Trust Receipts
Individual Sureties
Rule 8.200 (from the Pacific Stock Exchange) Trust Issued Receipts
(a) The Corporation will consider for trading, whether by listing or pursuant to unlisted trading privileges, Trust Issued Receipts that meet the criteria of this Rule.
(b) Definitions. A Trust Issued Receipt is a security (1) that is issued by a trust ("Trust") which holds specific securities deposited with the Trust; (2) that, when aggregated in some specified minimum number, may be surrendered to the Trust by the beneficial owner to receive the securities; and (3) that pay beneficial owners dividends and other distributions on the deposited securities, if any are declared and paid to the trustee ("Trustee") by an issuer of the deposited securities.
The US Treasury’s Federal Register / Vol. 68 No. 109 / Friday. June 6, 2003 / Rules and Regulations / Subpart C – General Definitions
• 594.309 Property; property interest.
The terms property and property interest include, but are not limited to, money, checks, drafts, bullion,….stocks, bonds,…trust receipts,..letter of credit,…and any other interest therein, options, negotiable.
Standard & Poors call their Trust Receipts for their Trust, the Standard & Poor’s Depository Receipts (SPDRs).
The US Department of Housing and Urban Development, Washington, D.C. issues Trust Receipts for all participants in the Ginnie Mae Multiclass Securities Program.
The Internet Architecture HOLDER (IAH on the American Stock Exchange) Trust issues Depositary Receipts (Trust Receipts) called Internet Architecture HOLDRs representing beneficial ownership in common stock. The Bank of New York is the trustee.
In the annual report of New York Daily Tax Free Income Fund for the year 2003 with a total net assets value of $508,083,528 where;
• three million is “New York City, NY GO Trust Receipts SGB 33 Series 1 1996F”,
• five million is “New York City, NY Municipal Water Finance Authority RB Municipal Securities Trust Receipts.
The United Kingdom Parliament for 2000-2001 in their Sources and Application of HCHS Capital list NHS Trust Receipts.
Birmingham Steel here in the US on their Statement of Income for 2002 listed total Trust Receipts of $24,799,145.13.
TENNESSEE BOARD OF REGENTS state in their definition number 10. "Trust Receipts" means a receipt issued by the trustee custodians in lieu of the actual deposit of eligible collateral, it is subject to all respects to the claims and rights of the institution to the same extent as though such collateral had been physically deposited with the institution.
CHICAGO, May 23 /PRNewswire-FirstCall/ --
PECO Energy Capital, L.P., a wholly owned subsidiary of PECO Energy Company, announced today the call for redemption of all outstanding Trust Receipts of PECO Energy Capital Trust II, CUSIP No. 69331A 20 1, each representing an 8% Cumulative Monthly Income Preferred Security of PECO Energy Capital, L.P. The redemption date of the Trust Receipts is June 24, 2003. The redemption price is $25 per Trust Receipt, plus accrued and unpaid distributions to the redemption date.
Florida law allows local governments under 218.415.18.3.b the unit of local government's governing body may also receive bank trust receipts in return for investment of surplus funds in securities.
The Trust Receipts Law
A law embodying an agreement entitling the beneficiary to the proceeds from the sale of the goods, documents or instruments released under a trust receipt to the trustee to the extent of the amount owing to the beneficiary or as appears in the trust receipt, or to the return of the goods, documents or instruments in case of non-sale, and to the enforcement of all other rights conferred on him in the trust receipt provided such are not contrary to the provisions of The Trust Receipts Law.
The beneficiary may cancel the trust and take possession of the goods, documents or instruments subject of the trust or of the proceeds realized there from at any time upon default or failure of the trustee to comply with any of the terms and conditions of the trust receipt or any other agreement between the beneficiary and the trustee, and the beneficiary in possession of the goods, documents or instruments may, on or after default, give notice to the trustee of the intention to sell, and may, not less than five days after serving or sending of such notice, sell the goods, documents or instruments at public or private sale, and the beneficiary may, at a public sale, become a purchaser. The proceeds of any such sale, whether public or private, shall be applied (a) to the payment of the expenses thereof; (b) to the payment of the expenses of re-taking, keeping and storing the goods, documents or instruments; (c) to the satisfaction of the trustee’s indebtedness to the beneficiary. The trustee shall receive any surplus but shall be liable to the beneficiary for any deficiency. Notice of sale shall be deemed sufficiently given if in writing, and either personally served on the trustee or sent by post-paid ordinary mail to the trustee's last known business address.
