New Law Impacts Operators of Warehouses, Silos and Cold Storage Facilities

The Warehouse, Silo and Cold Storage Act (the “Act”) was signed into law on 22 August 2015 and will come into effect one hundred days following publication in the Government Gazette, which publication occurred on 27 August 2015. The Act’s main provisions include (i) the creation of a “Warehouse, Silo and Cold Storage Supervisory Committee” (the “Supervisory Committee”) as a regulator to oversee and implement the Act and (ii) requirements for operating a warehouse, silo or cold storage business.

Supervisory Committee

The Supervisory Committee established under the Act is chaired by the Minister of Commerce and consists of representatives of several other ministries, including finance, agriculture, and industry as well as other experts.   Its role is similar to that of other committees set up in under other acts to regulate other areas of business and includes the authority to issue rules and notifications under the general ambit of the Act.  However, business operators will want to focus on some of the Supervisory Committee’s other more bespoke and possibly troubling and vague discretionary powers, including the ability to set capital requirements for running a warehouse, silo or cold storage business and to set fees for the storage of goods and related services when there are “certain reasons seen as appropriate or necessary to maintain fair rates of remuneration.”

Although a “competent official” is appointed by the Minister of Commerce with the power to enforce the Act and is permitted to enter operators’ workplaces during their working hours, in practice, it is the Director General of the Department of Internal Trade who plays a prominent role on the Supervisory Committee and in enforcing the Act.  The Director General’s responsibilities include approving and renewing operating licenses, approving branch offices of operators, approving reductions in capital requirements set by the Supervisory Committee and allowing operators to deposit money outside of banks or finance companies.   Operators may appeal decisions of the Director General with the Supervisory Committee.

Operating a warehouse, silo or cold storage facility

The Act imposes a host of requirements and restrictions on operators.  As an initial matter, a three-year license from the Director General is required to operate, even for existing operators who received approval under previous law.   The Act also spells out a list of details required to be included in the receipts and warrants issued by operators to depositors of goods, such as the names and addresses of the depositors and of the “entrepreneurs” of the warehouse, silo or cold storage business, the charges for storage and services, a description of the goods, the period for storage, and insurance details.  Operators face liability for damage caused to deposited goods and are required to go through periodic checks at least twice a year.   Operators are also required to file annual reports together with their financial statements. While the Act imposes a host of requirements and restrictions on operators, it does allow them to withhold goods deposited in order to satisfy a depositor’s debts owed to the operator.

The Act also impacts some of the more administrative aspects of an operator’s business.  For example, operators may only deposit funds with banks or finance companies unless the Director General of the Department of Internal Trade permits otherwise, and are prohibited from lending money to affiliated businesses or individuals, (a strict reading of the Act may allow more complicated corporate ownership structures to avoid these limits).  Operators are also required to give the Director General of Internal Trade at least 60 days’ advance notice before ceasing operations.

Exemptions for affiliates

A license is not required for the operation of a warehouse, silo or cold storage business for the benefit of affiliates (only notification to the Director General is required).  Such affiliated operators are subject to less stringent receipt and warrant issuance requirements.