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How can a warehouse receipt be transferred to create a security interest in stored goods?

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Mosaic portrait of Emperor Justinian I with a jeweled crown and halo, from the 6th-century Basilica of San Vitale in Ravenna, Italy. — Carriage of goods Justinian I, detail of a 6th-century mosaic at the Church of San Vitale, Ravenna, Italy.

A warehouse receipt serves as a document of title that embodies a claim for the delivery of stored goods. Because it functions similarly to a bill of lading, it can be used to create a security interest in those goods.1

If a warehouse receipt is made out to order, it may be transferred through endorsement and delivery of the document. Whether this transfer results in the conveyance of ownership or the creation of a security interest depends entirely on the stated intention of the parties involved. By transferring the document in this manner, the holder acquires the rights associated with the stored goods, allowing a creditor—such as a bank—to secure credit against the value of the collateral.1