Guarantee Counter-security

Guarantee Counter-security refers to a reverse guarantee required by the bank from the applicant (usually an importer or contractor) when the applicant applies to the bank for issuing a guarantee, to ensure that the bank can recover from the applicant after making payment under the guarantee. Common forms include cash margin, mortgage, pledge, or a third-party counter-guarantee. Use cases: international engineering contracting, bulk commodity imports, performance guarantees, advance payment guarantees, etc. Points to note: The counter-security is independent of the main guarantee, and the bank does not need to first seek recourse from the applicant when claiming; the counter-security amount is usually 100% or more of the guarantee amount and may decrease as the guarantee amount decreases; the counter-guarantee should clearly specify the applicable law and dispute resolution method. Difference from 'guarantee': A guarantee is the bank's payment commitment to the beneficiary, while a counter-security is the applicant's reimbursement commitment to the bank; difference from 'standby letter of credit': A counter-security is not directly to the beneficiary but to the bank issuing the guarantee. Foreign trade practitioners need to pay attention to the trigger conditions of the counter-security, matching of validity periods, and exchange rate risks.