Meaning of warehouse receipt
A warehouse receipt is a form of document used in the futures market to ensure the quality and quantity of a specific commodity stored in an approved facility. Warehouse receipts are part of the processing of business transactions involving physically delivered futures contracts.
Instead of immediately moving the actual goods under the contract, the warehouse receipt is used to settle the futures contract. In the case of precious metals, a warehouse receipt can also be called a vault receipt.
Warehouse receipts can be transferable or non-transferable.
Negotiable warehouse receipt
Negotiable warehouse receipts specify that the goods can be delivered to the document holder, which means they can be used as collateral for a loan. If the borrower defaults, the lender takes over the warehouse receipt and can sell the goods for payment of the loan.
Non-negotiable warehouse receipt
A non-negotiable warehouse receipt specifies to whom the goods should be delivered.
How to use warehouse receipt?
Stored goods cannot be delivered without a receipt.
Warehouse receipts are used to settle futures contracts. A vault receipt is an example of a warehouse receipt, but it is for metal. Vault receipts show ownership of precious metals stored in warehouses, banks and other approved facilities.
Warehouse receipts are used for stored goods that will be delivered or used at a later date. They are called physically delivered commodities. Physically delivered commodities are used in the production and manufacture of many commodities.
Tracking physical inventory is a critical process for future contracts. Inventory of goods must be registered with the designated authority and must be inspected and certified before it can be used in the future market.
When to use warehouse receipts?
Warehouse receipts are typically used when a seller signs a contract with a manufacturer to purchase some item that is not in stock, and then uses the warehouse receipt to collect the product at the warehouse.
