Slide thuyết trình TACN2 Topic: Third party securities for payment

• Payment risk: The importer and exporter’s risk Third party reduces risks of the importer and the exporter, • Forms of 3rd party: exporter credit insurance and bank guarantee.. • Differ

Title: Third-Party Security for Payment

• Payment risk: The importer and exporter’s risk Third party reduces risks of the importer and the exporter,

• Forms of 3rd party: exporter credit insurance and bank guarantee

• Difference of 2 forms: Export Credit Insurance and Payment Guarantee

Export Credit Insurance <ECI>

1 Overview of ECI

• Function: To stimulate exports and protect the

exporter against major risk, some countries

set up a special type of insurance

Are you need ECI ???

You need to extend competitive open-account terms to grow your international business, but what happens if you don’t get paid?

You can protect your foreign receivables against non-payment risks with an export credit insurance

policy.

2 Characteristics

• Applicability : Recommended for use in conjunction with open

account terms and pre-export working capital financing.

• Risk : Exporters assume the risk of the uncovered portion of

the loss and their claims may be denied in case of

non-compliance with requirements specified in the policy

• Pros :

- Reduces the risk of non-payment by foreign buyer

- Offers open account terms safely in the global market.

• To buy such insurance, the exporter explains the

details of the businessto an insurance company and receive a quotation Sometimes the insurer refuses to quote.

• Export insurance premiums vary according to the

type of goods exported, the creditworthiness of the buyer , the political stability of the buyer’s

country and so on.

• ECI has certain clear limitations : 6 months is

typical However with ECI, the exporter is covered against the worst.

Payme nt guar

antee

Why do we neek bank guarantee?

Buyer

Bank Seller

Guarantor <Normally a bank> pay the beneficiary

if the principal fails triangle relationship among buyer, seller, bank

4 business situations which

guarantee are commonly used in.

Risk 1: Non-Payment – payment guarantee:

Risk covered: Exporter

Purpose: To secure any claims by the seller on the buyer for payment of the contract price by the agreed date

Guarantee amount: Usually for 100% of the

contract price

Risk 2: Revocation – tender guarantee:

• Risk covered: Importer

• Purpose: To secure any claims by the party inviting the tender on the tenderer in the event of

withdrawal of the bid before its expiry date or if the bid is modified unilaterally – or if the tenderer, upon being awarded the contract, refuses to sign the

contract or provide further guarantees on request.

• Guarantee amount: In general 1% to 5% of the value

of the contract.

Risk 3: Non performance – Performance Guarantee:

• Purpose: To secure any claims by the buyer on the seller arising from default in delivery or

performance of the terms of the contract (e.g construction, assembly, execution)

• Guarantee amount: Frequently 5% to 15% of

the value of the contract

Risk 4: Losing prepayment – Prepayment Guarantee

• Purpose: To secure any claims by the buyer on

the seller for reimbursement of the buyer's

advance payment on the contract price before

delivery of the goods (or advance payment of

the full contract price) – in the event that the

seller has failed to meet his or her contractual

delivery obligations in full

• Guarantee amount: normally 100%, the

advance payment.

Conditional guarantee

( the bank would pay if the claim were supported by)

A decision of the court of the first

instance (a decision by a judge).

An arbitral award (a decision by a court

of arbitration).

The approval of the principal in writing

to the claim.

E x e r c i s e

The Seller will inform the Buyer about the insurance Company not later than thirty (30) days after the effective date of the Contract, if the Seller receives no objection from the Buyer within fifteen (15) days thereafter, the Insurance Company is considered accepted.

Người Bán sẽ thông báo Hãng Bảo hiểm cho Người Mua không muộn hơn 30 ngày kể từ ngày Hợp đồng có hiệu lực, nếu Người Bán không nhận được lời phản đối

từ Người Mua trong vòng 15 ngày sau đó, Hãng Bảo hiểm đó coi như được chấp nhận.

In the event that the performance of this contract is prevented or delayed, in whole or in part by war, revolution, riot, strike or other causes beyond the control of the parties hereto, then the parties shall not be liable for any default in the performance of all or part of this contract, provided that immediate notice of said delay shall perform such obligations with all due speed unless the contract is previously terminated.

Trong trường hợp việc thực hiện Hợp đồng bị đình lại, trì hoãn do ảnh hưởng hoặc 1 phần bị ảnh hưởng của chiến tranh.,bạo loạn, đình công, hoặc các tranh chấp lao động, hoả hoạn, lụt bão hoặc bất cứ nguyên nhân nào gây nên bên ngoài

ý muốn của hai bên thì hai bên phải không bị ràng buộc trách nhiệm đối với hợp đồng hoặc

bất cứ phần nào của hợp đồng này

Mọi vấn đề khác biệt hay tranh chấp phát sinh

từ hợp đồng này hay các văn bản thỏa thuận có liên quan đến việc thực thi hợp đồng sẽ được giải quyết bằng sự nỗ lực hòa giải giữa các bên

All disparities and disputes arising from this contract or agreement documents relevant to this contract implementation shall be settled by mediation between parties

Bên mua phải mua bảo hiểm rủi ro thiếu hụt Bên giám định sẽ do

công ty Bảo hiểm chỉ định.

The buyer shall buy Insurance covering shortage risk The inspection agency

will be Insurance Company.