Banks through out the world treat Trust Receipts as they would Letters of Credit.
OCBN Bank Singapore
Trust Receipt - This is a credit facility granted to the customer to enable him to take delivery of the goods prior to payment. As security, the goods title is with OCBC Bank, and the customer will undertake to hold the documents, the goods and the sale proceeds in trust for the bank.
United Overseas Bank, New York, NY
Opening of Letters of Credit
Letters of Credit (LCs) are undertakings by the Bank (the issuing bank) to pay the exporter if all the stipulated terms and conditions on the LC are met. Compliance with the terms is substantiated by documents furnished by the exporter within a specified time frame.
With LCs, the Bank is enlisted in giving the exporter a greater assurance of payment. At the request of its customer (the importer), the Bank issues an LC, which is an undertaking to pay the exporter for goods or services bought. This payment is on the condition that the exporter meets all the terms and conditions of the LC and presents the documents stipulated in the LC.
Credit lines to issue or amend importers' LCs are also available from the Bank. In addition, the Bank facilitates payment or settlement of importers' LCs, commonly through their conversion to Trust Receipts.
Performance Guarantees
These are issued for common commercial or statutory requirements, including contract tenders, maid guarantees and remisier deposits.
Shipping Guarantees Shipping
Guarantees are indemnities given by the Bank to the carrier of goods, so that the goods can be released to the consignee without producing the Bill of Lading or Air Waybill. This helps the importer to avoid demurrage charges which otherwise will be imposed if delivery of the goods is not taken up due to the absence of shipping documents.
Trust Receipts
The Bank provides short-term credit facilities for financing the importer when an LC or collection is due for payment.
Affin Bank Malaysia
Trust Receipts are documents executed by a customer who is the pledgor of the goods or the documents of the title thereto (example, bills of lading) when they are released to him by a bank, in order that he may sell the goods and pay the proceeds to the bank.
Trust receipts are available for importation of goods at sight basis.
Trust Receipt financing is normally extended for a period of 30, 60, 90, 120, and 180 days. The interest rate is 1 to 4 % plus BLR per annum (monthly rest).
Bank Muscat Dubai and Bahrain
Bank Muscat also offers advance against Trust Receipts. A sum of money is advanced for a pre-agreed tenor of no longer than one year by the Bank for the sole purpose of refinancing payments made by the customer covering purchase of goods either under a letter of credit established through us or by way of documents received on collection without a letter of credit. The documents negotiated under the letters of credit or documents received on collection are then released to the customer against his signed Trust Receipt and promissory note. The advance is repayable in whole or in part, as and when the customer collects sale proceeds.
Bank of Punjab Indian
The working capital facilities offered are designed based on the diversity of business needs in today's market place. The delivery mechanism is tailor made to ensure smooth functioning of your business cycle.
Working Capital Finance is available as:
Cash Credit against Pledge of Trust Receipts
Bank of America Hong Kong
In BofA’s contract they provide for advances against Trust Receipts.
The Trust Receipt
Lloyd's of London Press
"Maritime Asia / Intermodal Asia" Magazine
March 1994
Options And Terms For The Importer
When the documents arrive, whether under documentary credit or D/P payment terms, the importer is obliged to effect payment against the release of the documents from the bank. If the importer does not wish to effect payment, he can use the import financing provided by the bank under the Trust Receipt arrangement.
Once the importer's application for Trust Receipt facilities has been approved by the bank, a Trust Receipt Agreement and/or Letter of Hypothecation will be signed. The Bank will set a credit limit which is determined by the importer's three Cs of Credit Worthiness (Character, Capacity and Capital) and/or their goodwill.
