Hue Festival: exquisite ao dai show

VietNamNet Bridge – 260 ao dai by 12 fashion designers were modelled during the Ancient Imprint show on Sunday night, June 8, attracting thousands of visitors to Hue Festival 2008.

The major patterns of these ao dai are seals of the Nguyen Dynasty. The ao dai festival lured the highest number of visitors since the Hue Festival 2008 started.

VietNamNet introduces the Ancient Imprint ao dai collection through photos:

Ky Nhan – Ngoc Lan - Le Kim Hai

Hue Festival

Hue Festival 2008 closed after nine days, attracting 180,000 visitors, including 30,000 foreigners from 75 countries and territories, up 27% from Hue Festival 2006. This is the highest number of visitors at the Hue Festival so far.

Ky Nhan – Le Kim Hai

Miss Universe Vietnam: Photogenic Beauties

VietNamNet Bridge – The twenty girls in the Miss Universe Vietnam 2008 finals in the morning on May 25 participated in a photogenic competition to choose the winner of Miss Photo at Vinpearl Land, Nha Trang city.





















Vo Tien
Source: http://english.vietnamnet.vn

Letter of Guarantees in detail

Letter of Guarantees in detail

Meaning

A bank guarantee is an undertaking by the bank at the request of a party, whereby the bank – in the event of default by the principal in the fulfillment of his obligations to make payment to the beneficiary within the limits of specified sum of money and within the specified period of time. So, bank guarantees are usually limited with respect to amount and time. As for as the time is concerned - a grace period is usually granted to the beneficiary to claim under the guarantee. This is basically given for the time taken by the beneficiary to present his claim.


Guarantees are generally given by banks, insurance companies and other guarantors.

These guarantees are given in the form of tender bonds, performance guarantees and repayment guarantees in relation to projects in the same country or another country which involves supply of goods or services or the performance of work. These guarantees are currently an important tool of international trade.

Parties involved in guarantees and their interest differs. Lets see the same:

1.The beneficiary: He is the party inviting the tender or He is the party awarding the contract or He is the person who wants to receive a compensatory sum of money incase the tenderer fails to perform his obligations or fails to perform the contract in accordance with its terms or to secure repayment of any payment or advances made by him if the principal fails to perform the contract.

2.The principal : He is the party tendering the contract or He is the party to whom the contract has been awarded.

3.Guarantor : Guarantor is a party who will meet his commitment in terms of the guarantee, without becoming involved in possible disputes between beneficiary and principal.

4.The Instructing Party : The new rules recognise the existing widespread practice whereby an instructing party may forward to the guarantor instructions received from or on behalf of the principal and counter-guarantee such instructions.

Need for a Guarantee
1.To provide an assurance of the intention of the principal to sign the contract.
2.To safegaurd against the principal failing to meet his obligations under such a contract
3.To protect interest of a party awarding the contract (beneficiary) in respect of the repayment of payments and advances made by him in the even of principal not fulfilling the contract terms.

Types of guarantee :

1.Conditional and Unconditional Guarantees.
2.Fixed and Fluctuating Guarantees.
3.Financial Guarantees.
4.Performance / Non-financial guarantees.

1.Conditional and Unconditional Guarantees :

In case of conditional guarantees, the right to claim payment is conditional on external factors besides the beneficiary’s demand for payment. For example – If a guarantee states the clause that this guarantee is payable only on a particular ruling of a court

An unconditional / demand guarantee on the other hand, is payable on first demand by the beneficiary. Generally, banks prefer to issue unconditional guarantees so that they can avoid their obligation to pay being contingent on external factors. Because, these unconditional guarantees will afford them certainty about their obligation.

Fixed and Fluctuating Guarantees :

Under a fixed guarantee, the bank;s liability can be ascertained at the time of issuance.

On the other hand, in case of fluctuating guarantee, the bank’s liability can fluctuate subject to a fixed maximum amount.

1.Banks can exercise control over the fluctuating liability by retaining the right to cancel the guarantee at any time and crystallising their obligation on the date of cancellation.
2.Enough care should be taken in the text of guarantee which should not prohibit bank from terminating the guarantee before the expiry date.
3.The bank should give prior intimation to the parties involved in the guarantees for termination of guarantee.
4.The termination of guarantee should take place only upon the receipt of notice by the respective parties.
5.The bank’s liability would then be limited to the debt incurred prior to the receipt of notice.

Financial guarantees : A guarantee to ensure adherence to a financial commitment is a financial guarantee.

1.Disputed income tax / Customs & excise duties : Banks will issue guarantee to guard against non-payment of tax / duty amount.
2.Customs / Excise guarantee for clearance of goods : To guard against non-payment of duty amount after final assessment by the competent authority.
3.Insurance premium guarantee : To guard against non-payment of premium on demand from the insurance company.
4.Guarantee for grant of facilities to another company : To guard against non-payment of dues by the company to whom such facilities are granted.
5.Deferred payment Guarantee : To guard against non-payment of bill of exchange / loan instalment on the due date.
6.Bill of lading / Shipping guarantee : Indemnifies the transporter against all adverse consequences resulting from the delivery of goods without surrender of the transport document.

