Warehouse Receipt System Act

Section 1. Short title Section This Act may be cited as the Warehouse Receipt System Act.

Section 2. Interpretation Section In this Act, unless the context otherwise requires— "Agriculture and Food Authority" means the Agriculture and Food Authority established under section 3 of the Agriculture and Food Authority Act (Cap. 317); "agricultural commodity" means all agricultural produce, the storage of which is determined by regulations to be subject to this Act and includes goods that are packed, processed or otherwise transformed and stored in a warehouse; "Cabinet Secretary" means the Cabinet Secretary for the time being responsible for matters relating to agriculture; "central registry" means the central registry established under section 30 ; "collateral manager" means a person appointed by the owner or any other person who has an interest in agricultural commodities stored in a warehouse with the intention of monitoring or taking custody of the agricultural commodities; "Council" means the Warehouse Receipts System Council established by section 3 ; "county executive committee member" means the county executive committee member responsible for matters relating to agriculture in the respective county; "electronic warehouse receipt" means a warehouse receipt that has...

Section 3. Establishment of the Warehouse Receipt Systems Council Section 3(1) There is established a Council to be known as the Warehouse Receipt System Council. Section 3(2)(a) suing and being sued; Section 3(2)(b) taking, purchasing or otherwise acquiring, holding, charging or disposing of movable and immovable property; Section 3(2)(c) borrowing money or making investments; Section 3(2)(d) entering into contracts; and Section 3(2)(e) doing or performing such other things or acts necessary for the proper performance of the functions of the Council and which may lawfully be done or performed by a body corporate. Section 3(3)(a) a chairperson, who shall be appointed by the President; Section 3(3)(b) the Principal Secretary for the time being responsible for matters related to agriculture or a representative; Section 3(3)(c) the Principal Secretary for the time being responsible for matters related to finance or a representative; Section 3(3)(d) one person nominated by the Council of Governors and appointed by the Cabinet Secretary; Section 3(3)(e) the Director-General of Agriculture, Food and Fisheries Authority or a representative; Section 3(3)(f) the chief executive officer of t...

Section 4. Functions of the Council Section facilitate the establishment, maintenance and development of the Warehouse Receipt System for agricultural commodities produced in Kenya;

Section 5. Functions of the county executive committee member Section shall establish and maintain a county registry for the management of warehouse receipt transactions under this Act;

Section 6. Powers of the Council Section enter into contracts;

Section 7. Conduct of the affairs of the Council Section 7(1) The business and affairs of the Council shall be as provided in the Schedule. Section 7(2) Except as provided for in the Schedule, the Council may regulate its own procedure.

Section 8. Remuneration of members of the Council Section The members of the Council shall be paid such remuneration, fees, allowances and disbursements for expenses as may be approved by the Cabinet Secretary in consultation with the Salaries and Remuneration Commission.

Section 9. Chief executive officer Section 9(1) There shall be a chief executive officer of the Council who shall be appointed by the Council through a competitive recruitment process, on such terms and conditions of service as the Cabinet Secretary may approve. Section 9(2) The chief executive officer shall, subject to the direction of the Council, be responsible for the day to day management of the activities of the Council. Section 9(3)(a) holds a degree from a university recognised in Kenya; Section 9(3)(b) has relevant experience in management; and Section 9(3)(c) meets the requirements of Chapter Six of the Constitution. Section 9(4) The chief executive officer shall serve for a term of three years and shall, subject to satisfactory performance, be eligible for re-appointment for a further term of three years. Section 9(5)(a) at any time resign from office by a notice in writing addressed to the Chairperson of the Council; Section 9(5)(b) breaches the terms and conditions of the employment contract; Section 9(5)(b)(i) breaches the terms and conditions of the employment contract; Section 9(5)(b)(ii) is unable to perform the functions of the office by reason of a mental or phys...

Section 10. Staff of the Council Section The Council shall employ such other staff as it may consider necessary for the proper and efficient discharge of the functions of the Council, on such terms and conditions of service as it may, determine.

Section 11. Consultants and experts Section 11(1) The Council may engage the services of consultants or experts as it considers appropriate to assist in the discharge of its functions under this Act. Section 11(2) The Council shall publish in the Gazette , the names of persons engaged under subsection (1).