The bank then becomes the new creditor, effecting payment on behalf of the importer to the exporter overseas, under the Trust Receipt facilities, reducing the credit limit as the facility is used.
There are two types of Trust Receipts. Method A is where the importer is given the transport documents to arrange the discharge, customs clearance, transportation and insurance of the goods at their own risk and expense. For warehouses there are two options: safe keeping the goods in the importer's own warehouse, clearly separate from other goods, and made accessible to the bank or its agent for inspection from time to time; or: warehousing in the importer's name, in a warehouse approved by the bank with a warehouse warrant endorsed to the bank, and held by the bank as collateral. The collateral goods can then be sold to the purchasers.
Method B is where the importer is again given the transport documents to arrange at their own risk and expense, the discharge, customs clearance, transportation, procurement of insurance and warehousing of the goods, but in godowns approved by the bank and with a godown warrant made out to the order of the bank, and the original copy of the godown warrant given to the bank as collateral. All delivery orders for the delivery of the collateral goods to the purchaser need to be signed or countersigned by the bank.
There are several terms and conditions common to both these methods. The importer is the agent, trustee and/or bailee of the bank. Before full payment is made to the bank by the importer, the title of the goods and all documents relating to the title and the insurance, are held by the bank as collateral. The importer must procure full value insurance coverage, against all risks, covering fire, flood, burglary and other risks common in the trade. The insurance policy has to be held to the order of the bank, made out with the bank as the beneficiary and is retained by the bank as collateral.
The importer must not indebted to any other party in respect of the goods. In other words the importer cannot negotiate further loans, services and/or performance against the collateral goods from a third party.
If something goes wrong, the goods must be surrendered to the bank when demanded. Also, the bank can change from Method A to Method B at any time they think necessary.
The above terms may also change for raw materials. As it would be difficult for the bank to recover the raw materials if they have already been consumed during the manufacture of a finished product, and cannot be separated or recovered from the finished products the bank insists that it be notified of the sales details and prior approval must be obtained before the sale is made. This also applies to credit sales to the purchasers.
When accounting for goods sold under a Trust Receipt, all deposits, advance payments, bills of exchange, promissory notes, and other payments received from the sale of goods must be given to the bank as a special option. Normally, payment is made when the Trust Receipt expires which is either 30, 60 or 90 days from the signing depending on what has been specified. Accounts for the sale of the goods should be treated separately and not to be mixed with the sales of other goods or the capital of the importer.
Wherever possible the bank should be given priority in claiming the assets of the company after its bankruptcy.
To redeem the Trust Receipt, full payment is made to the bank including interest, once the goods have been sold. The bank will then release the insurance policy and/or warehouse warrant held as collateral. If necessary, it is possible to obtain approval from the bank for an extension on the expiry date of the Trust Receipt, if the importer is unable to sell the goods before expiry.
The accountants as well as the auditing firms adopt the "Concept of Going Concern" when dealing with collateral goods under a Trust Receipt. That is, the collateral goods will be treated like other equipment, where the real ownership is not yet transferred to the user (e.g. photocopiers and trucks under hire purchase instalment payments) and will treat them as if they were owned by the users. The remarks "True and Correct" or "True and Fair" appear on their audit reports.
The bankers may know how the accountants and the auditors treat the collateral goods in their books as the "Concept of Going Concern," instead of keeping separate accounts. This could lead to disputes in litigations and it would be difficult to judge which party is right. Importers of course would argue that they should not be held responsible for "unreasonable" terms which are against accounting and audit practices. The banks might argue that the importers sign these trust receipts without querying these terms.
It seems that the banks may enjoy false comfort by adding odd terms which they do not believe would actually be implemented. However, importers have to be aware of what they have really agreed to in the Trust Receipt Agreement. Most importers, when hearing that other companies have also signed the same agreement in printed format, feel content to put their signatures on these documents, having the comfortable feeling that if they have made a mistake, they are not alone. This kind of attitude encourages banks, shipping companies and other parties to add more odd terms to their contracts and in doing so will upset the trade equilibrium between the banks, shippers and traders against the interests of the traders.
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