Performance / Non-financial guarantees : A guarantee to ensure adherence to a commitment to perform a certain act as per stipulated conditions is a performance guanrantee.

1.Advance payment guarantee / Prepayment bond : To guard against non-delivery of goods/services for which advance has been received from the buyer.
2.Performance guarantee / Retention bond : to guard against non-performance of contracted obligations by the seller of the goods or the provider of the services.
3.Security deposit / Tenders / EMD / Bid bonds : To guard against failure of the principal to accept the contract as per the terms and conditions laid down in his tender / bid.
4.Retention money guarantee : To guard against non-compliance (with the terms of the contract) of the project executed by the principal.
5.Export performance guarantee : To guard against non-performance of the contracted export obligation.

General Aspects of Guarantee :

1.Benefits to the parties:

Benefits to the bank : It gets commission income.
Benefits to the principal / Instructing party : (a) It enables better liquidity by deferring payment and making it contingent on non-performance. (b) Cheaper than fund-based facilities except where it involves credit substitution.
Benefits to the beneficiary : Certiainty of payment, in the event of non-performance, guaranteed by the bank.

2.Important points to be noted before issuing a guarantee :

Since the bank is liability to pay on behalf of the principal, it must be protected against any loss arising out of meeting such an obligation. So, principal need to indemnify the bank against all losses that the bank may incur in the performance of its obligation to pay. Such indemnification is called counter guarantee / counter indemnify.

The bank can obtain further comfort by specifying the place of payment under a guarantee and the governing law. So that the beneficiary cannot claim with another branch / head office of the guarantor bank.

Date of expiry of the guarantee.

Total amount payable in local currency, for guarantees issued in foreign currency, and whether the extent exchange control regulations permit remittance in case of invocation.

Forece majeure clause – A guarantee should not be invoked due to non-performance arising on account of factors beyond the control of the principal.

For safety sake – the principal’s liability under the counter guarantee or any cash collateral / margine, should not be released until the expiry of the claims period or the return of the cancelled guarantee, whichever is earlier.

3.Bank guarantees are different from letters of credit. Payment under bank guarantee is contingent on non-performance whereas under LCs it is contingent on performance

4.A bank guarantee can be amended and whenever an amendment ‘weakens’ the BG for the beneficiary, his prior written permission should be obtained. Ex. Increase in amount requires a written permission from the principal whereas the decrease in the amount should have the written permission of the beneficiary.

5.Bank guarantee expires when – the validity period has ended or the BG is returned for cancellation or the entire amount of BG is paid by the bank or the bank is released from its obligations.

6.Documents required :
For grant of Bank guarantee limits
Hypothecation / Pledge agreement for collateral security formalities connected with registration charges where necessary.

For guarantee issuance :
Counter guarantee / indemnity from the principal.
Formal application for BG issuance.

Letter of Guarantee

About Guarantees

Standby letters of credit are remarkably versatile instruments for a bank to represent to a third party that they are willing to make payments on their customer’s behalf, if and when called for. Most often, these payments are to be made when the customer has failed or refused to do so themselves. The value of the bank’s commitment lies in the fact the bank is obligated to pay, even in the event of a dispute, as long as the documents specified in the L/C are presented as required.

Federal regulations prohibit most banks in the U.S. from issuing guarantees. To fill this void, American banks developed the standby letter of credit as a means of financial support for a variety of trade and investment needs. Originally, these same regulations even required that all letters of credit be "conspicuously titled" as letters of credit. Banks in other countries have long issued letters of credit that they have designated to be "demand guarantees" or "independent guarantees." These are not to be confused with "ancillary" or "contract" guarantees, which are not letters of credit. As U.S. banks are now, as of 1996, free to use any desired designation, the important thing to keep in mind is not what the arrangement is called, but how it works. Any letter of credit should state that it is subject to the Uniform Customs and Practice for Documentary Credits to ensure that it will work as expected.

Regardless of what it’s called, a letter of credit represents the issuing bank’s undertaking to pay the named beneficiary a sum of money upon presentation of specified documents conforming to the terms and conditions of the credit. As with a commercial L/C, the intent of a standby letter of credit is to substitute the creditworthiness of the bank for that of its customer, the applicant. The commercial letter of credit facilitates a commercial transaction through the use of shipping documents and negotiable drafts. A standby letter of credit, however, often takes the form of an obligation by the issuer to the beneficiary (1) to repay money borrowed by or advanced to or for the applicant, (2) to make payment of an indebtedness of the applicant, or (3) to make payment because of a claimed default by the applicant in the performance of an obligation. As such, it may require documents are simple as a statement signed by the beneficiary attesting to the existence of one of these types of situations.

