Drafting Title Retention Clauses in Cross Border Consignment Agreements
Cross-border title retention provisions fail without precise local statutory perfection filings, serialized physical inventory segregation, and proceeds trust accounting.
PMSI Registration
Meaning
Statutory filing procedures under commercial codes grant inventory suppliers super-priority security interests over prior blanket liens held by commercial lenders. Trade creditors complete PMSI registration by filing a financing statement and notifying existing secured lenders before delivering goods on credit. Securing purchase money security interests elevates a trade vendor’s claim above general bank liens on the specific inventory supplied.
Proper execution ensures the supplier retains recovery rights if the buyer becomes insolvent.
Filing Priority Mechanism
Public registry filings establish public notice of a vendor’s purchase money interest in collateral. Performing PMSI registration requires filing a UCC-1 statement or equivalent local registry entry before the debtor takes physical possession of inventory. Timely filing establishes legal priority over previously recorded floating charges held by institutional lenders.
Lender Notification Requirement
Formal written notice must reach prior secured creditors holding blanket liens over buyer inventory. As part of PMSI registration, suppliers issue explicit notices describing the inventory categories covered by the purchase money interest. Notifications remain valid for multi-year periods, protecting recurring inventory shipments against bank intervention.
Collateral Scope Boundary
Priority rights extend strictly to goods funded by the specific credit extension and identifiable cash proceeds. Following PMSI registration, security claims apply to delivered inventory items and identifiable account balances created by their resale. Claims fail to attach to general company assets or unrelated product inventory lines.