Section 12. Funds of the Council Section such moneys as may from time to time be provided by Parliament for the purposes of the Council;

Section 13. Financial year Section The financial year of the Council shall be the period of twelve months ending on the thirtieth June in each year.

Section 14. Annual estimates Section The annual estimates of the Council shall be prepared in accordance with the Public Finance Management Act (Cap. 412A).

Section 15. Parties to proceedings before the Court Section 15(1) The Council shall cause to be kept all proper audit books and records of accounts of the income, expenditure, assets and liabilities of the Council. Section 15(2) The books of accounts of the Council shall be audited in accordance with the Public Audit Act (Cap. 412B) and the Public Finance Management Act (Cap. 412A).

Section 16. Reports Section 16(1) The chief executive officer shall, cause to be prepared a report of the operations of the Council for every quarter and an annual report for every year. Section 16(2)(a) in the case of a quarterly report, within one month after the end of the quarter to which the report relates; or Section 16(2)(b) in the case of an annual report, within four months of the end of the year to which the report relates. Section 16(3) Each report shall contain, in respect of the period to which it relates a description of the activities of the Council. Section 16(4) In addition to what is required under subsection (3), each annual report shall include the financial statements of the Council for the year to which the report relates. Section 16(5) The Cabinet Secretary shall, within thirty days after receiving an annual report, transmit it to both Houses of Parliament.

Section 17. Licensing of warehouse operators Section 17(1) A warehouse operator shall apply to the respective county executive committee member for a licence to operate within the Warehouse Receipt System. Section 17(2) An application under subsection (1) shall be in the prescribed form and shall be accompanied by the prescribed fee. Section 17(3)(a) issue a licence where the applicant meets all the requirements set out in regulations; or Section 17(3)(b) the warehouse is not suitable for the proper storage of agricultural commodities; Section 17(3)(b)(i) the warehouse is not suitable for the proper storage of agricultural commodities; Section 17(3)(b)(ii) the operator is incompetent to operate a warehouse in accordance with this Act; or Section 17(3)(b)(iii) sufficient reason exists within the purposes of this Act for not issuing such licenses. Section 17(4) A license issued under this Part shall be valid for a period of twelve months from the date of issue and may be renewed subject to compliance of any set conditions. Section 17(5) A person who operates a warehouse under the warehouse receipts system without a licence issued by the county executive committee member, commits an o...

Section 18. Performance bond Section 18(1) A person applying for a licence under this Act shall, further to other requirements prescribed by the Council or imposed under this Act, provide a performance bond in such form as the Cabinet Secretary may prescribe. Section 18(2) A Performance bond shall serve as a financial assurance for the fulfilment of all obligations arising out of the licence under this Act, including potential costs relating to rescue, recovery of other costs and fines, penalties or compensation for violations against this Act, and shall be drawn upon in the prescribed manner. Section 18(3)(a) surety bond; Section 18(3)(b) trust fund with pay-in period; Section 18(3)(c) insurance policy; Section 18(3)(d) cash deposit; or Section 18(3)(e) annuities.

Section 19. Insurance Section A person shall not qualify for the grant of a licence under this Act unless that person provides an insurance policy securing the respective warehouse and goods against fire, flood, theft, burglary, earthquake, explosion and any other risk as the Cabinet Secretary may prescribe.

Section 20. Appeal to the Council Section A person who is aggrieved by a decision of the county executive committee member may, within thirty days of being notified of the decision, appeal to the Council in the prescribed manner.

Section 21. Revocation of licence and suspension of licence or operations Section 21(1)(a) if a warehouse operator transfers all or part of his or her control over the licence; Section 21(1)(b) immediately a licensed warehouse commences the process of dissolution or is dissolved; or Section 21(1)(c) if the warehouse operator violates or fails to comply with this Act. Section 21(2) The county executive committee member shall before revoking or suspending a licence, inform the licensee of the intended revocation or suspension, in writing, and give the licensee an opportunity to make representations before making a determination. Section 21(3) Upon the revocation of a licence, the county executive committee member shall, within fourteen days of the revocation, notify the licensee of the revocation and require the licensee to, within fourteen days of receipt of the notification, surrender the licence to the county executive committee member. Section 21(4) A licensee who, without reasonable cause, fails to surrender a licence within the period specified in subsection (3) commits an offence and is liable on conviction to a fine not exceeding one million shillings or imprisonment for a te...

