Republic of the Philippines
HOUSE OF REPRESENTATIVES

Quezon City

SEVENTEENTH CONGRESS
First Regular Session

House Bill No. 6310

INTRODUCED BY REPRESENTATIVE ARTHUR C. YAP

EXPLANATORY NOTE
L Context

Agriculture remains to be an important component of the Philippine Economy. Based on
statistics provided by the Philippine Statistics Authority, the total share of Agriculture in the GDP
of the Philippines was at 9% in 2015.' Based on those same statistics, 11,290,000 (eleven million
two hundred ninety thousand) persons were employed in the Agricultural sector in 2015, giving
the sector a 29% share in the total amount of employment in the Philippines.*

Despite its contributions to the GDP and its employment of millions of Filipinos, the
Philippines Statistic Authority has reported that the Agricultural sector declined by 1.1% in 2016.
This worrying decline, if not countered, may lead to long-term problems not only for the
Agricultural sector, but for other important facets of the economy such as food security,
employment, the price of agricultural commodities

nL Access to Finance for Agricultural Sector

One key reason for the decline of the Agricultural sector is a lack of available funds. While
there have been laudable attempts by Congress, as well as the Bangko Sentral ng Pilipinas, to
provide credit to the Agricultural sector — specifically through R.A. 10000 or the Agri-Agra
Reform Credit Act of 2009 and BSP Circular No. 736 s. 2011 — there is still room for improvement.
While members of the Agricultural sector in good financial standing may be able to obtain credit

* Philippine Statistics Authority. Philippine Agriculture in Figures, 2015. Last Accessed on August 20, 2017. (Available
at http://countrystat. psa gov, ph/?cont=3).

2 Philippine Statistics Authority. Philippine Agriculture in Figures, 2025, Last Accessed on August 20, 2017. (Available
at http://countrystat.psa.gov.ph/?cont=3).

» Philippine Statistics Authority. Philippine Economy Posts 6.6 Percent GOP Growth in the Fourth Quarter of 2016; 6.8
Percent in 2016, Last Accessed on August 20, 2017. (Available at https://psa.gov.ph/content/philippine-economy-
posts-66-percent-gdp-growth-fourth-quarter-2016-68-percent-2016)


from banks and other institutions under R.A. 10000, the reality is that most of those in need may
not be able to obtain the good financial standing necessary to obtain the funding they require

TI. Current Legal Regime

Under the current legal regime, a simple way by which members of the Agricultural sector can
obtain credit is by storing their goods in a warehouse and trading or encumbering the warehouse
receipt. This much has been provided for under Act No. 2137 of the Warehouse Receipts Law
which was enacted in 1912. However, this law is mainly outdated and fails to take advantage of
modern technological advances in order to prevent against fraud. By using a system largely reliant
‘on the issuance of paper receipts which are left to individual warehousemen to issue, larger
financial institutions such as banks would justifiably be hesitant to provide credit in exchange for
these paper receipts. Clearly, the system needs to be revised to promote transparency, security, and
ease of doing business.

IV. The Proposed Warehouse Receipts Law of 2018

Given advances in technology, the new Warehouse Receipts Law proposes to have a central
Registry for all Warehouse Receipts whose data shall be readily available online, This Registry
shall be managed by the Securities and Exchange Commission, who shall act in consultation with
other regulatory agencies in order to ensure the success of the system, Likewise, a system for
registering and accrediting both Warehousemen and Warehouses shall be put in place in order to
ensure that only qualified Warehousemen and Warehouses are allowed to store and handle the
goods within the auspices of the proposed Law.

Likewise, in order to deter fraud, stricter penalties have been put in place for those who engage
in prohibited activities such as the issuance of fake warehouse receipts, and the making of false
entries in a warehouse receipt.

Ultimately, a system as simple as that of a bag check counter is envisioned, wherein a party
can simply drop off his wares in the Warehouse — assured that his goods shall be taken care off ~
in exchange for a Warehouse Receipt which he can easily trade, or barter, or sell in order to obtain
the necessary credit. Furthermore, given the simplicity of the system and the use of secure methods
such as the electronic Registry, financial institutions would be enticed to accept such Receipts in
exchange for funds since they can easily verify the legitimacy of the Warehouse Receipt, as well
as the presence and quality of goods in the Warehouses,

Vv. Benefits of the New Warehouse Receipts Law

Together with the proposed Secured Transactions Bill that is pending in Congress, the
Warehouse Receipts Law of 2018 seeks to provide access to credit to those who need credit the
most. By helping our fellow countrymen utilize not only their crops but other movable items they
may choose to store in Warehouses, we give them a fast and reliable way to obtain credit from
established lending institutions such as banks. Likewise, by creating a Registry where parties check
the veracity of what is stated in the Warehouse Receipt, we enable parties to transact knowing that
they are not being victimized by any scam or scheme.



By enabling a faster way by which those in the agricultural sector, as well as all other sectors,
can convert their wares into credit, we would be able to facilitate a quicker circulation of money
through spending, which would translate to a better economy, and a brighter future.

In view of the foregoing, immediate passage of this bill is camestly sought.

