Title to a commodity cargo passes when the contract says so, and documents of title decide who can prove it
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Ossiano Guides · Documents and risk
Incoterms rules settle risk and cost. They leave ownership to the sale contract and the law, so finance providers rely on bills of lading, warehouse receipts and how the courts read them.
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01 · Where title sits
Title is a contract and law question that the Incoterms rules leave open
Who owns a cargo is a separate question from who carries the risk. means legal ownership of the goods. The trade term on a contract does not answer it.
The do not state when title, or ownership of the goods, passes from the seller to the buyer, the US International Trade Administration notes in Know Your Incoterms. What the rules do set is risk. Risk of loss or damage passes from the seller to the buyer at the same point and time as delivery, as an ICC Academy article explains. Our guide to Incoterms covers each rule.
So title comes from the sale contract and the law behind it. In the UK, section 17 of the Sale of Goods Act 1979 says property passes to the buyer at such time as the parties to the contract intend. Property here means ownership. The parties' intention is read from the contract terms, their conduct and the circumstances of the case.
In the US, the rule starts from delivery. Under UCC 2-401(2), unless otherwise explicitly agreed, title passes when the seller completes physical delivery of the goods. UCC is the Uniform Commercial Code, the model sales law adopted across US states.
Both systems let the parties choose. That is why title terms belong in the sale contract, next to the Incoterms rule. This guide describes statute and case law for general reference; take legal advice on any specific contract.
02 · Documents of title
A document of title lets its holder claim, hold and pass on the goods without moving them
Commodity cargoes are bought and sold while they sit on ships or in warehouses. A paper, or an electronic record, stands in for the goods. A is a document such as a bill of lading or warehouse receipt that entitles its holder to receive, hold and dispose of the goods it covers, under UCC 1-201.
At sea, the main document is the , issued by the carrier when it receives the goods. The person who holds it matters. US law defines a as a person having possession of, and a property right in, a bill of lading, in 49 USC 80101.
A seller can keep control by how it makes out the bill. A bill made out "to order" is a . Where the bill makes the goods deliverable to the seller's order, the seller is presumed to keep the , under section 19(2) of the Sale of Goods Act 1979. In plain terms, the seller stays in control of the goods until it hands the bill on. Our guide to the bill of lading covers the document in full.
On land, the warehouse does the same job. The warehouse operator issues , and those receipts form the collateral, the assets that secure the finance, according to UNCTAD's 1996 study of collateralized commodity financing (paragraph 23). The same study notes that in some countries, for example India and the United States, the law explicitly recognizes warehouse receipts as documents of title (paragraph 40).
Receipts can be electronic. The US Warehouse Act, at 7 USC 241, defines a receipt as a warehouse receipt issued under that chapter, including an electronic receipt.
Figure 1 · Interactive
How title and control move with the documents
Pick a document. Each step shows who holds it and what that holder can do.
Steps are drawn from UK Sale of Goods Act 1979 ss.17 and 19; UCC 1-201 and 2-401; UNCTAD/COM/84 (1996); and The Erin Schulte [2014] EWCA Civ 1382. The final step on each tab is the Ossiano Research Desk's reading.
03 · Collateral in practice
Finance providers take title or security through documents, so the documents must be real and acknowledged
A finance provider that funds stored goods wants control of them. In warehouse receipt finance, a bank or trader relies on goods in an independently controlled warehouse to secure the financing, as UNCTAD's 2001 study of structured commodity financing explains. This is a form of .
The same idea runs through . The Global Supply Chain Finance Forum says the finance provider takes title to the goods through negotiable warehouse receipts or warrants, or through an assignment of rights. Our guide to inventory finance and our card on warehouse finance cover these structures.
A receipt is only as good as the goods behind it and the warehouse's word. In Mercuria Energy Trading v Citibank NA [2015] EWHC 1481 (Comm), a financed aluminum and copper held in warehouses at Qingdao and Penglai. The transactions were worth about USD 271 to 272 million. The court held that handing over indorsed warehouse receipts, without by the warehouse operator, was not delivery of the metal (paragraph 77). Attornment means the warehouse confirms it now holds the goods for the new party.
In ED&F Man Capital Markets v Come Harvest Holdings [2022] EWHC 229 (Comm), repo deals were secured by 92 purported warehouse receipts for nickel. The court found the receipts were forgeries. Our guide to fraud controls in trade finance covers the checks that guard against this.
Price is the other risk. A finance provider advances only part of the goods' value. If the price falls, the goods may no longer cover the advance at the agreed rate. Here is a worked example with inputs for illustration only. A receipt covers 2,000 tonnes at $500 per tonne, so the collateral is worth $1,000,000.00. At a 70 percent advance rate, the loan is $700,000.00. If the price falls 20 percent, the goods are worth $800,000.00. At 70 percent, that supports a loan of $560,000.00. The client would need to pay down $140,000.00 to restore the advance rate.