Section 22. Fees Section The county executive committee member shall charge fees for initial warehouse inspection and issuance of a warehouse operator's licence as may be prescribed by the Council.

Section 23. Warehouse Receipts System Dispute Resolution Committee Section 23(1)(a) the refusal to grant a licence; Section 23(1)(b) the imposition of any conditions on a licence; Section 23(1)(c) the revocation, suspension or variation of a licence; Section 23(1)(d) a decision of a warehouse inspector; Section 23(1)(e) complaints by registered, licensed, or other persons operating under this Act; or Section 23(1)(f) any other decision of the Council or a county executive committee member under this Act. Section 23(2)(a) a chairperson who shall be an advocate of the High Court of Kenya of not less than seven years standing and with experience in dispute resolution, appointed by the Cabinet Secretary; and Section 23(2)(b) two other persons with experience in dispute resolution, appointed by the Cabinet Secretary. Section 23(3) The term of office of the Warehouse Receipts Dispute Resolution Committee shall be for a period of three years. Section 23(4) A person who has been aggrieved by any decision of the Council relating to the matters set out in subsection (1) may, within thirty days of being notified of the decision, appeal to the Warehouse Receipts Dispute Resolution Committee in...

Section 24. Grading and weighing of agricultural products Section 24(1) A licensed warehouse operator shall ensure commodities stored in a licenced agricultural warehouse meet the standards published by the Kenya Bureau of Standards and are weighed using equipment certified in accordance with laws relating to weights and measures. Section 24(2) The grading of agricultural commodities shall be undertaken by agricultural commodity graders certified by a mandated institution. Section 24(3) The Council shall prescribe guidelines on the minimum qualifications and competencies required of graders and weighers.

Section 25. Inspection of stored products Section 25(1) The chief executive officer, appointed Council Inspectors or authorized officers of the Council may inspect any agricultural commodity stored in a licenced warehouse and records relating to warehouse receipts where it is considered necessary. Section 25(2) The Council shall appoint by notice in the Gazette inspectors who shall exercise such powers in accordance with regulations made under this Act.

Section 26. Publication of general inspections Section The chief executive officer may, from time to time publish the results of any inspection made under the Act, including the names and locations of the licensed warehouses inspected and the names of the operators licensed under this Act.

Section 27. Examination of books and records of licensed warehouses and warehouse operators Section The chief executive officer may, through authorized officers, employees or agents examine all insurance contracts professional indemnities, warehouse receipts registry, books, records, papers, and accounts of warehouses licensed under this Act and of the warehouse operators working in such warehouses.

Section 28. Regulations Section The Cabinet Secretary may, in consultation with the Council, make regulations generally for the better carrying into effect of the provisions of this Part.

Section 29. Warehouse receipts Section 29(1) A warehouse operator shall issue a warehouse receipt for any agricultural commodity deposited in his or her warehouse. Section 29(2) A warehouse receipt may be in hard or electronic form. Section 29(3)(a) the name and physical address of the warehouse operator; Section 29(3)(b) the name and physical address of the warehouse where the goods are stored; Section 29(3)(c) the license number of the warehouse operator; Section 29(3)(d) the date of issue of the receipt; Section 29(3)(e) the serial number of the receipt; Section 29(3)(f) the particulars of the depositor; Section 29(3)(g) a statement whether the goods will be delivered to the bearer, to a specified person or his order for negotiable receipt; Section 29(3)(h) the description of the agricultural commodity including the type, grade, crop year and season and weight; Section 29(3)(i) the signature of the warehouse operator, which may be made by his authorized agent; Section 29(3)(j) a statement that the agricultural commodity covered by the warehouse receipt is insured by the warehouse operator for the full value thereof; and Section 29(3)(k) security features to be determined by the...

