Exporting to the United States – A Team Canada Inc Publication

4.7 Obtaining contract insurance and bonding

As a condition for closing the deal, your U.S. buyer may require you to provide financial security that will protect him against any failure, on your part, to meet your obligations under the contract. Such security can take several forms, such as an on-demand bank letter of guarantee, a standby letter of credit or a surety performance bond.

Depending on your circumstances, you might have difficulty arranging such security on your own. Export Development Canada (EDC) may help you obtain the required security instruments without restricting your working capital. You can find out more about these financial instruments on EDC's Bonding Products Web page.

If you provide one of these instruments, make sure that your contract clearly stipulates your performance obligations, as well as the conditions under which your buyer can make a valid call for non-performance so as to have the security paid out to him.