Figure 2 · Try it
When the commodity price falls under a warehouse receipt loan
Move the price fall. The top-up needed to restore the advance rate updates.
Loan today
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Collateral value after the fall
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Top-up to restore the advance rate
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How it works: collateral value equals tonnes times price; the loan equals that value times the advance rate; the top-up equals the loan minus the value after the price fall times the advance rate.
Our Research Desk applied the advance rate to the collateral value before and after the price fall. Inputs are for illustration and are not Ossiano pricing.
This calculator explains the concept only. Advance rates, margin terms and valuation methods vary by commodity, warehouse and lender.
04 · Title warranties
A letter of indemnity can promise good title, and courts enforce that promise
Sometimes the bill of lading is not ready when payment falls due. The seller may then give a instead, a written promise to cover the other side's loss. That letter can include a promise that the seller has good title.
In Credit Agricole CIB v PPT Energy Trading [2023] SGCA(I) 7, a bank issued a for about USD 23.66 million for a crude oil purchase. The buyer that applied for the credit had acted fraudulently. The seller presented a letter of indemnity warranting marketable title, because bills of lading were unavailable. The Court of Appeal of Singapore held the credit stayed binding despite the applicant's fraud. It awarded the bank USD 10,319,470.81 for breach of the marketable title warranty in the letter of indemnity.
"significantly undermine the whole system of documentary credits"
Court of Appeal of Singapore, CACIB v PPT [2023] SGCA(I) 7, paragraph 31, October 24, 2023
Holding the bill also gives a bank the right to sue. In The Erin Schulte [2014] EWCA Civ 1382, gasoil was sold under a letter of credit confirmed by Standard Chartered Bank, the . The cargo was discharged against a letter of indemnity. The bank paid the seller on July 7, 2010. The English Court of Appeal held the bank became holder of the bill of lading on that date, when possession was transferred voluntarily and unconditionally and accepted (paragraph 28). That gave the bank rights of suit under the Carriage of Goods by Sea Act 1992. Our guide to letters of credit explains how the credit works.
Figure 3
Four rulings on title, receipts and delivery
Each row gives the case, the value at stake as stated by the court, and the holding.
Sources: Court of Appeal of Singapore; Court of Appeal and High Court of England and Wales. Judgments dated 2014 to 2023.
05 · New law
Model laws are giving warehouse receipts and electronic records a common legal basis
Warehouse receipt law differs from country to country. A model law gives countries one text to adopt. The was adopted by UNCITRAL on June 26, 2024, and by the UNIDROIT Governing Council on May 8, 2024, according to the UNCITRAL text page. It covers paper and electronic warehouse receipts on a medium-neutral and technology-neutral basis, the UN Information Service in Vienna said.
Bills of lading are on the same path. A bill of lading is a : whoever holds it can claim what it records. The aims to enable the legal use of electronic transferable records both domestically and across borders, covering documents such as bills of lading and promissory notes, per UNCITRAL. For an electronic record, takes the place of physical possession.
Thirteen jurisdictions have legislation based on or influenced by the MLETR, according to the UNCITRAL status page (2025). They include Singapore (2021), the UK (2023), France (2024) and China (2025, bills of lading only). Our guides to electronic bills of lading and MLETR and digital trade law go further.
06 · Ossiano view
Title in commodity trade is a document question, and the documents are gaining legal support
OBSERVATION 01
The contract sets the moment
UK and US sale law both let the parties set when title passes, under the Sale of Goods Act and UCC 2-401. So title terms sit in the contract beside the Incoterms rule.
OBSERVATION 02
Acknowledged receipts carry the weight
Mercuria v Citibank turned on attornment by the warehouse operator. That puts the operator's confirmation at the center of finance backed by receipts.
OBSERVATION 03
Warehouse receipts now have a model law
UNCITRAL and UNIDROIT adopted the MLWR in 2024, on a medium-neutral and technology-neutral basis. Paper and electronic receipts now share one reference text.
Summary
The contract decides when title passes, and the documents prove who holds it
Incoterms rules do not say when title passes. They set when risk passes, at delivery. Under the UK Sale of Goods Act, property passes when the parties intend. A bill of lading to the seller's order means the seller is presumed to keep the right of disposal. Under UCC 2-401, title passes when the seller completes physical delivery, unless explicitly agreed otherwise.
Documents of title, such as bills of lading and warehouse receipts, let the holder receive, hold and dispose of the goods. India and the United States recognize warehouse receipts as documents of title in law. Courts have tested these documents: receipts without the warehouse's acknowledgment were not delivery, forged receipts gave no protection, and a title promise in a letter of indemnity was enforced. New model laws now cover warehouse receipts and electronic records.
