2022 South Carolina Code of Laws
Title 36 - Commercial Code
Chapter 7 - Commercial Code - Warehouse Receipts, Bills Of Lading And Other Documents Of Title

OFFICIAL COMMENTS

PREFATORY NOTE

ARTICLE 7 is the last of the articles of the Uniform Commercial Code to be revised. The genesis of this project is twofold: to provide a framework for the further development of electronic documents of title and to update the article for modern times in light of state, federal and international developments. Each section has been reviewed to determine its suitability given modern practice, the need for medium and gender neutrality, and modern statutory drafting.

To provide for electronic documents of title, several definitions in Article 1 were revised including "bearer," "bill of lading," "delivery," "document of title," "holder," and "warehouse receipt." The concept of an electronic document of title allows for commercial practice to determine whether records issued by bailees are "in the regular course of business or financing" and are "treated as adequately evidencing that the person in possession or control of the record is entitled to receive, control, hold, and dispose of the record and the goods the record covers." Rev. Section 1-201(b)(16). Such records in electronic form are electronic documents of title and in tangible form are tangible documents of title. Conforming amendments to other Articles of the UCC are also necessary to fully integrate electronic documents of title into the UCC. Conforming amendments to other Articles of the UCC are contained in Appendix I.

Key to the integration of the electronic document of title scheme is the concept of "control" defined in Section 7-106. This definition is adapted from the Uniform Electronic Transactions Act Section 16 on Transferrable Records and from Uniform Commercial Code Section 9-105 concerning control of electronic chattel paper. Control of an electronic document of title is the conceptual equivalent to possession and indorsement of a tangible document of title. Of equal importance is the acknowledgment that parties may desire to substitute an electronic document of title for an already-issued paper document and vice versa. Section 7-105 sets forth the minimum requirements that need to be fulfilled in order to give effect to the substitute document issued in the alternate medium. To the extent possible, the rules for electronic documents of title are the same or as similar as possible to the rules for tangible documents of title. If a rule is meant to be limited to one medium or the other, that is clearly stated. Rules that reference documents of title, warehouse receipts, or bills of lading without a designation to "electronic" or "tangible" apply to documents of title in either medium. As with tangible negotiable documents of title, electronic negotiable documents of title may be negotiated and duly negotiated. Section 7-501.

Other changes that have been made are:

1. New definitions of "carrier," "good faith," "record", "sign" and "shipper" in Section 7-102.

2. Deletion of references to tariffs or filed classifications given the deregulation of the affected industries. See e.g. section 7-103 and 7-309,

3. Clarifying the rules regarding when a document is nonnegotiable. Section 7-104.

4. Making clear when rules apply just to warehouse receipts or bills of lading, thus eliminating the need for former section 7-105.

5. Clarifying that particular terms need not be included in order to have a valid warehouse receipt. Section 7-202.

6. Broadening the ability of the warehouse to make an effective limitation of liability in its warehouse receipt or storage agreement in accord with commercial practice. Section 7-204.

7. Allowing a warehouse to have a lien on goods covered by a storage agreement and clarifying the priority rules regarding the claim of a warehouse lien as against other interests. Section 7-209.

8. Conforming language usage to modern shipping practice. Sections 7-301 and 7-302.

9. Clarifying the extent of the carrier's lien. Section 7-307.

10. Adding references to Article 2A when appropriate. See e.g. Sections 7-503, 7-504, 7-509.

11. Clarifying that the warranty made by negotiation or delivery of a document of title should apply only in the case of a voluntary transfer of possession or control of the document. Section 7-507.

12. Providing greater flexibility to a court regarding adequate protection against loss when ordering delivery of the goods or issuance of a substitute document. Section 7-601.

13. Providing conforming amendments to the other Articles of the Uniform Commercial Code to accommodate electronic documents of title.

Legislative Note: All cross-references in this draft to Article 1 are to Revised Article 1 (2001). In the event a state has not enacted Revised Article 1, the cross-references should be changed to refer to the relevant sections in former Article 1.

Editor's Note

Copyright (c) 2022 SOUTH CAROLINA SENATE. South Carolina Reporters' Comments contained herein may not be reproduced in whole or in part in any form or for inclusion in any material which is offered for sale without the express written permission of the Clerk of the South Carolina Senate.

Official Comments of the Uniform Commercial Code (c) 2022 The American Law Institute and the National Conference of Commissioners on Uniform Laws - Reproduced with permission.

Introduction

ARTICLE 7 concerns itself with that phase of a commercial transaction relating to the shipment and storage of goods and governs the use of the "document of title" issued as a receipt for the goods. Such documents consist principally of the bill of lading issued by a carrier and the warehouse receipt issued by a warehouseman. It is common practice to transfer the goods in the hands of such bailee by the transfer of the document. Money is frequently loaned on the pledge of these documents to government agencies and banks and other private lenders. It is within this factual context that this article operates.

At the present time in South Carolina, documents of title are governed by two uniform state acts: the Uniform Warehouse Receipts Act (UWRA) and the Uniform Bills of Lading Act (UBLA). These acts were promulgated by the National Conference of Commissioners on Uniform State Laws over fifty years ago. The Uniform Bills of Lading Act was enacted in thirty-one of the states, including South Carolina in 1930. This statute has been superseded by the almost identical Federal Bills of Lading Act of 1916 with respect to interstate shipments.

The Uniform Warehouse Receipts Act was adopted in all of the states, but a 1922 amendment was adopted in only some of these. South Carolina enacted the amended version of this statute in 1945.

ARTICLE 7 would replace the two existing statutes and consolidate their coverage into this single article entitled "Documents of Title". This is made possible by the fact that there are a number of problems common to all types of documents, such as negotiation of instrument and obligations of the issuer. Common solutions to these problems are provided in parts 1, 4, 5 and 6. In this way, inconsistencies and duplication of coverage are avoided. Special problems which relate only to warehouse receipts are set out in part 2 and those applicable to bills of lading are set out in part 3.

Changes in rules and practice brought about by Article 7 would be modest. Several points of uncertainty and conflict are clarified and resolved. There are a few minor changes in policy and some new coverage made necessary by changed business methods and technological developments since the drafting of the original act at the turn of the century.

2014 Act No. 213, Section 48, provides in part as follows:

"The Official Comments, prepared by the Uniform Law Commission with the intent of aiding the user in understanding the provisions to the Uniform Commercial Code, are not considered part of this act and do not indicate legislative intent."

2014 Act No. 213, Section 50, provides as follows:

"SECTION 50. The provisions of this act apply prospectively. To the extent that issues arise based upon rights or obligations that arise prior to the effective date of this act, prior law applies to resolve those issues. Transactions, documents of title, or bailment validly entered into before the effective date of this act and the rights, duties, and interests arising from them remain valid thereafter and may be terminated, completed, consummated, or enforced as required or permitted by any statute or other law amended or repealed by this act, as though the repeal or amendment had not occurred."