Hon. ARTHUR C. YAP
Representative


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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
Second Regular Session

0. 6310

House Bill

INTRODUCED BY REPRESENTATIVE ARTHUR C. YAP

AN ACT
STRENGTHENING AND MODERNIZING THE WAREHOUSE RECEIPTS LAW OF THE
PHILIPPINES IN ORDER TO PROVIDE A LEGAL FRAMEWORK IN THE PHILIPPINES THAT
SHALL FACILITATE TRADE, COMMERCE, AND OTHER RELATED PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:

CHAPTER 1 — GENERAL PROVISIONS

SECTION 1. Title. - This Act shall be known as the “Philippine Warehouse Receipts
Act of 2018.” (n)

SEC. 2. Declaration of Policy. — It is the policy of the State to promote economic
activity by increasing access, particularly for entities engaged in agricultural businesses
such as farming, to least cost credit by establishing a simplified, unified, and modern
framework for the storage of goods in warehouses and the subsequent trading of
interests therein.

SEC. 3. Definition of Terms. ~ As used in this Act, the following terms shall mean:

(a) Buyer in Good Faith —a person that buys goods in good faith without personal

knowledge of any defect in the title of the seller

Default — the failure or refusal of a debtor to pay in accordance with, or

otherwise perform an obligation under, a warehouse receipt.

Deposit — the act of transferring actual possession of goods to a

warehouseman.

(d) Fungible Goods — goods of which any unit is, from its nature by mercantile
custom, treated as the equivalent of any other unit.

{e) Goods - chattels or merchandise in storage or which has been or is about to
be stored except those that are meant for direct import or export. Goods, as
defined, shall not include any living objects.

{f) Holder — one who has both actual possession of a warehouse receipt and a

right of property therein.

Issuer — in the case of a release order, the holder or his agent who issued the

release order. An agent or employee of a holder may be considered an issuer

provided he issued the release order with real or apparent authority,

(b)

(c)

(a)


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regardless if the goods were not actually released or wrongly described, or if
he acted in violation of the holder's instructions.

(h) Notice — a statement of information that is registered in the Registry relating
to goods stored in a warehouse that are subject of a warehouse receipt.

(i) Person — includes both natural and juridical persons.

(i) Person entitled under the document — the valid holder of the warehouse
receipt, or the person to whom release of the goods is proper.

(k) Purchase — a voluntary transaction where one party obligates himself to
transfer ownership over the warehouse receipt and the goods they cover in
exchange for the other party paying a price certain in money or its equivalent.

()_ Receipt—a warehouse receipt.

{m) Record — information that is inscribed on a tangible medium or that is stored
in an electronic or other medium and is retrievable in perceivable form.

{n) Registry — the electronic Warehouse Receipts Registry.

{o) Release — means voluntary transfer of the warehouseman of actual
possession of goods deposited in a warehouse to a person entitled under a
warehouse receipt.

(p) Release Order — means a record that contains an order directed to a
warehouseman to release the goods to a specified person.

(a) Sign - the intentional adoption or ratification of a record through a tangible
or electronic symbol associated with the party making the sign.

(") Warehouse — a place for storing goods for profit within the territory of The
Philippines.

{s) Warehouse receipt — a receipt, whether electronic or otherwise, issued by a
warehouseman, evidencing title over goods stored at a warehouse.

{t) Warehouseman — a person lawfully engaged in the business of storing goods
for profit.

(CHAPTER 2 - WAREHOUSE RECEIPTS

SEC. 4. Creation of Uniform Registry System for Electronic Warehouse Receipts
~The Securities and Exchange Commission is hereby tasked with creating an online and
uniform Registry where all electronic Warehouse Receipts can be kept and accessed, as
well as rules and regulations pertaining specifically to registration procedures and
procedures on how to update or amend electronic Warehouse Receipts. The Securities
and Exchange Commission is likewise authorized to engage the services of third parties in
creating and maintaining the Registry.

‘SEC. 5. Local Sub-Registry — in addition to the Registry created and maintained by
the Securities and Exchange Commission, all warehouses must contain a sub-Registry
specifically for goods contained in them. Failure of a warehouse to keep a sub-Registry,
as well as any fraud committed thereon, shall be grounds for the revocation of a
warehouse’s license to operate.

SEC. 6. Creation of Warehouse Receipts ~ Only a duly registered and accredited
Warehouseman operating a duly registered and accredited Warehouse may validly create
an entry in the Registry for which an electronic Warehouse Receipt shall be issued.

SEC. 7. Nature of Warehouse Receipts — All Warehouse Receipts, regardless of
what is stated upon their face, are negotiable at the option of the holder.


SEC. 8. Original Warehouse Receipts - The electronic copy of a Warehouse
Receipt shall be considered as the Original. Any physical copy of the electronic Warehouse
Receipt that is a Certified True Copy of the same shall be valid. However, in case of any
discrepancy between the electronic Warehouse Receipt and a Certified True Copy of the
same, the electronic Warehouse Receipt shall be controlling.

A Certified True Copy of the electronic Warehouse Receiptis a representation and
warranty that such receipt is an accurate copy of an original electronic Warehouse Receipt
properly registered and un-canceled at the date of the issue of the copy.

SEC, 9. Issuance of Certified True Copies of electronic Receipts — The Securities
and Exchange Commission is hereby authorized to create rules and regulations for the
orderly and expedient issuance of Certified True Copies of electronic Receipts.

SEC. 10. Transactions involving Physical Copies of Warehouse Receipts — All
transactions involving Certified True Copies of Warehouse Receipts are valid provided
they comply with existing Philippine Laws regarding the form and substance of the mode
of transfer. However, the transferee is charged with the duty to have the electronic
Warehouse Receipt amended to reflect his interests therein. In case there are several
contesting parties, the buyer in good faith who had the electronic Warehouse Receipt
amended in his favor first shall be the valid owner of the same.

