Warehouse Receipt
A warehouse receipt is a document issued by a warehouse operator acknowledging that it holds specified goods for a depositor. A negotiable receipt lets the holder sell or pledge the goods by transferring the receipt, which makes it a common basis for commodity finance.
Also called: warehouse warrant · negotiable warehouse receipt · warehouse receipt financing · WR financing
The US Uniform Commercial Code defines a warehouse receipt as a receipt issued by a person in the business of storing goods for hire, lists it among documents of title, and governs it under Article 7. A negotiable receipt runs to order or to bearer, so the goods can change hands by endorsement without leaving the warehouse; a non-negotiable receipt names the person entitled to delivery. The UK Electronic Trade Documents Act 2023 lists warehouse receipts among the trade documents that may now exist electronically.
Warehouse receipts let stored goods serve as collateral. A lender takes a pledge over the receipt, the warehouse releases the goods only to the holder, and the loan is repaid when the goods are sold. Banks finance metals, grain, cocoa and coffee this way, often with an independent collateral manager monitoring the stock, and receipt systems in agricultural markets let farmers borrow against harvested crops instead of selling at harvest-time prices.
The receipt is only as good as the warehouse. On 28 May 2014, as the English High Court later recorded in Mercuria v Citibank, evidence began to emerge of a large fraud involving metal supposedly stored at Qingdao and Penglai in China: metal was missing or had been pledged more than once, supported by fraudulent port receipts. The court held that Citi's tender of endorsed warehouse receipts was not good delivery of metal. The lessons for lenders are independent warehouses, physical inspection and checks against trade authenticity red flags.
In practice
Not every legal system treats a warehouse receipt as a document of title. Where it is not one, the lender may hold only a contractual claim against the warehouse, not control of the goods.
Example
A cocoa exporter deposits 500 tonnes in a licensed warehouse and receives a negotiable receipt. It pledges the receipt to a bank for a loan of 60 percent of the cocoa's market value. When its buyer pays, the bank is repaid and endorses the receipt to the buyer, who collects the cocoa.
Learn more on Money Wiki
This page gives the short answer. Money Wiki has a longer guide to Warehouse Receipt, with more detail and background.
Commonly confused with
| Term | How it differs |
|---|---|
| Document of title | Document of title is the legal category. A warehouse receipt is one document that may fall within it, depending on its terms and on the governing law. |
See also
- Document of TitleA document of title is a document whose holder is treated, in law or commercial practice, as entitled to receive and deal with the goods it covers, so that transferring the document transfers control of the goods themselves.
- Bill of LadingA bill of lading is a transport document issued in connection with the carriage of goods by sea. Depending on its form, it can evidence receipt of the goods, contain the carriage terms and function as a document controlling delivery.
- Trade Authenticity VerificationTrade authenticity verification is the process of confirming that a cross-border payment is supported by a genuine underlying commercial transaction. Banks may compare the parties, invoice, contract, goods, shipment, amount and payment purpose for consistency.
- Letter of CreditA letter of credit is a bank’s conditional undertaking to pay when the seller presents documents that comply with its stated terms. Banks examine documents rather than confirming the physical quality or performance of the goods.
- Trade-Based Money LaunderingTrade-based money laundering (TBML) is the use of trade transactions to disguise and move criminal proceeds or to shift value across borders, most often by misstating the price, quantity or nature of goods on the documents.