Published — January 22, 2021
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
Read also: ON COVERED TRANSACTIONS UNDER ANTI-MONEY LAUNDERING ACT
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A Trust Receipt transaction is one where the entrustee has the obligation to deliver to the entruster the price of the sale, or if the merchandise is not sold, to return the merchandise to the entruster.
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A Trust Receipt is a commercial document whereby the bank releases the goods in the possession of the entrustee but retains ownership
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It is a security arrangement to which a bank acquires ownership of the imported personal property.
The utilization of trust receipts is a convenient business device in order to assist importers and merchants solve their financing problems.
What then constitutes a trust receipt transaction?
The law says:
A trust receipt transaction, is any transaction by and between a person referred to as the entruster, and another person referred to entrustee, whereby the entruster, who owns or holds absolute title or security interests over certain specified goods, documents or instruments, releases the same to the possession of the entrustee upon the latter’s execution and delivery to the entruster of a signed document called a “trust receipt”. The entrustee binds himself to hold the designated goods, documents or instruments in trust for the entruster and to sell or otherwise dispose of the goods, documents or instruments with the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as appears in the trust receipt or the goods, documents or instruments themselves if they are unsold or not otherwise disposed of, in accordance with the terms and conditions specified in the trust receipt.
Simply stated, a trust receipt transaction is one where the entrustee has the obligation to deliver to the entruster the price of the sale, or if the merchandise is not sold, to return the merchandise to the entruster. There are, therefore, two obligations in a trust receipt transaction: the first refers to money received under the obligation involving the duty to turn it over to the owner of the merchandise sold, while the second refers to the merchandise received under the obligation to “return” it to the owner.
In Garcia vs. CA G.R. No. 119845, July 5, 1996, the Court said that a Trust Receipt is a commercial document whereby the bank releases the goods in the possession of the entrustee but retains ownership thereof while the entrustee shall sell the goods and apply the proceeds for the full payment of his liability with the bank. It is a security arrangement to which a bank acquires ownership of the imported personal property.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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