ABSTRACT
The performance guarantee (PG) is often referred to as a performance bond, highlighting the lack of trading knowledge among internet traders. The bond is not so different to that which applies in criminal law where a bond is an assurance that defendant will return to court on bail to answer charges at a later date. In a Cost Insurance and Freight (CIF) deal, the goods pass the ships rail in port of loading and all delivery documents referred to in the contract and documentary letter of credit (DLC) are issued to the primary intermediary agent (PIA). The PIA has to keep the standby letter of credit (SLC), PG as issued from the supplier and issues full SLC at the new PG rate for the full amount that needs to be serviced from their own pocket. There is a lot that an intermediary has to understand about trading in commodities, especially when it comes to handling and transacting with financial instruments.
