United States Warehouse Act: Licensing, Receipts, and Enforcement

The United States Warehouse Act is a federal law that lets operators of warehouses storing agricultural commodities apply for a voluntary USDA license, and in exchange follow uniform federal standards for storage, financial responsibility, and the issuance of warehouse receipts. Signed by President Woodrow Wilson on August 11, 1916, and substantially rewritten in 2000, the law is now codified at 7 U.S.C. §§ 241–256 and administered by the Agricultural Marketing Service (AMS) within the U.S. Department of Agriculture.¹ Its receipts, paper or electronic, let farmers use stored crops as collateral for bank loans, which is why the statute still matters to agricultural finance more than a century after it was passed.

What the Law Covers

The act applies to warehouses that store agricultural products, including cotton, grain, tobacco, wool, dry beans, nuts, syrup, and cottonseed.² Coverage is voluntary. Regulators call it a “permissive regulatory act”: operators are not required to hold a federal license, but those who choose to accept USDA rules on storage practices, inspections, financial reporting, and receipt issuance in exchange for the credibility that federal oversight carries.¹

The statute’s stated purposes, as restated in the 2000 modernization, are to protect depositors, maintain a nationwide uniform system for commodity storage, keep warehouse receipts credible in financial markets, facilitate interstate and global commerce, provide safe storage at reasonable rates, and require licensed operators to accept products for storage without discrimination.³ The current text traces to the Grain Standards and Warehouse Improvement Act of 2000 (Public Law 106-472), signed November 9, 2000, which replaced the original act with the modernized version now in force.⁴

How Federal Licensing Works

An operator seeking a federal license applies to AMS with current financial statements prepared under generally accepted accounting standards, proof of legal entity status such as articles of incorporation, and documentation that the facility is suitable for storing the commodity in question. An AMS warehouse examiner then inspects the facility, and any deficiencies must be corrected before the license issues.⁵

Licensing is continuous. There is no annual renewal, but the operator must stay in compliance at all times and submit annual financial statements to AMS.⁶

Bonding and Financial Assurance

Every licensed operator must file a bond or other financial assurance with AMS to protect depositors. Acceptable instruments include a traditional warehouse operator’s bond, U.S. government obligations held at par value with an irrevocable power of attorney, an irrevocable letter of credit with a term of at least two years, or a certificate of participation in an approved state indemnity fund. The amount is tied to the facility’s storage capacity.⁵ If the assurance lapses, the license is revoked immediately and automatically.⁷ A person injured by a breach of the operator’s obligations may sue in U.S. district court to recover damages against the bond.⁸

Ongoing Duties

Once licensed, operators are bound by the act and by 7 CFR Part 869. They must deal fairly with anyone offering products that meet customary standards for the area, issue receipts for products actually in storage on request, deliver stored products and cancel the corresponding receipt on demand and payment of accrued charges, and keep accurate records with reports to AMS. Products may be commingled with the Secretary’s approval, but the operator remains individually liable to each receipt holder for that holder’s share.

Warehouse Receipts and What They Do

A warehouse receipt is a document of title issued by a licensed operator for agricultural products in storage. Receipts may be negotiable or non-negotiable and may be issued on paper or electronically.⁹ Their financial function is straightforward: a farmer who stores grain or cotton in a federally licensed warehouse and obtains a negotiable receipt can pledge that receipt to secure a loan. Federal Reserve member banks, the Commodity Credit Corporation, and commodity exchanges all rely on the credibility of USWA-issued receipts, which is how a physical commodity in a warehouse becomes a liquid financial instrument.

Electronic Receipts

Since the 2000 modernization, electronic warehouse receipts carry the same legal standing as paper ones. The holder of an electronic receipt is considered to be in possession of the commodity for all legal purposes, including the perfection of security interests under the Uniform Commercial Code.¹⁰ Electronic receipts run through central filing systems operated by AMS-approved providers. Four are currently authorized: Plains Cotton Cooperative Association (cotton); EWR, Inc. (cotton, peanuts, and grain); eCOPS, LLC (coffee, cocoa, orange juice, and related documents); and eGrain (rice and grain).¹¹ An operator must use one authorized provider annually, and only one person may be designated as the holder of an electronic receipt at any given time, which prevents the same commodity from being pledged twice.¹²

Use on Commodity Exchanges

USWA receipts also feed the physical delivery process on futures exchanges. Under Chicago Board of Trade rules, warehouse receipts represent direct ownership of physical grain in an exchange-approved warehouse. The CME Clearing House requires that outstanding shipping certificates be collateralized at 110 percent with cash, letters of credit, or U.S. Treasuries, or at 100 percent with USDA warehouse receipts. If a warehouse fails to deliver and the certificates are backed by USDA receipts, the receipts go to the buyer and USDA handles the default.¹³

Federal Licensing Displaces State Warehouse Law

Under 7 U.S.C. § 242(a), the Secretary of Agriculture’s authority over federally licensed warehouses is exclusive. Once an operator takes federal licensing, state laws on warehousing, grading, weighing, storing, and merchandising do not apply to that facility.¹⁴ The Supreme Court confirmed the principle in Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (1947), holding that federally licensed warehousemen “need serve but one master, and that one the USDA.” Later federal decisions have applied the same rule to state weighing regimes and to state-law claims about receipt obligations and storage methods.