SEC. 11. Notification Requirement — Whenever an amendment to the electronic
Warehouse Receipt pursuant to a valid transaction is sought by a party, whether he be
the transferee or transferor, the other party to the transaction must be notified of the
impending amendment. Such notified party shall be given three (3) working days from
receipt of notification to contest the amendment, otherwise it shall be ministerial on the
part of the Warehouseman to effect such amendment to the Registry.

SEC. 12. Required Contents of a Warehouse Receipt — Warehouse Receipts must
contain the following:
{a) A description of the goods or packages containing them,
{b) The date and time when the goods or packages were deposited with the
Warehouseman,
(c) The location of the Warehouse where the goods are stored,
(d) The date and time when the Receipt was issued,
(e) The consecutive number of the Receipt,
{f) The rate of storage charges,
(g) The signature of the Warehouseman which may be made by his authorized
agent,
(h) If the receipt is issued for goods of which the warehouseman is owner, either
solely or jointly or in common with others, the fact of such ownership, and
(i) A statement of the amount of advances made and of liabilities incurred for
which the warehouseman claims a lien. If the precise amount of such
advances made or of such liabilities incurred is, at the time of the issue of,
unknown to the warehouseman or to his agent who issues It, 2 statement of
the fact that advances have been made or liabilities incurred and the purpose
thereof is sufficient,
A statement of any interests on the Warehouse Receipt or goods subject
thereof, as well as the dates when such interests were registered

i)


SEC. 13. Required Contents of Certified True Copies of Warehouse Receipts — All
Certified True Copies of Warehouse Receipts must contain all the required contents of an
Original Warehouse Receipt as well as:

(a) A marking or statement that the copy is a mere copy and that in case of any
discrepancy, the original shall be controlling,
(b) The date and time when the copy was issued.

SEC. 14, Arbitration Clause — If a holder so desires, and with the express
conformity of the Warehouseman, he may cause to be written into the electronic
Warehouse Receipt a clause which states that the civil aspect of any liability arising from
the Warehouse Receipt shall be subject to Arbitration. in no instance shall an Arbitration
clause found in a Warehouse Receipt bind holders of the Receipt prior to its inclusion.

(CHAPTER 3 - WAREHOUSEMEN

SEC. 15. Registration of Warehouseman — All warehousemen are required to
register with the Securities and Exchange Commission. The Securities and Exchange
Commission is hereby ordered and authorized to create rules and regulations to facilitate
the registration of warehousemen. All warehousemen who are not registered and
accredited with the Securities and Exchange Commission are prohibited from creating
warehouse receipts.

SEC 16. Screening Process for Warehousemen - To ensure the quality of the
Warehousemen, the Securities and Exchange Commission is hereby authorized to create
a screening process for Warehousemen which may include the adoption of written
examinations. The Securities and Exchange Commission may coordinate with other
governmental bodies in order to create a viable screening process for Warehousemen,

SEC. 17. Warehouseman’s Bond ~ Prior to operation, a Warehouseman must post
a bond to answer for any liabilities he may have during the effectivity of his license. The
Securities and Exchange Commission is hereby ordered and authorized to come up with
rules and regulations concerning the Warehouseman’s bond.

SEC. 18. Duty of Warehousemen to Create Electronic Warehouse Receipts —
When goods are deposited with the Warehouseman, the Warehouseman has the duty to
create an electronic Warehouse Receipt in the Registry to reflect the deposit of such
goods. Likewise, a Warehouseman has the duty to cause the amendment of the electronic
Warehouse Receipt when he is informed by a valid holder of any change in the details
found on the electronic Warehouse Receipt, including but not limited to changes in
interest.

SEC. 19. Liability for Omission of Required Contents ~ A warehouseman shall be
liable to any person for all damages caused by his omission from a Warehouse Receipt of
any detalls required to be placed on a Warehouse Receipt under this Act.

‘SEC. 20. Permissible Insertions — A warehouseman may insert in a receipt issued
by him any other terms and conditions provided that such terms and conditions shall not:

{a) Be contrary to the provisions of this Act;


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(b) In any wise impair his obligation to exercise that degree of care in the safe-
keeping of the goods entrusted to him which a reasonably careful man would
exercise in regard to similar goods of his own.

SEC. 21. Obligation of Warehousemen to Release Goods — A Warehouseman, in
the absence of some lawful excuse provided by this Act, is bound to release the goods
upon a written demand from the party registered under the electronic Warehouse
Receipt provided that such demand is accompanied with:

(a) An attached Certified True Copy of the electronic Warehouse Receipt clearly
showing that the demanding party is the registered owner of the electronic
Receipt;

{b) An offer to satisfy the warehouseman's lien coupled with the subsequent
satisfaction thereof; and

(c) An offer to sign, when the goods are released, an acknowledgment that the party
causing the release is lawfully entitled to the goods, and that such goods have
been released to them.

When the Warehouseman receives a valid written demand, it is ministerial upon him
to release the goods absent the existence of a lawful excuse for such refusal as found in
this Act. Failing to establish such lawful excuse, the Warehouseman shall be liable for all
damages stemming from his failure or refusal to release the goods

SEC. 22. Valid Excuses for Non-Release of Goods ~ A Warehouseman can validly
refuse to release the goods when:

(a) The party asking for the release of goods falls to deliver a valid written demand
as contemplated in this Act;

(b) There is a Court Order prohibiting him from releasing the goods;

(c) Despite the offer to satisfy the same, the Warehouseman’s lien was not fully
satisfied;

(d) The demanding party reneges on its offer to sign an acknowledgment that the
party causing the release is lawfully entitled to the goods, and that such goods
have been released to them.