Section 30. Establishment of central registry Section 30(1) There is established a Central Registry which shall be operated by the Council. Section 30(2) The Central Registry shall have the necessary infrastructure to link it with a central depository system of a commodities exchange licensed by the Capital Markets Authority. Section 30(3) The chief executive officer shall put in place the infrastructure under subsection (2). Section 30(4) The chief executive officer shall be the Registrar for the purpose of registering any transaction relating to a warehouse receipt issued under the Act. Section 30(5) A warehouse receipt issued in accordance with this Act, including any negotiation in respect of it shall be delivered up to the Registrar for registration within fourteen days of any such issue or negotiation. Section 30(6) A certificate of registration signed by the Registrar shall be conclusive evidence of the issue or negotiation of a warehouse receipt. Section 30(7) The Cabinet Secretary in consultation with the Council may make regulations to govern the day to day operations of the Central registry.

Section 31. Replacement of receipts Section 31(1) Any loss, theft or destruction of the warehouse receipt shall be reported to the warehouse operator who shall notify the central registry. Section 31(2) A warehouse operator may, on the request of the holder of a warehouse receipt, issue a warehouse replacement receipt for a lost, stolen or destroyed warehouse receipt, where the request is accompanied by a police report of the loss, theft, or destruction of the receipt. Section 31(3) A warehouse operator shall notify the central registry of the issuance of a replacement for a warehouse receipt that is lost, stolen or destroyed. Section 31(4) A person who presents or deals with the original receipt after a replacement receipt has been issued commits an offence.

Section 32. Warranty and standing of duplicate receipt Section A replacement receipt issued under section 31 shall have the same standing as the original and shall not impose upon the warehouse operator any additional liability.

Section 33. Obligation of warehouse operator to deliver Section 33(1) A Warehouse operator shall deliver the goods referred to in a warehouse receipt to the holder of the receipt or depositor upon the presentation of the receipt. Section 33(2) Where the warehouse operator refuses or fails to deliver the goods in compliance with the provisions of this section, the warehouse operator shall be required to prove the existence of any lawful act for the refusal or failure.

Section 34. Wrongful release of goods Section Where a warehouse operator delivers agricultural commodities in a warehouse to a person who is not lawfully entitled to the possession, the warehouse operator is liable for the loss.

Section 35. Separation of goods and fungible goods Section 35(1) A warehouse operator may commingle agricultural commodities of the same type and grade. Section 35(2) A warehouse operator is liable, to each depositor or holder, for the care and redelivery of a depositor or holder of the commingled agricultural commodity to the same extent and under the same circumstances as if the agricultural commodity had been stored separately.

Section 36. Attachment or levy upon goods for which negotiable receipt has been issued Section 36(1) If goods are delivered to the warehouse operator by the owner or by a person whose act in conveying title to them to a purchaser in good faith for value would bind the owner, and a negotiable receipt is issued for them, they cannot thereafter, while in possession of the warehouse operator, be attached by garnishment or otherwise, or be levied on under an execution, unless the receipt be first surrendered to the warehouse operator, or its negotiation enjoined. Section 36(2) The warehouse operator shall in no case be compelled to deliver up the actual possession of the goods until the receipt is surrendered to the operator or impounded by the court.

Section 37. Warehouse operator's lien Section 37(1) A warehouse operator has a lien on the goods covered by a warehouse receipt or on the proceeds of those goods in his or her possession for all lawful charges in the storage contract. Section 37(2) A warehouse operator is entitled to all remedies allowed by law to a creditor against a debtor, for the collection from the depositor of all charges and advances which the depositor has expressly contracted with the warehouse operator to pay. Section 37(3)(a) the written notice shall be given by delivery in person or by registered letter addressed to the last known place of business or abode of the person to be notified; Section 37(3)(b) if the warehouse receipt has been registered in the Central Registry, the warehouse operator shall also give written notice to the chief executive officer.

Section 38. Negotiation by endorsement Section A warehouse receipt issued to a person may be negotiated by endorsement and delivery to another specified person.

Section 39. Persons capable of negotiating a Warehouse Receipt Section A warehouse receipt shall be regarded as duly negotiated in the manner stated under section 38 to a person who purchases it in good faith, for value without notice of any defect or claim to it by any other person.

