Warehousing engages the storage of goods by a warehouseman on behalf of a depositor, against consideration, for a defined period. Under Iraqi law, the warehousing relationship is characterised as bailment under the general law of contracts in the Iraqi Civil Code No. 40 of 1951, with specific application of Articles 949 et seq. governing the contract of deposit. The warehousing arrangement engages substantive considerations regarding the warehouseman’s duty of care, the allocation of risk for loss or damage, the warehouseman’s lien, the procedures for the handling and release of goods, and the interaction with the customs and tax regimes where the goods are subject to those regimes.
Warehouseman’s Duty of Care
Under the Civil Code, the depositary is bound to preserve the deposited goods with the care of a reasonable person where the deposit is gratuitous, and with the care of a prudent professional where the deposit is for consideration. The duty extends to the protection of the goods against loss, damage, deterioration, and unauthorised removal, by reference to the standard of care applicable. Where the warehouseman is a professional warehousing service provider, the duty engages the higher standard, including the implementation of physical security measures, environmental controls appropriate to the nature of the goods, inventory management systems, and trained personnel.
Categories of Warehouse
The principal categories of warehouse engaged in Iraqi supply chain operations are:
- Private warehouses operated by the owner of the goods for the storage of its own inventory
- Public warehouses operated by warehousing service providers offering storage to multiple depositors
- Bonded customs warehouses operating under the Customs Law No. 23 of 1984, in which imported goods may be stored under customs supervision with suspension of duties and taxes
- Free zone warehouses located within designated free zones established under the Free Zones Law No. 3 of 1998
- Specialised warehouses for particular categories of goods, including pharmaceuticals, hazardous materials, refrigerated goods, and dangerous goods
Each category engages distinct regulatory frameworks and operational requirements.
Bonded Customs Warehouses
Bonded customs warehouses are warehouses approved by the General Authority of Customs under the Customs Law No. 23 of 1984 for the storage of imported goods with suspension of customs duties and taxes. Goods held in a customs warehouse remain in customs control, and their removal from the warehouse is conditional on the discharge of the applicable duties and taxes or the use of an authorised suspensive regime. The operator of the bonded warehouse is subject to specific licensing and supervisory requirements, including the maintenance of records, the provision of security in the form of customs bonds, and the cooperation with customs supervision.
Free Zone Warehouses
Free zones in Iraq are established under the Free Zones Law No. 3 of 1998 and operate under the supervision of the General Commission for Free Zones. The principal Iraqi free zones include the Khor al-Zubair Free Zone, the Falafel Free Zone, and the Nineveh Free Zone, with the Kurdistan Region operating additional free zones under the Kurdistan Regional framework. Goods held in free zone warehouses benefit from suspension of customs duties and taxes, simplified administrative procedures, and access to the broader free zone framework. The operator of a free zone warehouse is subject to the supervisory framework of the relevant free zone authority.
Warehouse Receipts and Documentation
The warehouseman issues to the depositor a warehouse receipt evidencing the deposit and the principal terms applicable. The receipt records the identity of the depositor, the identity of the warehouseman, the description and quantity of the goods deposited, the date of deposit, the warehouse charges, and the terms applicable to the deposit. Where the receipt is negotiable, it functions as a document of title and may be transferred to evidence the transfer of title to the underlying goods. The framework for negotiable warehouse receipts engages the Commercial Code provisions on commercial documents.
Warehouseman’s Lien
The Civil Code confers on the depositary the right to retain the deposited goods for the recovery of charges and costs incurred in the preservation of the goods. The lien engages the warehouseman’s right to refuse the release of the goods pending payment, and, in defined circumstances, to dispose of the goods to recover unpaid charges. The contract may supplement the statutory lien by specifying the events triggering its exercise, the procedure for its exercise, and the application of the proceeds of any disposition.
Allocation of Risk
The default allocation of risk under the Civil Code places on the depositary liability for loss or damage attributable to its fault, while preserving the depositor’s risk for loss attributable to the nature of the goods, the inherent vice of the goods, or force majeure. The contract may modify the default allocation by exclusion or limitation clauses, indemnities, and insurance obligations, subject to the limits prescribed by the Civil Code, which restricts the enforceability of clauses excluding liability for gross negligence or wilful misconduct. The interaction between the warehouseman’s liability and the depositor’s cargo insurance should be addressed expressly in the contract.
Inventory Management and Access
Substantial warehousing arrangements engage operational provisions on inventory management, including the warehouseman’s obligation to maintain accurate records, the depositor’s right of inspection, the procedures for the receipt and release of goods, the cut-off times for operational instructions, the reporting framework, and the integration with the depositor’s information systems. The contract should specify the operational standards with sufficient precision to support measurement and enforcement, and the consequences of inventory discrepancies and unauthorised releases.
Insurance Requirements
Insurance arrangements in warehousing engage the warehouseman’s liability insurance covering its statutory and contractual liability to depositors, the cargo insurance of the depositor covering the goods against loss or damage in storage, and the warehouseman’s property insurance covering its own premises and equipment. The contract should specify the insurance requirements applicable to each party, including the minimum cover, the named insureds, the rights of subrogation, and the procedures for claims handling. The interaction between the insurance arrangements and the liability provisions of the contract should be addressed expressly.
How We Can Help
Etihad Law Firm advises on warehousing arrangements in Iraq, including the drafting and negotiation of warehouse service agreements consistent with the Iraqi Civil Code provisions on deposit, the structuring of bonded customs warehousing and free zone warehousing arrangements, the allocation of risk and liability, the structuring of insurance, the management of inventory and operational disputes, and the conduct of disputes arising from warehouse incidents.