Remerciez-le!

Remerciez @Admin pour avoir partagé cet document gratuitement, de la manière la plus simple, en partageant sur les réseaux sociaux.

The BExA Guide to On-Demand Contract Bonds We are pleased to present our update

The BExA Guide to On-Demand Contract Bonds We are pleased to present our updated BExA Guide to On-Demand Contract Bonds. Our first Bond Guide was published in October 2004 and much has changed since then. New ICC Rules for Bonds (URDG 758) have replaced URDG458. Similar updates have been made to rules on letters of credit and delivery terms. Another milestone has been the introduction, after much pressure from BExA, of UK Government support for the issue of bonds: the Bond Support facility from UK Export Finance. And then there has been the change in the banking environment: the financial crisis that started to bite in 2008, and which continues to influence bank strategies and regulation (Basel III being the most notable), changed banking perspectives irrevocably. This 2013 edition of the Bond Guide has been more than updated: it has been re-written. At BExA, we see real value in sharing experiences to help fellow exporters to fathom and manage the complexities of risk and finance in trade. We are delighted that our vision is shared by our sponsors who have financed the publication of this Guide and therefore deserve our thanks. Please do review their literature in the final pages of this Guide. Jon Coleman Chairman, the British Exporters Association September 2013 The BExA Guide to On-Demand Contract Bonds 1 CONTENTS FOREWORD 2 EDITOR’S NOTE 3 Chapter 1 WHAT IS AN ON-DEMAND CONTRACT BOND? 5 On-demand, unconditional or conditional, bond types, SBLCs, extend or pay, other forms of guarantee, bond issuers Chapter 2 THE CUSTOMER’S VIEW 12 Chapter 3 THE BANK’S VIEW 14 Exporter risk, security, pricing, banks, bond wording, destination, UK Export Finance bond support, capital allocation, fees, practicalities, MAC clause, large bonds. Chapter 4 THE EXPORTER’S VIEW 23 Credit risk, putting the bond in place, cost, risk of call, joint ventures, bond watch list. Chapter 5 THE LAWYER’S VIEW 29 Chapter 6 WHAT TO WATCH OUT FOR AND WHAT TO AVOID 32 Watch list, what to avoid. Chapter 7 EXTEND OR PAY 39 Chapter 8 YOUR BOND IS CALLED 42 Chapter 9 UNFAIR CALLING INSURANCE 44 Insurance, exclusions, how the cover works, tender bond cover Chapter 10 URDG 49 Appendix 1 SOME SAMPLE WORDINGS 50 Appendix 2 LOCAL LAWS AND CUSTOMS 53 Appendix 3 THE UN CONVENTION 59 Appendix 4 TERMINOLOGY 61 SPONSORS’ LITERATURE 63 The BExA Guide to On-Demand Contract Bonds 2 FOREWORD What are contract bonds? The answer is that they are a financial guarantee of your performance. However, being unconditional, the exporter, in providing the guarantee, is, in a sense, saying to his customer: “Here you are, help yourself to my money whenever you like.” There may be very good reasons (if you are the customer in such a transaction) for requiring such an arrangement but the fact of the matter is that bonds present all sorts of difficulties for the exporter and the banker. It is the purpose of this guide to help exporters navigate this interesting subject and come out the other side, money intact. Surprisingly for financial instruments that are independent of the contracts that they guarantee, and allow drawdown of sizeable amounts of cash, most bonds are individually written. There is an international set of rules for bonds and guarantees (the ICC’s URDG) but many bonds are not subject to its disciplines. Finance has tightened in recent years. The economic environment, together with increased regulation has led to banks restricting overall lending, including bonding lines. BExA lobbied energetically for many years for British exporters to have access to Government support for the raising of bonds. We are pleased, therefore, that in 2011, Bond Support was made available from the Government’s UK Export Finance (the trading name for ECGD). Bond Support enables the bank to issue bonds more readily. The intention of this guide is to share practical experiences relating to bonds such that British exporters gain confidence in the subject and do not shy away from bidding for contracts because of the necessity to provide on- demand bonds. This is not the only BExA guide. The stable of BExA guides now totals seven1, all of which are based on exporters’ hard experience and are written by exporters for exporters with invaluable contributions from BExA’s banking and insurance members. Rt Hon Earl of Kilmorey PC President, the British Exporters Association Minister of State for Trade 1992 - 1995 