Introduction
In accordance with the Interim Measures on Retention for Foreign Labor Cooperation, Bank of China issues a written document to the competent commerce department for the enterprise engaged in overseas labor service, guaranteeing that enterprise makes a certain amount of payment for addressing emergent events involving overseas labor service.
Functions
Replace margin with a letter of guarantee to reduce capital occupation; enhance credit standing of enterprise.
Features
1. Lower enterprises' pressure to pay cash retention money.
2. Support enterprises to conduct overseas labor cooperation.
Charges
The guarantee fees shall be charged based on the principles 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 the same way as for letter of guarantee in RMB.
Target Customers
Enterprises conducting overseas labor cooperation business.
Application Qualifications
1. The applicant shall hold a business license and the People's Republic of China Operating Qualification Certificate for Foreign Economic Cooperation, which passed annual inspection as scheduled;
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, etc.);
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.
III. Letter of guarantee fees
The letter of guarantee fees should be charged based on the principles and rates determined in accordance with relevant regulations of Bank of China head office.
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.
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