SEC. 23. Release of Goods to Agent — A Warehouseman is justified in releasing
the goods to an agent of a party entitled to the goods under the electronic Warehouse
Receipt provided that such agent had an apparent or real authority from his principal to
cause the release of the goods. Where the Warehouseman released the goods to an agent
absent any showing of real or apparent authority from the principal, both the
Warehouseman and the Agent shall be liable for all damages stemming from the unlawful
release.

SEC. 24, Obligation to Cancel Electronic Warehouse Receipt upon Release — A
Warehouseman has the duty to cause the electronic Warehouse Receipt to be marked
“cancelled” once he has validly released the goods, regardless if the release was in full or
merely partial.


When a Warehouseman fails to have the electronic Warehouse Receipt cancelled
after releasing the goods, he shall be liable to anyone who purchases in good faith and
for value such receipt, on account of his inability to release the goods to him, whether
such purchaser acquired title to the receipt before or after the release of the goods by
the Warehouseman.

SEC. 25. Effect of Partial Release of Goods ~ If the party causing the partial release
of goods wishes to keep the remaining goods stored in the same Warehouse, he shall
Inform the Warehouseman of his intention and have a new Warehouse Receipt created
in his favor over the remaining goods. Otherwise, it is incumbent upon the
Warehouseman to remove such goods no longer covered by a valid Warehouse Receipt
from his Warehouse.

SEC. 26. Fraudulent Alterations of Receipt — Any fraudulent alteration made by
the Warehouseman on the electronic Warehouse Receipt or any copy thereof shall make
him liable for all damages stemming from the unlawful alteration. If the fraudulent
alteration was caused by any party other than the Warehouseman, and without the
Warehouseman’s knowledge that the same was fraudulent, the Warehouseman shall
‘only be liable according to the tenor of Warehouse Receipt prior to its fraudulent
alteration.

SEC. 27. Innocent Purchaser of Fraudulently Altered Receipt ~ Any purchaser of
the receipt for value who had no knowledge that the same had been fraudulently altered
by the Warehouseman at the time of purchase shall acquire the same rights against the
Warehouseman which such purchaser would have acquired if the receipt had not been
altered at the time of purchase.

In the event the fraudulent alteration was caused by any party other than the
Warehouseman, and without the Warehouseman’s knowledge that the same was
fraudulent, both the Warehouseman and the party causing the alteration shall be held
liable to the innocent purchaser according to the tenor of the altered Receipt, but the
liability of the Warehouseman shall not go beyond what he would have been liable for
according to the tenor of Warehouse Receipt prior to its fraudulent alteration.

SEC, 28. Irretrievable Loss of Electronic Receipts ~ The Securities and Exchange
Commission is hereby authorized to settle claims and disputes stemming from the
irretrievable loss of electronic Warehouse Receipts in the Registry. In such cases, the
claimant must adequately show he had a valid and existing electronic Warehouse Receipt
in the Registry, and that such electronic Warehouse Receipt was, in fact, lost, destroyed,
or corrupted through no fault of his own. The ruling of the Securities and Exchange
Commission shaill be final and executory.

SEC. 29. Liability for Non-Existence or False Description of Goods ~
Warehouseman shall be liable to the holder of a receipt for damages caused by the non-
existence of the goods or by the failure of the goods to correspond with the description
thereof in the receipt at the time of its issue.

if, however, the goods are described in a receipt merely by marks or labels upon
them or upon packages containing them, or by a statement that the goods are said to be
goods of a certain kind or that the packages containing the goods are said to contain


goods of a certain kind, or by words of like purport on the goods themselves or on their
packages or containers, such statements, if true, shall not render liable the
Warehouseman issuing the receipt, even if the goods are not of the kind which the marks.
or labels upon them indicate, or of the kind they were claimed to be by the depositor.

SEC. 30. Liability for Damage or Loss to Goods ~ A Warehouseman shall be liable
for any loss or injury to the goods caused by his failure to exercise such care in regard to
them as reasonably careful owner of similar goods would exercise, but he shall not be
liable, in the absence of an agreement to the contrary, for any loss or injury to the goods
which could not have been avoided by the exercise of such care.

SEC. 31. General Prohibition on Co-Mingling of Goods ~ Except where expressly
allowed by this Act, a Warehouseman shall keep the goods under his care reasonably
separated from the goods of other depositors, and from other goods of the same
depositor for which a separate receipt has been created, as to permit at all times the
identification and redelivery of the goods deposited.

SEC. 32. When Co-Mingling of Goods Allowed — if authorized by agreement or by
custom, a Warehouseman may mingle fungible goods with other goods of the same kind
and grade. In such case, the various depositors of the mingled goods shall own the entire
mass in common and each depositor shall be entitled to such portion thereof as the
amount deposited by him bears to the whole.

SEC. 33. Liability of Warehouseman for Unauthorized Co-Mingling — The
Warehouseman shall be severally liable to each depositor for the care and redelivery of
his share of such mass to the same extent and under the same circumstances as if the
goods had been kept separate.

(CHAPTER 4 - WAREHOUSES

‘SEC. 34, Establishment of the Warehouse Accreditation Council. - The Securities
and Exchange Commission shall establish an accrediting body for Warehouses to be
known as the Warehouse Accreditation Council, herein referred to as the “Council”. The
Council shall be composed of: four (4) permanent members and three (3) members who
are experts on Warehouses.