Related guides: Incoterms; The bill of lading; Structured commodity finance; Financing agricultural commodity trade; Fraud controls in trade finance; Inventory finance.
Instrument cards: Warehouse finance (warehouse receipts); Inventory finance; Structured commodity finance; Tolling. Every term on this page is defined in the Trade Finance Glossary.
For questions on how title and documents apply to existing or planned trade flows, contact the Ossiano Research Desk.
Sources
- High Court (Commercial Court), England and Wales, ED&F Man Capital Markets v Come Harvest Holdings [2022] EWHC 229 (Comm), February 16, 2022. Supports: 92 purported warehouse receipts for nickel found to be forgeries.
- High Court (Commercial Court), England and Wales, Mercuria Energy Trading v Citibank NA [2015] EWHC 1481 (Comm), May 22, 2015. Supports: repo values of about USD 271 to 272 million; tender of warehouse receipts without attornment was not delivery (paragraph 77).
- Court of Appeal of England and Wales, Standard Chartered Bank v Dorchester LNG (2) Ltd (The Erin Schulte) [2014] EWCA Civ 1382, October 22, 2014. Supports: the bank became holder of the bill of lading on July 7, 2010, with rights of suit under the Carriage of Goods by Sea Act 1992 (paragraph 28).
- UNCITRAL, UNCITRAL-UNIDROIT Model Law on Warehouse Receipts (2024), text page, June 26, 2024. Supports: adoption by UNCITRAL on June 26, 2024 and by the UNIDROIT Governing Council on May 8, 2024.
- US International Trade Administration, Know Your Incoterms, undated. Supports: Incoterms rules do not state when title passes from seller to buyer.
- UK legislation (legislation.gov.uk), Sale of Goods Act 1979, section 17, 1979. Supports: property passes when the parties to the contract intend it to pass.
- UK legislation (legislation.gov.uk), Sale of Goods Act 1979, section 19, 1979. Supports: section 19(2), a bill of lading to the seller's order means the seller is presumed to reserve the right of disposal.
- Uniform Law Commission and American Law Institute (UCC text hosted by Cornell LII), UCC 2-401, Passing of title, undated. Supports: UCC 2-401(2), title passes on completion of physical delivery unless otherwise explicitly agreed.
- Uniform Law Commission and American Law Institute (UCC text hosted by Cornell LII), UCC 1-201, General definitions, undated. Supports: UCC 1-201(b), definition of document of title.
- UNCTAD secretariat, Collateralized Commodity Financing, with Special Reference to the Use of Warehouse Receipts (UNCTAD/COM/84), July 2, 1996. Supports: the warehouse operator issues warehouse receipts that form the collateral (paragraph 23); law in India and the United States explicitly recognizes warehouse receipts as documents of title (paragraph 40).
- ICC Academy (guest post by Bob Ronai), Insider thoughts: Bob Ronai on Incoterms 2020 Rules; What are they about?, March 26, 2020. Supports: risk passes from seller to buyer at the same point and time as delivery.
- Office of the Law Revision Counsel, US House of Representatives, 49 USC 80101, Definitions, undated. Supports: definition of holder of a bill of lading.
- Office of the Law Revision Counsel, US House of Representatives, 7 USC 241, Definitions (United States Warehouse Act), undated. Supports: a receipt includes an electronic receipt.
- UNCTAD secretariat, Potential Applications of Structured Commodity Financing Techniques for Banks in Developing Countries (UNCTAD/ITCD/COM/31), August 29, 2001. Supports: warehouse receipt finance relies on goods in an independently controlled warehouse (paragraph 51).
- Global Supply Chain Finance Forum (ICC, BAFT, EBA, FCI, ITFA), Standard Definitions: Loan or Advance against Inventory, 2016. Supports: inventory finance security through title via negotiable warehouse receipts or warrants, or an assignment of rights.
- Court of Appeal of Singapore, Credit Agricole CIB v PPT Energy Trading [2023] SGCA(I) 7, October 24, 2023. Supports: USD 10,319,470.81 awarded for breach of the marketable title warranty in a letter of indemnity; the letter of credit of about USD 23.66 million stayed binding despite the applicant's fraud (paragraph 31).
- United Nations Information Service Vienna, Press release UNIS/L/358, Model Law on Warehouse Receipts adopted, June 27, 2024. Supports: the MLWR covers paper and electronic warehouse receipts on a medium-neutral and technology-neutral basis.
- UNCITRAL, UNCITRAL Model Law on Electronic Transferable Records (2017), 2017. Supports: purpose of the MLETR.
- UNCITRAL, UNCITRAL MLETR status page, 2025. Supports: 13 jurisdictions with legislation based on or influenced by the MLETR.
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