Legal Definitions - commodity paper

Commodity paper refers to a legal document that represents ownership or a claim to a specific quantity of a physical commodity. These documents are often negotiable, meaning they can be bought, sold, or transferred, thereby transferring ownership or the right to the underlying commodity without physically moving the commodity itself. They are crucial in trade and finance for facilitating transactions involving bulk goods like agricultural products, minerals, and energy resources.

• Example 1: Warehouse Receipt for Coffee Beans
  A coffee importer stores 50,000 pounds of unroasted coffee beans in a specialized commercial warehouse and receives a warehouse receipt. This document precisely details the quantity, type, and grade of coffee, along with the specific storage location and the owner's name.

  Explanation: Instead of physically moving the coffee beans, the importer can sell the warehouse receipt to a coffee roaster. The roaster then legally owns the coffee represented by the paper and can later present the receipt to the warehouse to take possession of the beans. The receipt itself acts as the "commodity paper" that enables the transfer of ownership without the physical transfer of the bulky commodity.

• Example 2: Bill of Lading for Natural Gas
  A natural gas producer ships a large volume of liquefied natural gas (LNG) from a port in the United States to a buyer in Asia via a specialized tanker. The shipping company issues a bill of lading to the producer.

  Explanation: This bill of lading serves as a contract for the transportation of the gas, a receipt for the goods, and a document of title. While the LNG is in transit across the ocean, the producer can sell the bill of lading to another energy trading firm. The new firm then becomes the legal owner of the LNG, even before it reaches its destination, simply by possessing this "commodity paper."

• Example 3: Dock Receipt for Industrial Metals
  A manufacturing company imports a substantial shipment of aluminum ingots from an overseas supplier. Upon arrival at the destination port, the port authority or a freight forwarder issues a dock receipt, confirming that the aluminum has been received and is awaiting customs clearance or further inland transport.

  Explanation: Before the aluminum is moved to the manufacturer's factory, the manufacturer might decide to sell a portion of the shipment to another industrial buyer due to a change in demand. They could transfer the dock receipt (or a subsequent warehouse receipt once the goods are moved to a bonded facility) to the new buyer. This document functions as the "commodity paper," representing the ownership of the aluminum ingots while they are still located at the port.