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Australian trade minister Mark Vaile has announced the establishment of a US$50mn bonding line by Export Finance and Insurance Corporation (EFIC) in cooperation with Liberty Mutual Surety to assist Australian SME exporters in the US government procurement market.

“With the potential new business opportunities for Australian exporters under the government procurement chapter of the Australia US Free Trade Agreement, EFIC’s new facility is timely,” Vaile says.

The facility is designed to assist Australian SME exporters overcome difficulties they may experience in securing a bonding line from their banks because of insufficient tangible security and the lack of familiarity by US surety bond issuers with Australian exporters.

Surety bonds are performance guarantees that provide compensation to the buyer if the supplying company does not fill its contractual obligations. The US market is unusual because it typically re quires suppliers to post bonds for up to 100% of the contract value for performance obligations particularly in the construction industry compared with 10-15% elsewhere.

Additionally, all surety bonds in the US must be issued by a licensed company in the state where the work is being performed. EFIC is teaming with a leading US surety writer, Liberty Mutual Surety, an operating division of the Boston-based Liberty Mutual Group, who is licensed to write surety bonds in all 50 states.

“EFIC’s US$50mn bonding line will clear a path through the complex United States bonding rules and allow Australian exporters to reap the opportunities emerging from the Australia US Free-trade Agreement,” Vaile adds.