URDG 758 Demand Guarantees: Fees & Mechanics
How advance-payment, performance and bid guarantees are priced under URDG 758, how they differ from standby letters of credit, and what banks charge for issuance and confirmation.
A URDG 758 demand guarantee is a bank promise to pay a stated amount to the beneficiary on demand, independent of the underlying contract. It is the workhorse of tender bonds, performance security and advance-payment protection across the GCC, Turkey, Europe and francophone Africa - and its pricing follows a predictable pattern that this guide breaks down.
The four demand guarantee types
- Bid bond - 2 to 5 percent of tender value, valid from tender submission to award plus a short grace period. Called if the winning bidder fails to sign or furnish the performance guarantee.
- Performance guarantee - 5 to 10 percent of contract value, valid through delivery plus warranty period. Called on delivery failure or defective performance.
- Advance-payment guarantee (APG) - 100 percent of any advance paid to the seller, reducing pro-rata as milestones are certified.
- Retention-money guarantee - 5 to 10 percent released instead of the buyer holding the money, valid through final acceptance.
Fee mechanics
The core price is a per-quarter commission on the guarantee amount, typically 0.15 to 0.40 percent per quarter. Quarters are rounded up, so a 100-day guarantee costs two quarters. Add a flat issuance fee (100 to 300 USD), a SWIFT charge (25 to 75 USD), and a per-amendment fee (50 to 150 USD) for any extension. If the applicant provides only a counter-guarantee from their local bank and asks a bank in the beneficiary's country to issue on that basis, add a confirmation-equivalent charge on top - priced as country risk on the counter-guarantor.
URDG 758 vs ISP98 standby LCs
Both instruments do the same job - independent bank obligation payable on demand - but under different rulebooks:
- URDG 758 is the ICC's guarantee rulebook, effective 2010. Wording is closer to civil-law practice; extension mechanics ("extend or pay") are highly formalised; presentation must include a statement of breach.
- ISP98 is the standby-LC rulebook, effective 1999. Wording is closer to UCP 600; presentation follows documentary-credit practice; often preferred when the beneficiary is US-based.
Practical rule: use URDG 758 when the beneficiary is in the GCC, Turkey, Europe or French-speaking Africa; use ISP98 for US, Latin American or Asian beneficiaries.
The extend-or-pay mechanism
A beneficiary who is near expiry but does not yet know if the default will be cured can present an "extend or pay" demand. Under URDG 758 Article 23 the bank must either extend the guarantee for the requested period or pay the demand. This gives the applicant a narrow window to negotiate an extension rather than trigger the call. Bank fees for extend-or-pay cycles usually include the amendment fee plus another quarter of commission.
Model it before you issue
Use the SBLC / Guarantee Fee Calculator to estimate quarterly commission, issuance and amendment fees for either a URDG 758 or ISP98 instrument. For a full LC-plus-guarantee package (e.g. performance guarantee alongside a commercial LC), the LC Cost Calculator handles the documentary-credit side.
Frequently asked questions
What is a URDG 758 demand guarantee?#
URDG 758 is the ICC's Uniform Rules for Demand Guarantees, in force since 2010. A demand guarantee is an independent undertaking by a bank to pay a stated amount to the beneficiary on presentation of a compliant demand - without needing to prove the underlying default. URDG 758 codifies the format, the wording, the presentation requirements and the extend-or-pay mechanism.
How is a URDG 758 guarantee priced?#
Standard bank tariff is a per-quarter fee on the guarantee amount, typically 0.15 to 0.40 percent per quarter for a well-rated applicant. Performance guarantees at 5 to 10 percent of contract value are common; advance-payment guarantees are usually 100 percent of the advance. Plus a flat issuance fee (100 to 300 USD) and a SWIFT charge. Extension amendments cost 50 to 150 USD each.
What is the difference between URDG 758 and a standby LC (ISP98)?#
Both are independent bank undertakings that pay on demand. URDG 758 is drafted around demand guarantees in the European and Middle Eastern tradition, with clear rules on extend-or-pay, complex demand contents and time bars. ISP98 (International Standby Practices) is drafted around standby LCs in the US and Asian tradition, closer to UCP 600 in structure. Pick URDG for guarantees issued in URDG-native markets (GCC, Turkey, francophone Africa); pick ISP98 for standbys where the beneficiary is US-based.
What are the four main types of demand guarantee?#
Bid bond (2-5 percent of tender value, expires shortly after award), performance guarantee (5-10 percent of contract value, valid through delivery plus warranty), advance-payment guarantee (100 percent of the advance, reducing as milestones are certified), and retention-money guarantee (5-10 percent, released after final acceptance). Each carries its own tenor and pricing curve.
Can a URDG 758 guarantee be called without cause?#
Legally, yes - that is the point of a demand guarantee. The beneficiary presents a written demand stating the applicant is in breach and the bank must pay against that demand alone. In practice, applicants can push back only via fraud-exception injunctions in domestic courts, which are hard to obtain. URDG 758 Article 15 requires the demand to state the nature of the breach, which gives limited protection against completely unfounded calls.