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Trust Receipts Law Explained for Importers

The document discusses the Trust Receipts Law and whether it applies to importers engaged in construction. While construction companies import raw materials for their own use, there is a possibility they may also sell imports, which could still fall under the Trust Receipts Law. For a transaction to be considered a true trust receipt, the trustee must be able to sell the goods or use them personally and return any unsold goods.

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Rikka Reyes
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5 views1 page

Trust Receipts Law Explained for Importers

The document discusses the Trust Receipts Law and whether it applies to importers engaged in construction. While construction companies import raw materials for their own use, there is a possibility they may also sell imports, which could still fall under the Trust Receipts Law. For a transaction to be considered a true trust receipt, the trustee must be able to sell the goods or use them personally and return any unsold goods.

Uploaded by

Rikka Reyes
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

And with the alternative obligation to return the

goods to the entruster, if they are unsold, then that


would be covered by the Trust receipts law.

Do not automatically conclude that just because there


is an importer that is engaged in construction it is no
longer included in the Trust Receipts Law. There is a
need to consider what is the purpose of the goods
imported. It is highly possible that since because it is
a construction company, they are the ones who will
make use of the raw materials that they import but
there is still a small possibility that they will try to sell
it even if they are engaged in the construction
business and with that promise it is possible that if
they entered into that trust receipt transaction with
the purpose of financing importation, hence, they are
still covered under the Trust Receipt Law.

In other words, will the trustee be able to comply


either of the obligations wherein, it will be sold by the
trustee or use it for personal purpose? Obviously, it is
not covered because what will he remit if he did not
sell it in the first place.

In addition, if the entrustee is not expected to return


the unsold good covered by the trust receipt
transaction it could also not be considered as a true
trust receipt transaction but a contract of loan.

Again, this usually happens because again what


happened here was that the importer wanted to
borrow money by way of letter of credit and as a form
of security to the bank a trust receipt will be signed.

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