September 2013 1 BExA Guides to Successful Exporting, Financing Exports, Letters of Credit, Export Credit Insurance, Retention of Title, Export Compliance and On- Demand Contract Bonds can be downloaded from www.bexa.co.uk. Printed copies are provided to BExA members. Foreword The BExA Guide to On-Demand Contract Bonds 3 EDITOR’S NOTE On-demand contract bonds The term ‘bond’ is widely used in finance and trade. In the days of open trading, the London Stock Exchange had the phrase ‘my word is my bond’ inscribed on its coat of arms to confirm that a verbal agreement was an effective contract. This notion of guarantee has been used to describe a range of instruments, not only contract bonds which are the subject of this guide, but also financial bonds (also known as corporate bonds) which are a means of raising money in the capital markets and which guarantee a regular interest payment as well as the return of your money after an agreed period. In this guide, we focus on on-demand contract bonds that support export contracts. Sometimes called independent guarantees, these bonds are provided on behalf of an exporter for the benefit of its customer. They can be called without the agreement of the exporter or even the assessment of an independent third party. We will consider other export-related bonds only briefly, principally in illustrating points of particular interest or importance with regard to on-demand contract bonds. The purpose of the bond is to provide the customer with a degree of security, perhaps in respect of costs he may have incurred or payments that he may have made in advance to the exporter, or for the proper performance of the contract (or of the goods and services supplied under the contract) by the exporter. It provides a ready redress for the exporter’s failure to perform its obligations. Terminology In preparing this guide we have tried to maintain a degree of consistency with regard to terminology. • The ‘exporter’: this guide is written from the point of view of a company exporting goods or services from the UK to a country overseas. • Where it appears, ‘you’ means the exporter. • The ‘customer’ is the exporter’s counter-party, the purchaser of the goods or services. • The ‘beneficiary’ is the person to whom the bond is given (usually the customer in the export contract). • For the purposes of this guide the words ‘bond’ and ‘guarantee’ are synonymous, being the instrument by which a bank undertakes to make a payment to a beneficiary in circumstances specified in it, for example the unsatisfactory performance of the exporter. • The ‘issuing bank’ is the bank which issues the bond at the request of the exporter. It may be the exporter’s bank but is more likely to be an overseas bank, local to the customer. Editor's Note The BExA Guide to On-Demand Contract Bonds 4 Other reference material The International Chamber of Commerce (ICC) produces a number of documents that are directly relevant to contract bonds, and which should therefore be part of the exporter’s library, especially: • Uniform Rules for Demand Guarantees - ICC 758 - see Chapter 10. • Incoterms 2010® (ICC terms of delivery) define when delivery takes place plus which party is liable for transport and insurance. Standby letters of credit, which have much in common with bonds and guarantees, may be subject to International Standby Practices (ISP98) or occasionally UCP600. Contributors The 2004 BExA bond guide was compiled and edited by Richard Hill of BAE Systems along with exporters and their advisers and bankers: Robin Arthur of ANZ Malcolm Booth of BExA Tony Chitty of Mace David Donnelly of Alstom Richard Heyhoe of ANZ John Lodge of Marconi Selenia Communications Michael Possener, Export Consultant Susan Ross of Aon Jeremy Smith of LloydsTSB John Tyler of Alstom This 2013 update of the Guide has been compiled with the help of: Andrew Bennion of AIS David Benton of Rolls-Royce Jackie Lea of Rolls-Royce Deborah Bass of Credit Agricole Mark Bull of Alstom Jon Coleman of BAE Systems Allan Dowie David Ellis of Converteam Tony George of Ince & Co Ed Harkins of Barclays Lorna Johnston of Aon Glyn Powell of Trade Finance Partners Chris Siegl of Sovereign Star Guillaume Simonnet of Thales Patricia Smith of Alderley John Tyler Andy Wheatley of CA-CIB Any value which it might have is attributable to them and to their contributions. All views expressed are personal. Susan Ross Aon Trade Credit Vice President, the British Exporters Association www.bexa.co.uk September 2013 Copyright & disclaimer All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or uploads/Finance/ bond-guide.pdf