Perfection Strategies for Foreign Inventory Consignors Facing Secured Floating Charges
Foreign inventory consignors defeat prior floating charges by completing PMSI registry filings and notifying existing lenders before destination delivery occurs.
Pmsi Perfection
Meaning
Securing super-priority status over earlier lenders requires strict compliance with statutory filing procedures. Pmsi perfection is the legal process by which a supplier of goods or equipment establishes a purchase money security interest that takes priority over a pre-existing general lien on the debtor’s assets. This mechanism allows manufacturers to ship inventory to a heavily indebted distributor on credit, knowing they have first claim on those specific goods if default occurs.
Filing Requirement
Creditors must complete specific administrative steps to secure this protective status. To achieve pmsi perfection, the supplier must file a financing statement in the appropriate public registry before or within a set number of days after the debtor takes possession of the goods. This public filing alerts other lenders that the supplier holds a special claim on the newly delivered stock.
It prevents other creditors from claiming the inventory under an after-acquired property clause.
Priority Protection
This registration defeats the claims of general bank lenders. The supplier has the right to repossess the specific goods if the distributor fails to make payments. This priority status is essential for high-value equipment leases and continuous inventory supply agreements.
Timeliness Standard
Strict deadlines apply to these filings.