The permanent members of the Council shall be composed of the following:
(a) The Chairman of the Securities and Exchange Commission or designated

representative as the Chairperson of the Council;
{b) The Secretary of the Department of Trade and Industry (DT!) or designated

representative;

(c) The Secretary of the Department of Finance (DOF) or designated
representative; and

(4) The Secretary of the Department of Agriculture (DA) or designated
representative.

The three (3) members who are Warehouse experts shall be chosen by at least majority
of the permanent members of the Council from a list of nominees prepared by the SEC.
They shall serve for a term of one (1) year and shall not be disqualified from being re-
chosen by the permanent members of the Council.

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‘Once the full membership of the Council is obtained, all members of the Council are
entitled to one (1) vote each in the conduct of its business.

The Council shall be assisted by a secretariat to be lodged in the SEC, which shall
coordinate the activities involved in the accreditation process.

SEC. 35. Functions and Responsibilities of the Warehouse Accreditation Council
— As the accrediting entity, the Council shall have the following functions and
responsibilities:

(a) Institute and operationalize a system of accreditation for
Warehouses: Provided, that the criteria for accreditation shall include sound and
measurable standards relating to sanitation, storage, and safety of goods stored
in Warehouses;

(b) Issue certificate of accreditation to qualified Warehouses upon determination
that the criteria set for this purpose have been fully satisfied: Provided, That the
certificate of accreditation shail be valid only for such period as may be prescribed
under the implementing rules and regulations of this Act;

{c) Monitor the performance of Warehouses to ensure continuing compliance
with the provisions of this Act and its implementing rules and regulations;

(d) Place under probation, suspend or revoke any certificate of accreditation upon
due determination that a Warehouse no longer meets the criteria for
accreditation;

(e) Require regular submission of reports by Warehouses;

{f) Collect reasonable accreditation and monitoring fees from a Warehouse which
shall be used for the accrediting entity's operational requirements;

(g) Submit an annual report to the President of the Philippines and the concerned
committees of both Houses of Congress; and

{h) License inspectors, graders, and weighers who shall assist in ensuring the good
quality of warehouses.


(i) Perform such other functions as may be necessary to accomplish the purposes
and objectives of this Act in relation to Warehouses.

SEC, 36. Warehouse Experts — The Council is authorized to create rules and
regulations in order to determine which persons would qualify as Warehouse Experts.
The Warehouse Experts must be persons actually knowledgeable on the running and
maintenance of Warehouses in accordance with globally accepted best practices in
Warehousing.

SEC. 37. Registration with Securities and Exchange Commission ~ All accredited
Warehouses must be registered with the Securities and Exchange Commission. The
Securities and Exchange Commission is hereby ordered and authorized to create a system
for registering accredited Warehouses which may be accessed by the public. The
Securities and Exchange Commission is likewise authorized to create rules and regulations
governing the registration of accredited Warehouses.

SEC, 38, Prohibition of Non-Accredited and Non-Registered Warehouses ~ All
warehouses that are not accredited by the Council and not registered with the Securities
and Exchange Commission are prohibited from being used by Warehousemen in storing
goods covered by Warehouse Receipts.

‘SEC. 39. Insurance — All warehouses must be insured in accordance with the value
and types of goods kept in them. The Securities and Exchange Commission is hereby
empowered to close down any warehouse that stores goods covered by Warehouse
Receipts despite not having the necessary insurance until the same becomes compliant.

SEC. 40. Initiative to Examine Warehouses ~ The Insurance Commission, or any
permanent member of the Council, may request the Council to examine the operations
of Warehouses for the purpose of determining that the Warehouses are not engaged in
unauthorized undertaking or activities which are subject to their respective jurisdictions.
In case of a finding by the Council that an accredited Warehouse is engaged in an
unauthorized undertaking or activities subject to their said respective regulations, it shall
place on probation, suspend or revoke the accreditation of the Warehouse based on such
ground, as may be appropriate under the circumstances.

CHAPTER 5 — RIGHTS OF HOLDERS AND CLAIMANTS

‘SEC. 41. Rights of Persons to whom a Receipt has been transferred — A person to
whom a receipt has been validly transferred acquires thereby:

(a) Such title to the goods as the person transferring the receipt to him had or had
ability to convey to a purchaser in good faith for value,

(b) The right to have the electronic Warehouse Receipt amended to reflect his
‘ownership over the goods, and

(c) The direct obligation of the Warehouseman to hold possession of the goods for
him according to the terms of the receipt as fully as if the Warehouseman and
contracted directly with him.

‘SEC. 42. Warranties of a Transferor — A person who, for value, transfers a receipt,
unless a contrary intention appears, warrants:


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(a) That the receipt is genuine,

(b) That he has a legal right to transfer it,

(c) That he has knowledge of no fact which would impair the validity or worth of
the receipt.

SEC. 43, Transferor not a Guarantor ~ The transferor shall not be liable for any
failure on the part of the Warehouseman or previous transferors of the receipt to fulfill
their respective obligations.

SEC. 44. When transfer not impaired by fraud, mistake or duress. — The validity
of the transfer of a receipt is not impaired by the fact that such transfer was a breach of
duty on the part of the person making the transfer, or by the fact that the owner of the
receipt was induced by fraud, mistake, or duress to entrust the possession or custody of
the receipt to such person, if the person to whom the receipt was transferred, or a person
to whom the receipt was subsequently transferred, paid value therefor, without notice of
the breach of duty, or fraud, mistake or duress.

