Guarantee Management Fee

Guarantee Management Fee refers to the ongoing fee charged by a bank or guarantee institution to the applicant (usually a foreign trade enterprise) during the issuance and maintenance of a guarantee (such as a performance guarantee, advance payment guarantee, bid guarantee, etc.). This fee is typically calculated as a certain percentage of the guarantee amount (annual rate) and is charged quarterly, semi-annually, or annually to compensate the bank for the risks it assumes and its management costs. Usage scenarios include: international engineering contracting, bulk commodity trading, complete equipment export, and other businesses requiring bank guarantees. Notes: 1) The rate is affected by the type of guarantee, term, applicant's creditworthiness, and country risk; 2) Some banks have a minimum charge; 3) Amendments or extensions of the guarantee may incur additional management fees; 4) Unlike the issuance fee (one-time), the management fee is a period expense and must be included in the cost when quoting. Difference from 'guarantee commission': Commission may cover one-time operations such as issuance and amendment, while management fee emphasizes the management cost during the existence of the guarantee. Foreign trade practitioners should carefully review the bank's rate schedule to avoid profit erosion due to overlooking management fees.