Foreign trade is a very broad field to understand, which must be governed under certain rules, which grant several obligations to exporters and importers, one of them are the guarantees.
What is a warranty good for?
The guarantees, just like its name says, it guarantees the importer financial security in the event of non-compliance with the exporter\’s obligations. In other words, if the exporter for one reason or another is unable to enforce the terms of its contract with the importer, the latter can go to a bank institution that functions as the exporter’s guarantor to obtain a financial compensation through the guarantees.
The guarantees are divide into two principal classes:
- First demand guarantee: They are cauterized because they are the only ones that can be applied to a foreign buyer and because they are independent of the contract.
- Conditional guarantee: They are characterized by protecting the exporter, since it requires a proof to issue the guarantee demanded.
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Inside of these two principal classes, there are sub-classes of various kinds, however, the most common are:
- Good execution.
- Advanced payment guarantee or refund.
- Payment / Charge.
- Letter of credit guarantee or contingency
Each one is under specifics terms that can go oriented to either the importer or exporter, as well as having its own restrictions for locals and foreigners.
If you want to learn more about the guarantees and bonds of foreign trade, it is recommendable that you look for specialized courses that will help you to understand how to apply these guarantees correctly and at the same time, have a better command of trade.