SEC. 45. Enforcement of Security Interest of Secured Creditor’s for Transfers
where the Receipt is a Security ~ In any transaction where the Warehouse Receipt or the
goods evidenced thereby are treated as security to the transaction, the same shall be
governed by the Personal Property Security Act of 2018.

EC. 46. Attachment or Levy upon Goods covered by an electronic Warehouse
Receipt. — if goods are delivered to a Warehouseman by the owner, or by a person whose
act in conveying the title over the goods to a purchaser in good faith for value would bind
the owner, and a receipt was created far them, such goods cannot thereafter, while in
the possession of the Warehouseman, be attached by garnishment or otherwise, or be
levied upon under an execution, unless the receipt be first cancelled. The Warehouseman
shall in no case be compelled to deliver up the actual possession of the goods until the
receipt is cancelled or he is otherwise ordered by the court.

SEC. 47. Creditor's Remedies to reach Warehouse Receipts. — A creditor whose
debtor is the registered owner of an electronic Warehouse Receipt shall be entitled to
such aid from courts of appropriate jurisdiction, by injunction and otherwise, in attaching
such receipt or in satisfying the claim by means thereof as is allowed at law or in equity in
these islands in regard to property which cannot readily be attached or levied upon by
ordinary legal process.

SEC. 48. Conflicting Claims over Warehouse Receipts. — The Securities and
Exchange Commission is hereby empowered to settle any conflicts relating to title and
ownership over Warehouse Receipts. The decision of the Securities and Exchange
Commission shall be final and executory.

(CHAPTER 6 — WAREHOUSE RECEIPTS ASSURANCE FUND

SEC. 49. Establishment of Warehouse Receipts Assurance Fund — A Warehouse
Receipts Assurance Fund is hereby established to cover for losses involving Warehouse
Receipts stemming from Registry based failures including but not limited to the
Irretrievable destruction of the Registry or any entries therein. The Securities and
Exchange Commission shall be in charge of the Warehouse Receipts Assurance Fund and

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is hereby ordered and authorized to create rules and regulations for the creation,
management, and disbursement thereof. The Securities and Exchange Commission is
likewise authorized to seek third party assistance for the creation and maintenance of the
Assurance Fund.

SEC. 50. Contribution to Assurance Fund ~ Upon the issuance or amendment of
an electronic Warehouse Receipt, as well as the issuance of a Certified True Copy of the
electronic Warehouse Receipt, there shall be paid to the Securities and Exchange
‘Commission one-fourth of one per cent of the assessed value of the goods covered by the
Warehouse Receipt, as contribution to the Assurance Fund. The Securities and Exchange
Commission is hereby ordered to coordinate with the Department of Trade and Industry,
‘as well as other government agents, to come up with a proper and just valuation for any
and all goods that may be covered by a Warehouse Receipt.

Nothing in this section shall in any way preclude the court from increasing or
decreasing the valuation of the goods should it appear during the hearing that the value
stated is either too small or too large.

‘SEC. 51. Recovery of Losses from Fund — A person who, without negligence on his
part, sustains loss or damage, or is deprived of any goods covered by an electronic
Warehouse Receipt or any interest therein as a consequence of Registry based failures
shall file a claim before the Securities and Exchange Commission, The Securities and
Exchange Commission is hereby authorized to settle claims and disputes involving a
party's right to recover from the Fund. The Securities and Exchange Commission is
likewise ordered and authorized to create rules and regulations regarding the procedure
that must be followed by parties seeking to claim against the Fund. Any decision by the
Securities and Exchange Commission involving such matter shall be final and executory.

‘SEC. 52. Maximum Recoverable Claim — A party may only claim a maximum of
five hundred thousand pesos for every electronic Warehouse Receipt. In case the damage
suffered by the claimant was caused by fraud, the claimant Is not precluded from pursuing
@ claim for damages against such liable persons for the amount of the goods covered by
the electronic Warehouse Receipt less any amounts recovered from the Fund.

SEC. 53. Losses not recoverable — The Assurance Fund shall not be liable for any
loss, damage or deprivation that is not caused or occasioned by a Registry based failure.
Any losses stemming from Sub-Registry based failures are not recoverable from the Fund.

SEC. 54, Release of Funds — Any money obtained by the Securities and Exchange
Commission in relation to the Assurance Fund shall be placed in a special fund and shall
be treated as part of the savings of the Securities and Exchange Commission which shall
be deposited with the National Treasury. Once the Securities and Exchange Commission
makes a request from the National Treasury or the Department of Budget and
Management for the release of such funds in relation to a lawful purpose primarily related
to the Assurance Fund, the release of the funds is immediate and ministerial.

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(CHAPTER 7 —- WAREHOUSEMAN’S LIEN

SEC. 55. What Claims are included in the Warehouseman's Lien. — Subject to the
provisions of this Act, 2 Warehouseman shall have a lien on goods deposited, or on the
proceeds thereof, in his hands, for all lawful charges for storage and preservation of the
g00d5; also for all lawful claims for money advanced, interest, insurance, transportation,
labor, weighing, coopering and other charges and expenses in relation to such goods, also
for all reasonable charges and expenses for notice, and advertisements of sale, and for
sale of the goods where default had been made in satisfying the warehouseman's lien.

