Home Mr Old Man Q&A TRUST RECEIPT

TRUST RECEIPT

3 min read
4
0
4,318

facebook_1443687773366

QUESTION

Dear Mr. Old Man,

We presented via our bank one set of documents under an LC at sight to the issuing bank for payment. Since having not received the payment, we contacted the importer and were informed that they were applying for Trust Receipt.

What is Trust Receipt? Why must the importer apply for Trust Receipt?

Thank you

LC

————

ANSWER

Dear LC,

Trust Receipt is a type of short-term loan which the bank gives to the importer to settle the goods imported under letter of credit or under collection transaction where the title of the goods is held by the bank.

When the transport documents are sent to the bank, the importer will submit to the bank Trust Receipt Application in which the importer undertakes:

+ to acknowledge the issuing bank’s interest in the goods

+ to hold the goods in trust for the bank

+ to have the goods insured with the bank as the beneficiary.

+ to hold any sales proceeds in trust for the bank

If the bank approves the Trust Receipt Application, it pays the exporter/beneficiary  and releases the documents to the importer to enable the importer to take delivery of the goods. The importer sells the goods on the behalf of the bank and uses the proceeds to pay off the loan.

Under letter of credit transaction  (as in your case), Trust Receipt facility is a financing arrangement between the issuing bank and the importer/applicant. There is no need for you (the beneficiary) to care about Trust Receipt because the issuing bank must pay if the documents presented are complying notwithstanding whether the importer has applied for Trust Receipt or not.

Kind regards,

Mr. Old Man

Load More Related Articles

Check Also

INVOICE NOT CERTIFYING WHAT HAS NOT BEEN SHIPPED

QUESTION Dear Sir, LC allows both AIR and SEA shipment. Amount: USD 100,000 Shipment by AI…