Guarantee Letter Extension: 45-Day Notice or Automatic One-Year Extension

1. Key takeaways

The KIMADIA notice of June 2026 to all companies and Scientific Bureaus (website post 56174) states that companies must notify the KIMADIA Credit Department of the extension period they consider appropriate 45 days before the expiry date of the guarantee letter; otherwise the guarantee will be extended for a full year, and once the extension request has been sent to the issuing bank, no request to shorten the validity period will be accepted. The direction of this rule is the reverse of most markets: not expiry-on-maturity, but automatic extension where no application is made. GRZAN lists it as the most easily underestimated funding cost in Iraqi public tender projects.

• Notify the KIMADIA Credit Department of the desired extension at least 45 days before guarantee expiry.
• Failing that, the guarantee is extended for a full year by default.
• After the extension request reaches the issuing bank, no shortening of validity is accepted.
• Silence therefore costs twelve months of bank credit line occupation.

2. Legal basis

The instruments below carry the extension rule and the deposit framework it interacts with. Verification status follows the source review.

Extracts of the operative provisions, translated from the Arabic key phrases. First, the KIMADIA announcement: companies must inform the Credit Department of the period they consider appropriate for extending their guarantee letters before 45 days from the expiry date of the letter; otherwise the guarantee letters will be extended for a full year, and the company will decline any request to shorten the validity period once the extension requests have been sent to the banks issuing the letters. Second, Article 27(1) of Instruction No. 1 of 2025: the initial deposit is a lump sum of not less than 1% (floor) and not more than 3% (cap) of the estimated cost allocated for award purposes, with the percentage falling as the estimated cost rises; only guarantee letters, certified cheques, drafts or cash deposits are accepted (cash deposits capped at 50,000,000 Iraqi dinars), to be submitted before the bid deadline. Third, Article 27(2): the final deposit is a performance guarantee letter of 5% of the contract amount, submitted after receipt of the award letter and before contract signature; it is released only after the final acceptance certificate is issued and the accounts are settled, with partial release possible.

3. Expert insights

Automatic extension is a hidden occupation of cash flow. Companies normally size guarantee validity and bank credit occupation by contract duration plus warranty period. Once the 45-day window is missed, the guarantee is extended by a full year, the bank credit line stays locked for 12 further months, and the underlying contract may already have been fully performed. The typical case GRZAN sees is a company discovering the automatic renewal only when preparing the next tender and finding its credit line insufficient.

Stacked with the release conditions of Article 27, the occupation period can exceed the contract itself. The final deposit is released only upon the final acceptance certificate and settlement of accounts, with partial release possible. The nominal endpoint of the guarantee is thus final acceptance plus account settlement, and the automatic extension rule can push that endpoint a further year out. The combined result of the two provisions is: actual guarantee occupation = contract duration + acceptance and settlement cycle + a possible one-year automatic extension. This formula belongs in the project funding schedule.

In comparison, Chinese bid guarantees run on an expiry-on-maturity logic while Iraq runs a no-application-means-extension logic. In China, bid and performance deposits carry validity periods stated in the tender documents and the guarantee text, lapse on expiry or are returned as agreed, and extension requires fresh mutual agreement. The Iraqi rule reverses the default state: silence means consent to a one-year extension. This is not a clause detail but a difference in default values — a team managing its guarantee ledger on Chinese habit will systematically miss this window.

The no-shortening rule closes the correction channel. The third layer of the rule is that even if a company immediately discovers the extended period is too long after its request has been sent, KIMADIA will not accept any request to shorten the validity, to avoid operational disruption. The 45-day window is therefore the single, irreversible decision point; missing it leaves no remedial action, only a year of occupation.

The addressees are companies and Scientific Bureaus, which connects to the licence-holder question of article 31. Who issues the guarantee and who submits it to the KIMADIA Credit Department depends on whose name the registration file and representative qualification are held in. Under the agent-attachment model the agent performs this action, and the manufacturer may never even receive the 45-day window reminder — the funding-level expression of the question of who holds the file.

4. Practical recommendations

• GRZAN maintains a guarantee ledger recording, per letter, the issuing bank, beneficiary, amount, expiry date and extension window, with the reminder set at 60 days before expiry. Practical estimate: 45 days is KIMADIA’s explicit floor, and the extra 15 days is a buffer for internal approval and bank processing — an internal GRZAN practice (no official provision found).
• State the desired period at the application stage: the extension notice to the KIMADIA Credit Department must specify the concrete period sought, not merely request an extension; otherwise the default one year applies.
• For projects using the self-operated entity holding arrangement, the GRZAN entity in the target market receives KIMADIA notices and manages the ledger directly, so the window is not missed through an agent’s relay.
• Confirm with the issuing bank in advance the reminder service before guarantee expiry, and reserve the worst case of automatic one-year extension in the credit line calculation.
• At project close, push actively for the final acceptance certificate and account settlement to shorten the release precondition under Article 27; once acceptance and settlement documents are archived, submit the release request to KIMADIA promptly.

5. Verification checklist

• □ Connect to KIMADIA post 56174 and the PDF (path /2026/06/) and re-check the two statements of 45 days and a full year.
• □ Check that the notice addressees are the companies and the Scientific Bureaus, confirming who bears guarantee management responsibility.
• □ Re-check Article 27 of Instruction No. 1 of 2025: initial deposit 1%–3%, cash deposit cap 50,000,000 dinars, final deposit of 5% performance guarantee.
• □ Check the expiry dates and extension windows of all guarantees in execution, confirming none has passed the 45-day window.
• □ Confirm with the issuing bank the operating process for expiry reminders and release of credit occupation.
• □ After obtaining the final acceptance certificate and settlement vouchers, submit the final deposit release request in writing and keep the receipt.
• □ Re-check whether the official documents cited here have been replaced by later instructions or decisions (verification baseline date: 29 October 2026).

Regulatory information verified as of 29 October 2026.

How GRZAN can help. GRZAN provides medical device and IVD registration, quality system, authorised representative and local testing support for the Iraqi market. Our team coordinates local importer arrangements, and supports post-market vigilance obligations. Business enquiries: info@grzanglobal.com