SEC. 56. Against what property the lien may be enforced. — A Warehouseman's
lien may be enforced against any and all goods stored in his Warehouse and covered by a
valid Warehouse Receipt.

SEC. 57. Receipt must state charges for which the lien is claimed. —The
Warehouseman shall have no lien on a Receipt except for charges for storage of goods
subsequent to the date of the Receipt unless the Receipt expressly enumerated other
charges for which a lien is claimed. In such case, there shall be a lien for the charges
enumerated so far as they are consistent with this Act provided the amount or rate of the
charges so enumerated is stated in the Receipt.

SEC. 58. Warehouseman need not release until lien is satisfied. — A
Warehouseman having a lien valid against the person demanding the goods may refuse
to release the goods to him until the lien is satisfied.

A Warehouseman who voluntarily releases the goods despite his lien not being
fully satisfied waives his lien over the same.

SEC. 59, Warehouseman's lien does not preclude other remedies. — Whether a
Warehouseman has or has nota lien upon the goods, he is entitled to all remedies allowed
by law to a creditor against a debtor for the collection from the depositor of all charges
and advances which the depositor has expressly or impliedly contracted with the
Warehouseman to pay.

SEC. 60. Notice of Warehouseman’s Lien, — Following a valid offer to satisfy the
Warehouseman's lien, he must provide the following notices to the person who validly
offered to satisfy his lien:

(a) An itemized statement of the Warehouseman's claim, showing the sum due at
the time of the notice and the date or dates when it becomes due,

(b) A brief description of the goods against which the lien exists,

(c) A demand that the amount of the claim shall be paid on or before a day
mentioned, not less than ten days from the delivery of the notice if it is
personally delivered, or from the time when the notice shall reach its
destination, according to the due course of post, if the notice is sent by mail,

(d) A statement that unless the claim is paid within the time specified, the goods
will be advertised for sale and sold by auction at a specified time and place.

SEC. 61, Procedure for Auction Sale to Satisfy Warehouseman’s Lien — In relation
to the aforementioned provision, if the Warehouseman’s lien is not satisfied within the
time specified, he may satisfy his lien over the goods by selling the same through auction.

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The auction sale shall be had in the place where the lien was acquired, or, if such place Is
manifestly unsuitable for such purpose, in the nearest city or municipality where such a
sale is may be suitably conducted.

Prior to the auction sale, the Warehouseman must advertise the sale, describing
the goods to be sold, and stating the name of the owner or person on whose account the
goods are held, and the time and place of the sale. Such advertisement shall be published
‘once a week for two consecutive weeks in a newspaper published in the place where such
sale is to be held. The sale shall not be held less than fifteen days from the time of the
first publication. If there is no newspaper published in such place, the advertisement shall
be posted at least ten days before such sale in not less than six conspicuous places therein.

From the proceeds of such sale, the Warehouseman shall satisfy his lien including
the reasonable charges of notice, advertisement and sale. The balance, if any, of such
proceeds shall be held by the Warehouseman and delivered on demand to the person to
whom he would have been bound to release or justified in releasing goods.

At any time before the goods are so sold, the registered owner may pay the
Warehouseman the amount necessary to satisfy his lien and to pay the reasonable
expenses and liabilities incurred in serving notices and advertising and preparing for the
sale up to the time of such payment. Once the registered owner has satisfied the
Warehouseman’s lien, he must release the goods absent any lawful cause as provided
under this Act.

SEC. 62. Perishable and hazardous goods. — If goods are of a perishable nature,
or by keeping will deteriorate greatly in value, or, by their order, leakage, inflammability,
or explosive nature, will be liable to injure other property, the Warehouseman may give
such notice to the owner or to the person in whose names the goods are stored, as is
reasonable and possible under the circumstances, to satisfy the lien upon such goods and
to remove them from the warehouse and in the event of the failure of such person to
satisfy the lien and to receive the goods within the time so specified, the Warehouseman
may sell the goods at public or private sale without advertising. If the Warehouseman,
after a reasonable effort, is unable to sell such goods, he may dispose of them in any
lawful manner and shall incur no liability by reason thereof.

The proceeds of any sale made under the terms of this section shall be disposed
of in the same way as the proceeds of sales made under the terms of the preceding
section,

SEC. 63. Other methods of enforcing lien. — The remedy for enforcing a lien
herein provided does not preclude any other remedies allowed by law for the
enforcement of a lien against personal property nor bar the right to recover so much of
the Warehouseman’s claim as shall not be paid by the proceeds of the sale of the
property.

SEC. 64. Effect of sale. — After goods have been lawfully sold to satisfy a
Warehouseman’s lien, or have been lawfully sold or disposed of because of their
perishable or hazardous nature, the Warehouseman shall not thereafter be liable for
failure to deliver the goods to the registered owner of the goods.

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CHAPTER 8 — PENALTIES

‘SEC. 65. Creation of Receipt for Goods not Received — A Warehouseman, or an
officer, agent, or servant of a Warehouseman who creates or aids in creating a Receipt
knowing that the goods for which such Receipt is created have not been actually received
by such Warehouseman, or are not under his actual control at the time of creating such
receipt, shall be guilty of a crime, and, upon conviction, shall be punished by
imprisonment of ten years, or a fine equal to triple the value of the goods involved, or
both. If the Warehouseman himself is liable, his license shall likewise be revoked.

