Our clients in China, (PRC) would like to pay us with a bank guarantee from the Bank of China,(Branch inside of China).
Our suppliers would like to have the Guarantee confirmed via a Western Bank
or BOC NYC or London. BOC-NYC says they will advise the guarantee holder who than must send us a copy of the advised bank guarantee which we submit to our
supplier.
What is the difference between bank
advisement and bank confirmation? Thanks
Bank guarantees
-
StuartEmmons
- Posts: 1
- Joined: Fri Apr 05, 2019 5:25 pm
Bank guarantees
I give the following strictly personal thoughts without any responsibility on my part:
1. The practice of ‘confirming’ on-demand guarantees is not generally recognised, unlike for documentary credits/standby letters of credit.
2. Where a beneficiary wishes to have an undertaking from a bank in their own state/country (i.e. they wish to be in a similar position as if they had received a standby letter of credit confirmed by a bank in their own state/country), the usual practice is for the principal’s* bank (the ‘Instructing Party’ per Uniform Rules for Demand Guarantees) to instruct such a bank (the ‘Guarantor’ per Uniform Rules for Demand Guarantees) to issue the guarantee in favour of the beneficiary, against the Instructing Party’s ‘counter-guarantee’ (in favour of the Guarantor, not the beneficiary).
3. However, just as with a documentary credit/standby letter of credit, a bank may pass-on to the beneficiary (without any engagement or responsibility) another bank’s guarantee, i.e. they may ‘advise’ it in a similar manner to an unconfirmed documentary credit/standby letter of credit.
*The principal is the party that has the underlying obligations to the beneficiary which are being ‘guaranteed’.
1. The practice of ‘confirming’ on-demand guarantees is not generally recognised, unlike for documentary credits/standby letters of credit.
2. Where a beneficiary wishes to have an undertaking from a bank in their own state/country (i.e. they wish to be in a similar position as if they had received a standby letter of credit confirmed by a bank in their own state/country), the usual practice is for the principal’s* bank (the ‘Instructing Party’ per Uniform Rules for Demand Guarantees) to instruct such a bank (the ‘Guarantor’ per Uniform Rules for Demand Guarantees) to issue the guarantee in favour of the beneficiary, against the Instructing Party’s ‘counter-guarantee’ (in favour of the Guarantor, not the beneficiary).
3. However, just as with a documentary credit/standby letter of credit, a bank may pass-on to the beneficiary (without any engagement or responsibility) another bank’s guarantee, i.e. they may ‘advise’ it in a similar manner to an unconfirmed documentary credit/standby letter of credit.
*The principal is the party that has the underlying obligations to the beneficiary which are being ‘guaranteed’.
Bank guarantees
TWO IMPORTANT CHECKUPS
With all the nice things being said by Jeremy, and inspired by his wise declaration of liabilities, we would add that the parties should do two things:
(1) With so many financial products available in the market place, it is important to verify whether the guarantee from the enquirer is in fact subject to URDG.
(2) If the guarantee is subject to URDG, then it is crucial to check with each party for their individual interpretations on Article 20 (b) of the URDG that has often been mis-interpreted, sometimes even by certain bankers, to mean "to provide solid documentary evidences of default or no payment" rather than "a simple declaration/statement of default".
If there are differences in their interpretations of this important sub Article, they should have them synchronised by referring to "ICC Uniform Rules on Demand Guarantees, A User's Handbook to the URDG", ICC Publicaton No.631, a new publication from Dr. George Affaki, who is the dedicated promoter of URDG and a recognised authority on this subject. I hear some members of the ICC National Committees call him "Mr. URDG" in our bar chattings!
We are from http://www.tolee.com
[edited 11/21/02 9:57:09 PM]
With all the nice things being said by Jeremy, and inspired by his wise declaration of liabilities, we would add that the parties should do two things:
(1) With so many financial products available in the market place, it is important to verify whether the guarantee from the enquirer is in fact subject to URDG.
(2) If the guarantee is subject to URDG, then it is crucial to check with each party for their individual interpretations on Article 20 (b) of the URDG that has often been mis-interpreted, sometimes even by certain bankers, to mean "to provide solid documentary evidences of default or no payment" rather than "a simple declaration/statement of default".
If there are differences in their interpretations of this important sub Article, they should have them synchronised by referring to "ICC Uniform Rules on Demand Guarantees, A User's Handbook to the URDG", ICC Publicaton No.631, a new publication from Dr. George Affaki, who is the dedicated promoter of URDG and a recognised authority on this subject. I hear some members of the ICC National Committees call him "Mr. URDG" in our bar chattings!
We are from http://www.tolee.com
[edited 11/21/02 9:57:09 PM]