The code of commerce expressly allows banks to charge their customers to receive goods on a fiduciary/agency basis and to sell them on behalf of the bank (and on the bank`s account) on terms agreed between the bank and the customer. The customer acts as a representative of the Commission and the bank has all the rights of the client over this commodity or its value. To this end, the customer and the bank can enter into a trust agreement whereby the bank authorizes the customer to release the goods as a client on behalf of the bank as part of the bill of lading. Note: Section 9 security interest replaces proof of trust when the single code of commerce has been adopted. The proof of the trust serves as a debt title to the bank, namely that the amount of the loan is repaid on the sale of the commodity. The bank pays the exporter at its end or issues a creditor to the seller (or the seller`s bank) guaranteeing payment of the goods. However, the lender reserves ownership of the goods as collateral. The customer or borrower is required to separate the goods from their other stock and to hold and sell the goods as agents of the bank. Extending short-term financing through a trust receipt assumes that the client or borrower is in a good position with the bank. The bank and the customer must also accept the terms of the trust report, including terms such as due date, interest expense and amount of financing. In the United Arab Emirates, trust reception facilities are often used as documentary financing. Banks and financial institutions provide letters of credit on behalf of their customers to enable customers to use their purchased products (financed by these letters of credit) and to enter into a debt transfer agreement so that the products can be made available to the customer for sale in local markets. The proof of trust ensures that the bank retains ownership of the goods while giving the customer the right to act.
Loans against the trust`s supporting documents or the LATR are facilities that the bank gives to its client, usually an importer of goods or assets. This is essentially a short-term loan against Trust Receipt, which allows the importer to make the payment to the seller. The bank retains ownership of the goods. A buyer can recover the property after repaying the loan amount. Although the LATR installation is generally available for short term for 90 days, it can be extended to one year under special circumstances. You will not receive a trusted credit unless the minimum of the above documents is disclosed. In practice, it is not possible to obtain customs clearances for the export of goods to the customer without actually producing the goods. Banks generally do not hesitate to lend in trust. Because it is certain that the money will be repaid with interest as soon as the goods are sold. This is a win-win situation for both the bank and the borrower, as the bank receives money in the form of interest and the business earns money without having to invest in the first place.
Although the bank has a security interest in the goods under the usual terms of a trust document, the client takes possession of the goods and can do whatever they want with them as long as they do not violate the terms of their contract with the bank. When it decides to terminate the Bank`s security interests and attach itself to the inventory, it can tender for the advanced amount on the goods, which gives it full ownership of the goods. Note that in a trust structure, it would be essential for the client (as an agent) to be obliged to comply with the bank`s mandatory and explicit instructions (as a client`s client) and that if the customer violates these instructions without acceptable excuses, the bank may refuse the agreement. The customer is also responsible for the loss of the goods or a deterioration of the goods and other goods held by the customer, unless the damage or deterioration is due to a foreign cause beyond the customer`s control or an inherent defect of the goods.