Field Warehousing

Field Warehousing operations essentially employ a method whereby a Depositor's trading assets are used as security at the Depositor's own premises for a loan or financing. It is a security instrument which enables the Depositor, to deliver to the Bank legally valid documents of the title and to grant a possessory pledge over goods stored in the Depositor's own plant, mill, refinery or warehouse via the legal principle of "Bailment." This creates constructive possession in the Goods for and on behalf of the Bank.

"Bailment" would refer to the transfer of the possession of Goods by the owner (bailor) to another (the bailee) which shall thereafter maintain notorious, continuous and exclusive possession of all the Goods, for particular purposes such as hiring, financing, pledge of goods, and the delivery of Goods for carriage, safe custody or repair.

Notorious possession is evidenced by numerous conspicuous signs placed by at the storage premises.; Continuous and exclusive possession is assured by the fact that the collateral controller has one of its employees or agents or representatives on duty at all times when the premises are unlocked and that anyone permitted to enter the premises does so only at the will of the collateral controller or with its consent.

The foregoing steps accomplish an effective change in the possession of the goods and premises. Thereafter, warehouse receipts may be issued at the borrower's premises in respect of Goods stored therein and the constructive possession of the Goods is maintained by the collateral controller for and on behalf of the Bank/ financier throughout the duration of the financing and till the goods are required to be released.

The ACE Global Depository documentation (Field Warehousing and Storage Agreement) clearly establishes the link between a pledge over goods by the Bank, the acceptance of goods by ACE Global Depository as the collateral controller on behalf of the Bank as bailee of the goods, and the creation and perfection of a valid security under the financing facility for and on behalf of the Bank. ACE Global Depository therefore acts exclusively as the agent of and on the instructions of the Bank and accordingly ensures that the Bank's pledge over goods is maintained without excuse or delay.

  • ADVANTAGES TO THE LENDER

From the lender's point-of-view, the legal title in the goods is unquestioned if the field warehouse is properly established and maintained on its behalf and possession of the Goods is maintained in the hands of an independent third party.

As a pledgee the lender is a secured creditor pursuant to the financing documents and is in constructive possession of the goods placed as security and listed on ACE Global Depository's Warehouse Receipts. A lender secures its interest in the goods and perfects the pledge through ACE Global Depository via:

  • Constructive possession of pledged goods;
  • Accurate reporting and accounting by ACE Global Depository of all movements and balances;
  • Deliveries to the borrower and releases being made only in accordance with the lender's instruction;
  • ACE Global Depository ensures accurate reporting over the condition of the goods described in the Warehouse Receipts; and
  • Lender as the holder of the Warehouse Receipts is protected against professional negligence and fraud under ACE Global Depository's comprehensive professional indemnity insurance.
  • ADVANTAGES TO THE BORROWER

From the borrower's perspective, facilities can be provided for the convenient deposit and withdrawal of goods for processing or sale, a condition which may be essential to the proper conduct of the business.

The establishment of a field warehouse may be the least costly method of enabling a business to obtain credit and to carry on productive operations that would otherwise be impossible to do. Field warehouse operations may also be set up to effect savings in storage rates or to avoid costs of transporting goods to a public terminal warehouse.

  • PRE LOAN CONSIDERATIONS FOR THE FINANCIER

The release mechanism prior to the goods being released by ACE Global Depository to the borrower / relevant Buyer.

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