SEC. 66, Creation of Receipt containing False Statement — A Warehouseman, or
any officer, agent or servant of a warehouseman who fraudulently creates or aids in
fraudulently creating a Receipt for goods knowing that it contains any false statement,
shall be guilty of a crime, and upon conviction, shall be punished by imprisonment of ten
years, or a fine equal to triple the value of the goods involved, or both. If the
Warehouseman himself is liable, his license shall likewise be revoked.

SEC. 67. Creation of fraudulent duplicate receipt — A Warehouseman, or any
officer, agent, or servant of a Warehouseman who creates or aids in creating a second
electronic Warehouse Receipt for goods knowing that there Is an existing prior electronic
Warehouse Receipt for the same goods or any part of them, except in the case of a Court
order following an irretrievably lost receipt as provided for in this Act, shall be guilty of a
crime, and upon conviction, shall be punished by imprisonment of ten years, or a fine
equal to triple the value of the goods Involved, or both. If the Warehouseman himself is
able, his license shall likewise be revoked.

SEC. 68. Unlawful Release of Goods covered by Warehouse Receipt — A
Warehouseman, or any officer, agent, or servant of a Warehouseman, who releases
without any legal basis any goods covered by an electronic Warehouse Receipt shall be
guilty of a crime, and upon conviction, be punished by imprisonment of ten years, or a
fine equal to triple the value of the goods involved, or both. If the Warehouseman himself
is liable, his license shall likewise be revoked.

SEC. 69, Fraudulent Deposit of Goods. — Any person who, with fraud, deposits
‘goods to which he has no title, or upon which there is a lien or mortgage, and who obtains
an electronic Warehouse Receipt for the same, shall be guilty of a crime, and upon
conviction, be punished by imprisonment of ten years, or a fine equal to triple the value
of the goods involved, or both.

‘Any Warehouseman or his agent who knowingly facilitates the creation of an
electronic Warehouse Receipt for such goods shall be guilty of a crime, and upon
conviction, be punished by imprisonment of ten years, or a fine equal to triple the value
of the goods involved, or both. if the Warehouseman himself is liable, his license shall
likewise be revoked.

SEC. 70. Issuance of Warehouse Receipts by Unregistered Warehouseman. —
Any Warehouseman who issues a Warehouse Receipt despite not being registered with
the Securities and Exchange Commission shall be guilty of a crime, and upon conviction,
be punished by imprisonment of ten years, or a fine equal to triple the value of the goods
involved, or both.

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SEC. 71. Willful Operation of an Unregistered or Un-Accredited Warehouse. —
Any Warehouseman who issues a Warehouse Receipt for goods stored in a Warehouse
that is not registered with the Securities and Exchange Commission, or not accredited by
the Warehouse Accreditation Council, or whose registration or accreditation has been
revoked or suspended under the provisions of this Act shall be guilty of a crime, and upon
conviction, be punished by imprisonment of ten years, or a fine equal to triple the value
of the goods involved, or both.

(CHAPTER 9 - TRANSITORY PROVISIONS

‘SEC. 72. Role of the Securities and Exchange Commission and Coordination with
Other Agencies — The Securities and Exchange Commission shall be the primary
regulatory body in charge of all matters related to Warehouse Receipts. While the
Securities and Exchange Commission may consult with other regulatory bodies, as well as
other organizations representative of a particular sector, the Securities and Exchange
Commission shall, at all times, be the lead agency in ensuring the successful
implementation of this Act.

SEC. 73. Inter-Connected Registry Information — Where feasible, the Securities
and Exchange Commission is ordered and authorized to engage in concerted activity with
other government agencies for the linking of the Registry provided under this Act with
other Registries in order to be able to come up with an inter-connected Registry.

‘SEC. 74. Public Information — All entries in the Registry of electronic Warehouse
Receipts shall be available to the public. Likewise, the list of licensed Warehousemen and
Warehouses, as well as the list of Warehouseman and Warehouses whose licenses have
been revoked, shall be available to the public. The Securities and Exchange Commission
is ordered and authorized to create rules and regulations to facilitate the orderly and
‘expedient access to such information by the public, in accordance with existing standards
under Philippine law.

SEC. 75. Dispute Resolution — Except in cases specifically placed under the
Jurisdiction of the Securities and Exchange Commission under this Act, as well as cases
where the electronic Warehouse Receipt includes a valid Arbitration Clause, all actions
arising from this Act shail fall under the jurisdiction of the Regional Trial Courts.

SEC. 76. Transition Period — All existing Warehousemen and Warehouses must be
compliant with the provisions of this Act relating to registration and licensing within three
years from the effectivity of this Act. All physical Warehouse Receipts must be converted
to electronic Warehouse Receipts within three years of the opening of the system of
Registry for Warehouse Receipts to be made by the Securities and Exchange Commission.

SEC. 77. Appropriations - The amount necessary to carry out the initial
implementation of this Act shall be included in the General Appropriations Act.

SEC. 78. Implementing Rules and Regulations. — Within ninety (90) days after the
effectivity of this Act, the Securities and Exchange Commission, in coordination with the
DTI, the DOF, the DA, and other relevant organizations, shall promulgate rules and
regulations for the implementation of this Act and/or for the public interest or for the
Protection of Warehousemen and Warehouses accredited or regulated pursuant to the
authority granted under this Act.

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SEC. 79. Repeals. — All acts and laws and parts thereof inconsistent with this Act
are hereby repealed.

‘SEC. 80. Time when Act takes effect. — This Act shall take effect fifteen days after
its publication in the Official Gazette of the Philippines shall have been completed.

Approved,

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