Guarantees for export trade

A bank guarantee for import and export trade is a commitment issued by the bank on your company's behalf, in favour of your foreign contractual partner. As the guarantor, under the terms of the guarantee the bank is committed to paying compensation if your company does not fulfil its contractual obligations.

A bank guarantee abroad can be issued as an absolute guarantee or first demand guarantee. First demand guarantees are standard practice in international trade.

 

Bank guarantees for international trade
  • Bid bond or tender guarantee: the exporter presents a tender, to which a tender guarantee must be attached. The idea is to compensate the beneficiary (buyer/party arranging the tendering exercise) for possible loss in case, for example, the exporter withdraws its tender, does not sign the agreement after approval of the tender, or fails to arrange a contractual performance guarantee. A tender guarantee usually covers around 2—5 per cent of the tender’s value. 
  • Performance guarantee: under a performance guarantee, the beneficiary/buyer is compensated if the performance (delivery of good or service) is not as stated in the agreement. A tender guarantee usually covers around 10—20 per cent of the purchase’s value. 
  • An advance payment guarantee ensures that the beneficiary/buyer recovers its advance payment in the case of non-performance or failure to fulfil the contractual terms and conditions. The guarantee covers the advance payment in full.
  • A maintenance guarantee/warranty guarantee/retention money bond compensates the beneficiary/buyer if the exporter fails to correct any deficiencies or defects within the guarantee period. This guarantee usually covers 5‒10 per cent of the purchase price.
  • A payment guarantee is issued to the seller on behalf of the buyer, as collateral for payment for imports. The guarantee may cover a single order or continuous imports. When a foreign seller grants a post-delivery payment period to a Finnish importer, the related guarantee is either a single guarantee for one transaction, or a credit limit type payment guarantee.
  • A customs guarantee is needed if an importer applies to Customs for temporary exemption from customs duties. A guarantee submitted to Finnish Customs for the Community transit procedure is comparable to a customs guarantee, but covers customs duties and other such charges payable by the guaranteed party within the EU.
  • Other guarantees: in addition to the above, guarantees can cover rental agreements, and compliance with laws and regulations. 

Fill in our form to apply for a guarantee:

 

Bank guarantee implementation

Direct guarantee from OP

An OP direct guarantee can be sent, as a printed out version on paper, to the guaranteed party or beneficiary in accordance with the guarantee application. On the other hand, if the beneficiary is foreign, the guarantee can be sent as an authenticated SWIFT message via the beneficiary’s bank (a so-called advised guarantee).

Indirect guarantee

The beneficiary can require that a guarantee is issued by a bank in the beneficiary’s home country. In such a case, the guarantee is issued through our local correspondent bank as an indirect guarantee. OP will ask the correspondent bank to issue the required guarantee to your company’s contractual partner. At the same time, OP will issue a counter-guarantee to the correspondent bank. The counter-guarantee must be valid for at least as long as a guarantee issued in the beneficiary’s country. It is common practice for a counter-guarantee to be valid for 15–45 days longer than a guarantee issued in the beneficiary’s country. You must take this into account in your guarantee application.

An indirect guarantee is a first demand guarantee in every case.