comply with the re-issuing bank’s usages and local regulations, and the applicant should be liable to pay the re-issuing fees;
The guarantee fees shall be charged based on the factors such as the category, risk level and validity of the guarantee, depending on different situations;
Upon mutual consent of the applicant and the beneficiary, an amendment request (such as extend the expiry) can be submitted.