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Bank Guarantees for officially supported exports

Introduction
Bank guarantees are used to secure an obligor's payment to the creditor. They are written promises by the bank to satisfy the creditor in accordance with the terms of the guarantee in the event that the obligor fails to honor the specified obligations.

A direct bank guarantee by the export bank (i.e., one not guaranteed by another financial institution) is issued on the request of a principal for a guarantee from the export bank. The guarantee is a written promise made by the export bank in the letter of guarantee to satisfy the beneficiary on first request, without any need for court intervention, without protest and with recourse to the principal up to the sum specified if the principal fails to meet the specified obligation.

An indirect bank guarantee is issued where the beneficiary - a foreign importer, often a state organization - is located in a country whose statutes permit only a guarantee from a bank licensed locally. Upon written request by the exporter, the export bank applies for a guarantee from the foreign bank, provides the details for the guarantee to the beneficiary's bank, and secures it with its own counter-guarantee.

The CEB provides primarily non-payment guarantees, such as:

• Bid Bonds are guarantees that insures the obligation of a winning bidder to enter into a contract. The bidder, under the terms of the tender, deposits a bond - in the form of a bank guarantee to the benefit of the...........................
• Performance Bond insures the obligation of the bidder to duly perform the contact.  With a performance bond, the..............................
• Advance Payment Guarantee insures the obligation of the seller to return the advance payment in case of failure to supply the goods .............................. 

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