The Custody File: Board Evidence for Stock Held in Another Firm’s Warehouse Abroad

When a UK retailer or product company places stock in a third-party fulfilment centre in the Netherlands, Poland or further afield, the commercial case is rarely difficult to see. Local despatch shortens delivery times, reduces cross-border friction and allows a smaller UK business to look established in a new market. The board’s difficulty is different. The stock has left the company’s sight, but it has not left its balance sheet. As peak trading approaches in late 2026, that distinction deserves formal attention.

Overseas fulfilment is often sold as a service. In substance it is a custody arrangement over inventory that may represent a material share of working capital. The board should therefore govern it as a controlled operational asset, not as a logistics convenience. The evidence file does not need to be bureaucratic, but it should allow directors to answer a simple question: if the warehouse, the operator or the trading relationship failed tomorrow, could the company prove what it owned, where it was, and how it would get it back?

Custody, not merely logistics

The first task is to establish the legal character of the arrangement. A contract may be titled a fulfilment services agreement, but the operator may still hold goods as a bailee. That matters for title, risk, lien rights and insolvency. The board should ask for a custody schedule that identifies SKUs, quantities, values, locations and the legal owner of the stock. It should also confirm whether the operator may commingle stock with goods belonging to other clients, whether it has a general lien, and whether the warehouse landlord has any claim over inventory stored on the premises.

A monthly stock reconciliation signed by both parties is more useful than a polished dashboard. So is a clause that prevents the operator from pledging, selling or otherwise encumbering the stock. Where the operator acts as importer of record or as agent, the board should see the agency terms in writing. The test is not whether the contract sounds reassuring. The test is whether a third party, including an insolvency practitioner, would recognise the UK company’s title from the documents available.

Insurance that follows the goods

Many UK policies contain territorial limits or wording that treats stock in the custody of others differently from stock in the company’s own premises. The board should obtain the certificate and the relevant endorsements, not merely a broker’s summary. It should check the named insured, the loss payee, per-location limits, deductibles, average clauses and any exclusion for theft, flood, temperature damage or employee dishonesty. Peak values should be endorsed explicitly rather than left to an annual declaration.

Insurance should also be tested as a scenario. If a fire destroys the overseas warehouse in the first week of December, who notifies the insurer, who proves the stock value, and how quickly can replacement stock be sourced? Business interruption cover may be relevant, but it is no substitute for a retrieval plan. The board should know whether the operator’s own insurance responds before the company’s policy and whether subrogation rights are waived. A certificate in a drawer is not assurance. A tested claims route is.

Customs status belongs in the asset register

Stock abroad is not simply stock in another country. It has a customs status. Goods may be in free circulation, in a customs warehouse, under temporary admission or in transit. Each status carries different obligations and different risks. The board should map the customs procedure by location, identify the importer of record, and confirm the EORI numbers, duty deferment arrangements and VAT treatment. If the fulfilment operator imports goods on the UK company’s behalf, the board should see the declaration evidence and understand who bears duty, import VAT and compliance risk.

Peak trading makes this more acute. Returns, replacements and unsold stock may need to move again, and each movement can create a new customs event. A board that cannot state the customs status of its overseas inventory is not in full control of its working capital. The evidence file should include a simple location-by-location schedule, refreshed before the peak season and reconciled with the stock record.

Service credits are not operational resilience

Service-level agreements and service credits have their place, but they are weak remedies when stock is stranded or a peak despatch window is missed. A credit of a few percentage points of monthly charges is no answer to a five-week stock-out. The board should examine peak capacity commitments, cut-off dates, prioritisation rules, contingency arrangements and the operator’s own business continuity plan. It should also check liability caps against the value of stock at risk, not merely against the annual service fee.

Access rights matter as much as remedies. Can the company send its own staff or auditors into the warehouse? Can it retrieve stock at short notice? What happens if the operator becomes insolvent or loses its lease? The contract should provide for step-in rights, transition assistance and a clear stock retrieval procedure. A short tabletop exercise before peak trading will reveal more than another review of the clause list.

Data feeds and reconciliation

The board’s view of overseas stock is only as good as the data feed behind it. The company should confirm the frequency and reliability of stock updates, the error rate, the reconciliation process and the audit rights available. Access controls should be defined, and the operator should be able to demonstrate backup and recovery arrangements. If the board sees only a weekly stock snapshot, it is governing a photograph, not a warehouse.

Exception reporting is particularly important. The board does not need every SKU movement, but it should see ageing stock, shrinkage, unexplained adjustments and any divergence between the operator’s records and the company’s own. Cyber risk also belongs here. A fulfilment operator holds commercially sensitive data about demand, pricing and product mix. The board should know where that data sits, who can access it and how it is deleted at exit.

Exit before entry

Finally, the board should test the exit before approving the entry. Notice periods, transition assistance, removal and return costs, customs export formalities and data deletion should all be documented. The company should know how long it would take to retrieve stock, who would pay for the move and what would happen if the operator refused access. Portability is a board test, not a legal afterthought.

Overseas fulfilment can remain a sensible convenience. It should not remain an unexamined one. A pre-peak evidence file should include the custody schedule, the contract clause map, the insurance endorsement, the customs status register, the peak capacity plan, the reconciliation and data-access terms and the exit playbook. Reviewed quarterly and certified before peak trading, that file gives the board something more valuable than reassurance: a defensible record of control.