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Trust Receipt
A Trust Receipt is a document signed by a buyer on the strength of which a bank releases merchandise for the purpose of manufacture or sale but retains title to the goods. The Trust Receipt itself is a written declaration by a customer to a bank that ownership in goods released by the bank is retained by the bank. The buyer signing the trust receipt is obligated to maintain the identity of the goods or the proceeds thereof distinct from other assets and to hold them subject to repossession by the bank or to hold any proceeds of the sale of the merchandise for remittance to the bank.
Trust receipts are used extensively in the Far East where international transactions still occur occasionally on terms of 60 or 90 days Documents against Acceptance. The collecting bank permits buyers in good standing to clear the merchandise under a trust receipt contract before the maturity date of the draft. In some countries, 'warrants' serve the same purpose.
Edited by Michael C. Dennis. Mr. Dennis is a consultant specializing in improving the quote to cash process.