Purchase Money Security Interest Registration Timelines in PBOC System
Registration within ten days of physical delivery grants purchase money security super-priority over prior floating charges under PRC Civil Code Article 416.
Transfer of Possession
Meaning
A legal and physical act shifts the actual control of an asset from one party to another, marking a decisive transition in property transactions. This transfer of possession represents a formal step in sales contracts, manufacturing agreements, and leasing arrangements. The event can happen through direct physical handover or through administrative changes in control.
It establishes which party is responsible for the care and safety of the item.
Physical Delivery
The physical handover of the asset occurs when the goods are delivered to the recipient’s designated warehouse or factory floor. Under the typical procedures for a transfer of possession, the recipient signs a delivery receipt after inspecting the outer packaging. This signature serves as formal evidence that the physical custody of the goods has changed hands.
The receiving company must then store the goods in a secure area to prevent any damage.
Constructive Delivery
Possession can also change hands without a physical movement of the goods, through the transfer of documents of title or change of legal status. In the context of a transfer of possession, a bill of lading or a warehouse receipt can be transferred to the buyer to give them legal control. This method is common in international trade where goods are held by third-party logistics providers.
The warehouse operator then holds the goods on behalf of the new owner.
Risk Allocation
The shift in possession determines which party bears the financial risk of loss or damage to the goods if an accident occurs. Under the statutory rules of transfer of possession, the risk transitions to the buyer the moment they or their designated carrier take physical control. This rule applies even if the buyer has not yet paid the full purchase price of the items.
The buyer must arrange for adequate insurance coverage to take effect from the exact moment the handover is completed.