importer of the silk in Paterson and the banker in
New York who issued him the credit.

Assume now that a week has passed and that the New York banker finds
himself in possession of a bill of lading for ten bales of silk,
merchandise deliverable to his order. A few days later, perhaps, the
goods arrive overland by fast freight from Seattle. The Paterson silk
manufacturer, who is eagerly awaiting their arrival, comes around to
the banker: "Endorse over the bill of lading to me," he says, "so that
I can get the silk and start manufacturing it."

If the banker does it, he will be giving over the only security he has
for the payment at maturity of the draft his London correspondent
accepted, and for which he himself is responsible. Still, the
manufacturer has to have his silk.

A number of different agreements exist between bankers and importers to
whom the bankers issue credits, as to the terms on which the importers
are to be allowed to take possession of the merchandise when it arrives
here. Sometimes the goods are put into store and handed over to the
merchant only when he shows that he has sold them and needs them to
make delivery. Sometimes they are warehoused at once, and parcelled out
to the importer only in small lots, as he needs them. But more often
the goods are delivered over to the importer on his signing one form or
other of what is known as a "trust receipt."

[Illustration: Form of Trust Receipt]

[Illustration: Form of Bailee Receipt]

Such difference of opinion exists among foreign exchange men as to the
goodness of the trust receipt system that the author refrains from
making comment on it, confining himself strictly to description of what
the system is. As will be seen from the accompanying reprint of the
trust receipt used by one of the largest issuers of commercial credits
in the country, the document is simply a pledge on the part of the
importer to hold the merchandise in trust for the banker, and, as the
merchandise is sold, to hand over the proceeds to apply against the
draft drawn by the shipper of the goods. The theory of the thing is
that by the time all the merchandise has been sold more than enough
money will have been handed over to the New York banker to take care of
the draft accepted by his London correspondent, the excess constituting
the importer's profit.

The kind of trust receipt under which bankers are willing to give over
the merchandise (the only collateral they have) nat