When you’re competing for overseas contracts, it is often a condition of the contract that before the final payment is made, you will provide a warranty bond (also called a maintenance or retention bond). A warranty bond protects the buyer from loss if the goods or services you’ve provided don’t meet your contractual warranty obligations after you’ve completed the contract.
As a result, the ability to offer a buyer a warranty bond means you can compete more effectively in the global market.
If your bank can’t help you with a warranty bond, EFIC may be able to assist. If you meet our eligibility criteria, we can issue the bond to your buyer directly or in conjunction with your bank. The bond will generally be provided as an extension to a performance bond from EFIC.
What are the benefits?
- Enables you to compete more effectively in global markets
- Flexibility: a bond can be issued directly by EFIC or in conjunction with a bank
- There is no need for your buyer to keep a retention payment at the end of the contract, as the warranty bond protects them from loss.
How does a warranty bond work?
- You enter into an export contract with your overseas buyer which requires a warranty bond
- If your bank can’t help you with a warranty bond, you apply to EFIC for issue of the bond
- If EFIC approves your application, you provide security to EFIC
- EFIC issues the bond directly to your buyer. Alternatively to 4:
- and 6. If your buyer requires your bank to issue the bond, EFIC provides a guarantee to your bank for the value of the bond and the bank issues the bond to your buyer.
Terms and conditions
Terms and conditions will be negotiated during the application process. The following guidelines provide an indication of typical requirements:
You should be an Australian exporter producing goods or services for export which have substantial Australian content.
You should demonstrate that you have the managerial, technical and financial capabilities to satisfy the contractual obligations covered by the bond.
The bond remains in force for the term required by the export contract.
Fees & charges
Fees and charges vary depending upon a number of factors including EFIC’s risk assessment, term and security.
The security required will be determined by EFIC based upon our credit and performance risk assessment.
EFIC will require recourse to your company and may require recourse to company directors and related companies.
NOTE: Information on terms and conditions is supplied as a guideline only. The EFIC Act and various OECD guidelines, together with EFIC’s credit assessment and other policies, influence the actual terms and conditions that may be applicable to any eventual transaction with EFIC.
The information provided does not comprise advice or a recommendation and EFIC makes no representation or warranty relating to it. To the maximum extent permitted by law, EFIC will not be liable for any direct or indirect loss or damage incurred by any person on the basis of this information.