Introduction
A written document issued by Bank of China, at the request of a ship owner, shipping company, P&I club or insurance company, to a maritime court or maritime arbitration authority, guaranteeing that the payment listed on the court verdict or arbitration award will be made after the detained ship or property is released.
Functions
Applicable to the situation that ships or properties are detained by a maritime court or maritime arbitration authority due to collision between ships or maritime dispute; and able to avoid various losses and expenses of the applicant arising from the detention.
Features
1. Reduce capital occupation due to cash margin payment.
2. Avoid effectively various losses and expenses arising from detention of ship or property and guarantee that the payment listed on the court verdict or arbitration award will be made after the detained ship or property is released.
3. Improve the commercial credit of enterprises. With good reputation, Bank of China involves in the transaction and acts as a guarantor to promote smooth transaction by providing guarantee for the parties.
Charges
The marine guarantee fees shall be charged based on the criteria and rates determined in accordance with relevant rules of Bank of China; the fees for letter of guarantee in foreign currency shall be charged in reference to that of RMB letter of guarantee.
Target Customers
Ship owners, shipping companies, P&I club or insurance companies.
Application Qualifications
1. The applicant shall hold a business license of legal person that has passed the annual inspection or other valid certificates which fully prove its legal operation and scope of business;
2. The applicant shall have a loan card;
3. The applicant shall have an account opening permit and open a settlement account with Bank of China;
4. The applicant shall have the qualification to engage in relevant business (such as qualification of contracting foreign projects, construction qualification of building enterprise.);
5. The applicant shall have a credit line at Bank of China, or pay full margin, or full guarantee acceptable to Bank of China.
Process
I. Application for letter of guarantee
1. The applicant fills out an application form or a contract for issuance of a letter of guarantee;
2. The applicant pays margin or submits other counter-guarantee;
3. The applicant submits primary documents related to the contract;
4. The applicant submits other documents necessary for issuance of a letter of guarantee as required by Bank of China.
II. Examination and issuance of letter of guarantee
1. Bank of China examines the customer qualification, underlying transaction and relevant documents;
2. Bank of China confirms the customer's margin or credit line and other mortgages;
3. Bank of China examines the written application and form of letter of guarantee;
4. Bank of China issues the letter of guarantee.
Kind Reminder
1. Amendment to letter of guarantee: The clauses of the letter of guarantee can be amended on request of the guaranteed party and the beneficiary, such as extension of the validity period.
2. Payment/compensation against letter of guarantee: In case the beneficiary claims compensation within the validity period of the guarantee, the applicant should be notified in time. The payment should be made after the guaranteeing bank examines the claim documents and confirms the documents are in compliance with the claim clauses of the guarantee.
Case
A ship of Shipping Company A of China collided with the jetty at a port in Africa. While the jetty facility was damaged, the ship was still able for normal operation. Because it would take a long time to determine and indemnify the damages, Company A didn't want the ship to be detained at the port. Bank of China, upon being informed of the situation, immediately issued a marine guarantee for the company to the port management company. With this letter of guarantee the ship was released and put in operation at once.
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