Section 40. Rights acquired after negotiation of warehouse receipts Section such title to goods as the person who negotiated the receipt to him had ability to convey to a purchaser in good faith for value and also such title to the goods were to be delivered by the terms of the receipt had or had ability to convey to a purchase in good faith and for value;

Section 41. Rights and obligations of transferors and transferees of negotiable warehouse receipts Section 41(1) The transferee of a negotiable warehouse receipt for value and in good faith shall have the right to compel the transferor of such receipt to endorse the receipt. Section 41(2) A warehouse receipt shall not be regarded as negotiated until the transferor endorses it. Section 41(3) The endorsement of a warehouse receipt in good faith shall not make the transferee liable for any default or fraudulent acts on the receipt occasioned by the warehouse operator or previous endorsers.

Section 42. Stay of execution on review Section 42(1)(a) the receipt is genuine; Section 42(1)(b) has legal right to negotiate, transfer or assign it; Section 42(1)(c) knows no fact which would impair the validity or worth of the receipt; and Section 42(1)(d) has the right to transfer the title to the goods. Section 42(2) If the contract of the parties is in respect of the transfer of goods to which such warehouse receipt is involved, the fact that the goods are merchantable or fit for that particular purpose, would have been implied. Section 42(3) Warranty shall not be implied in cases where a creditor of the transferor demands in good faith or receives payment of the debt for which such receipt is security.

Section 43. Issuing of fraudulent warehouse receipts Section A warehouse operator, or any officer, agent, or employee of a warehouse operator, who issues or aids in issuing a receipt knowing the goods for which such receipt is issued have not been actually received by such warehouse operator, or are not under his actual control at the time of issuing such receipt, commits an offence and is liable on conviction to a term of imprisonment not exceeding ten years or a fine not exceeding ten million Kenya shillings, or to both.

Section 44. Issuing of receipts with false information Section A warehouse operator, or any officer, agent, or employee of a warehouse operator, who fraudulently issues or knowingly facilitates the fraudulent issuing of a receipt for goods based on a false statement or a false statement to the effect that the warehouse is licensed under this Act or the goods are insured if they are not so insured or fails to disclose such fact, commits an offence and is liable on conviction to a fine not exceeding ten million shillings or to a term of imprisonment not exceeding ten years, or to both.

Section 45. Unlawful issuing of duplicate Receipts Section A warehouse operator or any officer, agent, or employee of a warehouse operator, who issues or facilitates the issuing of a duplicate or additional negotiable receipt for goods knowing that a former negotiable receipt for the same goods or any part of them is outstanding and not cancelled, without plainly placing upon the face thereof the word "Replacement", commits an offence and is liable, on conviction, to a fine not exceeding ten million shillings or a term of imprisonment not exceeding ten years, or to both.

Section 46. Depositing goods without proper title Section A person who deposits goods whose title belongs to another party in a warehouse registered or licensed under this Act without the approval of the owner, commits an offence and is liable on conviction, to a term of imprisonment not exceeding fourteen years.

Section 47. Obstruction Section A person who obstructs the inspection of a registered or licensed warehouse in contravention of this Act or any other law, commits an offence and is liable on conviction, to a fine not exceeding one million shillings or to a term of imprisonment not exceeding five years, or to both.

Section 48. General penalty Section A person convicted of an offence under this Act for which no other penalty is specified is liable to a fine not exceeding three hundred thousand shillings, or to imprisonment for a term not exceeding six months, or to both.

Section 49. Regulations Section 49(1) The Cabinet Secretary, in consultation with the Council, may make Regulations for the carrying into effect the intent and purposes of this Act. Section 49(2)(a) on insurance policy required under this Act; Section 49(2)(b) for the procedure for appealing to the Council or the Appeal Committee; Section 49(2)(c) for the qualifications and appointment of officers undertaking inspection of warehouses registered or licensed under this Act; and Section 49(2)(d) on the form of warehouse receipts, whether negotiable or non-negotiable. Section 49(3)(a) the purpose and objective of the delegation under this section is to enable the Cabinet Secretary to make regulations to provide for the better carrying into effect the provisions of this Act; Section 49(3)(b) the authority of the Cabinet Secretary to make regulations under this Act will be limited to bringing into effect the provisions of this Act and fulfilment of the objectives specified under this section; and Section 49(3)(c) the principles and standards applicable to the regulations made under this section are those set out in the Interpretation and General Provisions Act (Cap. 2) and the Statutory...

Section 50. Consultation Section The Cabinet Secretary may, in carrying out the functions under this Act, consult the Cabinet Secretary responsible for matters related to trade.