Note that although the beneficiary of a standby credit may be required by the L/C to present a written statement claiming that some sort of default has occurred, in no case does the issuing bank agree to guarantee the completion of any project or contract nor is it bound to make determinations of fact regarding the underlying transaction (as is generally the case with a "contract" or "ancillary"

guarantee). The bank’s responsibilities and liabilities are financial only. If the beneficiary presents documents that comply with the letter of credit requirements, the bank must pay regardless of any assertions of fraud or non-validity made by the applicant. Furthermore, the applicant is legally bound to reimburse the bank. For this reason, the applicant for a standby letter of credit must trust the beneficiary not to draw improperly under the L/C.

The applicant for a standby letter of credit should consider the risks involved in having a bank issue a standby letter of credit for its account and can take two important steps to minimize these risks. The applicant should, just as in the commercial letter of credit transaction, know the beneficiary and be comfortable with the beneficiary’s character and business reputation. Many sources can assist the applicant: trade associations, credit reporting firms, chambers of commerce, etc. Second, the applicant and the beneficiary should negotiate and document the terms of the underlying transaction. This may take the form of a written contract or be as simple as a purchase order or pro forma invoice. Once the issuing bank has made payment, the applicant’s recourse to recover the payment through legal channels is only as strong as his ability to prove that the beneficiary has violated the contract.

If the beneficiary of a standby letter of credit is in a foreign country and the letter of credit is to remedy non-performance, the applicant should be sure that his contract with the beneficiary relieves the applicant from responsibility for non-performance due to force majeure. Strikes, military coups, hurricanes, and other events beyond the control of the applicant which prevent the applicant from fulfilling the contract should not constitute non-performance of the applicant’s obligations.


Bid Bonds

Government buyers and buyers involved in sizable projects frequently request suppliers and contractors who are bidding on a sale or project to post "bid bonds" in the form of standby letters of credit, usually for a percentage of the contract amount. These are used for the bidding process only and assure the buyer that the original bid will be honored by the bidder selected. The winning bidder is commonly required to post a "performance bond" (see below) to prove his ability to honor his bid. If the performance bond is not posted in a timely manner, the amount of the bid bond will be forfeited as a penalty.

Performance Bonds

When a buyer awards a large contract for goods and/or supplies, especially commodities like oil and grain, to a particular seller, he wants assurance that the agreed price will be honored and that the seller will not otherwise default on the contract. Similarly, throughout the life of a project, the contracting party is interested in ensuring that the project will in fact be completed in accordance with the terms and conditions of the contract. In cases like these, a standby letter of credit may be required to provide financial compensation in the event of default. These are generally designed to decrease in amount over the life of the contract until completion.
Performance bonds are also used to back up international warranties that machinery or other goods will work properly for a certain period of time. If the machinery breaks down and the manufacturer fails to provide timely repairs, the buyer may arrange repairs himself and draw on the L/C for costs incurred and/or a penalty.


Advance Payment Bonds

When the manufacturer who has been awarded a sale begins work, partial payment may be required in advance for materials, start-up costs, or general working capital. The buyer often requests a bond or standby letter of credit for assurance that such advances will be used for the project. In the event of contract default, the advance can be recovered from the bank that issued the standby letter of credit. These standby L/Cs can be issued to decrease in amount progressively as shipments take place.


Credit Line Support

When a buyer and seller agree to an "open account" or "cash-in-advance" relationship, a standby letter of credit can be used as financial security. In these situations, payments are made directly between the buyer and seller, but, in the event of default (e.g., non-payment in an open account transaction or defective goods in a cash-in-advance transaction), the affected party has recourse to a commercial bank.


Evergreen Letters of Credit
Sometimes a standby letter of credit will be issued with an initial expiration date but containing a clause that states that it will be automatically extended for additional periods unless the issuing bank provides notice to the beneficiary stating otherwise. Such a clause is called an "evergreen clause." Such a credit, in effect, has no expiration date and will remain open until the beneficiary returns it for cancellation since the beneficiary will simply draw the full amount of the credit if he receives notice from the bank that it is not going to extend it. Of course, the applicant’s obligation to reimburse the issuing bank remains in effect as long as the credit is open.


Clean Letters of Credit

In some instances, the beneficiary will request a letter of credit in which the only document required is a draft drawn on the issuing bank. This is sometimes called a "clean letter of credit." The issuing bank is required to pay, and the applicant in turn is required to reimburse, once the draft is presented. Such a letter of credit is very open and the beneficiary’s ability to draw is limited only by the amount and expiration date of the letter of credit; it may be thought of as giving the beneficiary a cashier’s check and asking him not to cash it unless necessary.

Forefaiting

S.W.I.F.T. Standards 2007

http://www.anasys.com/swifthandbook/