The practical consequence is a choice. In states with their own warehouse laws, an operator selects either state or federal regulation, not both. In at least twenty states with no warehouse regulation of their own, the choice is federal licensing or none, and many operators in those states pick USWA licensing because it gives depositors and lenders a recognized standard.⁶

Enforcement, Penalties, and Appeals

AMS conducts routine and special examinations of licensed warehouses, and those inspections are unannounced. Examiners verify storage obligations, physical inventory, facility suitability, and conformance with USWA business practices. In fiscal year 2024, AMS conducted 1,495 warehouse examinations; 325 produced 498 findings requiring follow-up.⁹

AMS may suspend or revoke a license for failure to meet minimum financial requirements, failure to file required financial statements, fraud against depositors or document holders, loss of control over the facility, and conduct that poses a probable loss of assets to depositors. In an emergency, AMS may immediately suspend operations or take control of a warehouse if continued operation threatens depositor assets or data integrity.⁷

Civil penalties can reach $25,000 per violation when no agricultural product is involved, or up to 100 percent of the value of the product when one is.¹⁵ Operators and employees also face federal criminal and civil fraud liability for false certifications or concealment of financial condition.¹⁶ An operator hit with an adverse determination has 28 calendar days to file a written appeal with the AMS Director. Decisions after the appeals process are final, and administrative remedies must be exhausted before going to court.⁷

Fees and Program Scale

The program is funded by user fees, not congressional appropriations. In FY 2024, it took in $3,958,564 in fees against $4,173,658 in expenses, a shortfall of roughly $215,000, and closed the year with a reserve balance of $1,269,189.⁹ To close the gap, AMS raised fees effective October 1, 2025, publishing the updated schedule in the Federal Register on April 29, 2025. The agency noted that fees had not been adjusted since 2019 and said it would “minimize the impact on industry by limiting any increases to cover inflationary costs only.” The changes cover license action fees, service license fees, inspection fees, and annual user fees, with rates varying by commodity type and storage capacity. The license action fee for cotton and grain warehouses, for example, is $95.¹⁷

The program’s footprint is larger than the warehouse licenses alone. In FY 2024, the Warehouse and Commodity Management Division maintained more than 13,600 active licenses for inspectors, weighers, classifiers, and graders, on top of the operator licenses, and oversaw the four electronic receipt providers. The same examiners handle Commodity Credit Corporation storage agreement inspections and commodity procurement warehouse inspections for other USDA programs.⁹

1
USDA Agricultural Marketing Service. United States Warehouse Act
2
U.S. Government Publishing Office. Senate Report 106-391
3
USDA Farm Service Agency. United States Warehouse Act Overview
4
U.S. Government Publishing Office. Public Law 106-472 — Grain Standards and Warehouse Improvement Act of 2000
5
eCFR. 7 CFR Part 869, Subpart B — Warehouse Licensing
6
National Agricultural Law Center. General Warehouse Regulation
7
eCFR. 7 CFR Part 869, Subpart A — General Provisions
8
Office of the Law Revision Counsel. Title 7, Chapter 10 — 7 U.S.C. § 245
9
USDA Agricultural Marketing Service. USWA Fiscal Year 2024 Annual Report
10
Office of the Law Revision Counsel. Title 7, Chapter 10 — 7 U.S.C. § 250
11
USDA Agricultural Marketing Service. Agreements With Approved Providers
12
Cornell Law Institute. 7 CFR § 869.303 — Electronic Warehouse Receipts
13
CME Group. Warehouse Receipts vs. Shipping Certificates — Frequently Asked Questions
14
U.S. Government Publishing Office. 7 CFR Part 869 — Regulations Under the United States Warehouse Act
15
Office of the Law Revision Counsel. Title 7, Chapter 10 — 7 U.S.C. § 254
16
USDA Farm Service Agency. USWA Export Food Aid Commodity Warehouse Licensing
17
Federal Register. 2025/2026 Rates Charged for AMS Services