(Adopted at the 25th meeting of the 7th Board of Governors on July 29, 2022; issued by Announcement [2022] No. 74 on August 31, 2022; effective as of December 1, 2022)

 

Chapter 1    General Provisions

Article 1          These Rules are made in accordance with the Trading Rules of Zhengzhou Commodity Exchange (“Trading Rules”) and other relevant rules for the purposes of strengthening the management of the designated commodity delivery warehouses of the Zhengzhou Commodity Exchange (the “Exchange”), regulating physical delivery activities, and ensuring smooth delivery processes.

Article 2          “Designated commodity delivery warehouse” (“delivery warehouse”) refers to a business establishment certified by the Exchange to provide warehousing and other related services in the physical delivery against commodity futures contracts.

For the purposes of these Rules, “delivery warehouse” does not include commodity factory warehouses designated by the Exchange, which are administered by the Exchange in accordance with the Rules of Zhengzhou Commodity Exchange on Designated Commodity Factory Warehouses.

Article 3          The Exchange shall sign a delivery warehouse agreement with each delivery warehouse in accordance with these Rules, which agreement shall specify that the futures delivery activities of the delivery warehouse is subject to the administration of the Exchange and that the delivery warehouse and its staff members shall comply with these Rules.

Chapter 2    Application and Approval

Article 4          An applicant for becoming a delivery warehouse shall:

(1)        lawfully hold a Business License for Enterprise Legal Person or a Registration Certificate for Public Institution Legal Person, with “warehousing” or “warehousing and logistics” specified in the scope of business;

(2)        have reached the level of net capital, registered capital, and paid-in capital required by the Exchange;

(3)        be financially sound and resilient;

(4)        have a good business reputation and well-developed warehousing protocols, and have no recent record of any major illegal or non-compliant activity, major integrity breach, major safety-related accident, or disqualification as a delivery warehouse;

(5)        acknowledge and abide by the Trading Rules, Futures Delivery Rules of Zhengzhou Commodity Exchange (“Delivery Rules”), Rules of Zhengzhou Commodity Exchange on Standard Warehouse Receipts (“Standard Warehouse Receipt Rules”), and the product-specific rules of the Exchange;

(6)        ensure its key managers possess the corresponding experience in managing a warehouse for the relevant deliverables;

(7)        possess the storage conditions for the relevant deliverables, a sizable storage capacity, and a full, compliant, and well-maintained set of storage and measurement equipment and facilities;

(8)       have rigorous and comprehensive protocols for the load-in, load-out, storage, management, inspection, and testing of deliverables;

(9)        be conveniently located with a high transit, receiving/shipping, and loading/unloading capacity;

(10)      have obtained the customs’ approval with respect to its Bonded Delivery service for futures products, special customs supervision area, and bonded supervisory location, if it is applying to provide such services;

(11)      meet the requirements of the Exchange on video surveillance, storage management, and other related systems as well as on other facilities and equipment;

(12)      possess the firefighting equipment, facilities, and personnel required for the storage and safekeeping of the relevant deliverables; and

(13)      meet any other requirements specified by the Exchange.

Article 5          An applicant for becoming a delivery warehouse shall submit the following documents:

(1)        the application form;

(2)        its Business License for Enterprise Legal Person or Registration Certificate for Public Institution Legal Person;

(3)        such materials as the audit reports of the most recent two (2) years issued by an accounting firm or the annual financial statements audited by a government body recognized by the Exchange, or, if the applicant has been operating for less than two (2) years, such materials as the audit reports or financial statements since the date of its establishment to the satisfaction of the Exchange;

(4)        approval of the application’s submission issued by the applicant’s supervising body or the institution prescribed in its articles of association;

(5)        security documents required by the Exchange;

(6)        documents evidencing title and property interest, such as the land-use certificate and house ownership certificate for the warehouse, and related documents; or for leased properties, the lease agreement signed with the owner of the premises and other relevant documents;

(7)        warehouse management rules and an overview thereof;

(8)        fire safety certificate issued by the local fire department or other relevant institutions of the People’s Republic of China;

(9)        information on the state of its video surveillance, storage management, and other IT systems; and

(10)      any other documents required by the Exchange.

Article 6          The Exchange reviews each delivery warehouse application in accordance with the following procedures:

(1)        conduct a preliminary review of the application materials listed in the preceding Article;

(2)        conduct inspection and evaluation of the warehouse based on the results of the preliminary review; and

(3)        select the most qualified applicants based on the results of inspection and evaluation and sign the delivery warehouse agreement.

Article 7          An applicant shall complete the following procedures upon being approved as a delivery warehouse:

(1)        file with the Exchange the seals that will be used for registering standard warehouse receipts;

(2)        appoint one person to oversee the futures delivery business, set up a delivery services department, assign dedicated persons to manage futures deliverables and standard warehouse receipts, and file the relevant letters of authorization and the signature of the authorizer with the Exchange;

(3)        pay the delivery deposit;

(4)        develop operating procedures or detailed rules in accordance with the requirements of the Exchange and these Rules, and file them with the Exchange;

(5)        arrange the managerial staff for the futures delivery business to attend the delivery training organized by the Exchange; and

(6)        complete any other procedures specified by the Exchange.

Article 8          Any delivery warehouse that wishes to relinquish its delivery warehouse status shall submit a withdrawal application to the Exchange for approval.

The Exchange has the right to suspend a delivery warehouse from all or part of its delivery business or cancel its delivery warehouse status in view of market or risk management needs.

Article 9          Any delivery warehouse whose delivery warehouse status is cancelled shall complete the following procedures:

(1)        load out all deliverables or convert them into spot commodities, or dispose of them in such other manners as approved by the Exchange;

(2)        settle all claims and liabilities with the Exchange; and

(3)        apply for the return of the delivery deposit in accordance with the rules of the Exchange.

Article 10        The Exchange shall, upon the confirmation, cancellation, or approval of relinquishment of the delivery warehouse status of a delivery warehouse, notify Members and the delivery warehouse in a timely manner.

Chapter 3    Rights and Obligations

Article 11        A delivery warehouse has the right to:

(1)        request to register standard warehouse receipts in accordance with the rules of the Exchange;

(2)        charge such fees, at such rates, and in such manner as approved by the Exchange;

(3)        offer suggestions to the Exchange with regard to its rules on physical delivery;

(4)        lease in warehouse buildings or warehouse premises with the approval of the Exchange to store deliverables;

(5)        exercise other rights provided in the Futures Delivery Rules, Standard Warehouse Receipt Rules, the various product-specific rules of the Exchange, and the delivery warehouse agreement.

Article 12        A delivery warehouse has the obligation to:

(1)        comply with the Futures Delivery Rules, Standard Warehouse Receipt Rules, product-specific rules, and other rules of the Exchange; accept the supervision of the Exchange; and provide relevant information to the Exchange in a timely manner;

(2)        store the deliverables and keep them safe in accordance with relevant rules;

(3)        purchase and maintain all-risk property insurance at the full value of the deliverables in storage as well as other relevant insurance policies, or insure the deliverables as required by the Exchange;

(4)        renovate and upgrade video surveillance, fire safety, and other facilities and equipment in a timely manner and as required by the Exchange;

(5)        handle the inspection and load-in of futures deliverables in accordance with the Rules of the Exchange and establish an electronic inventory management system and other necessary systems;

(6)        provide deliverables in accordance with the requirements specified in the standard warehouse receipts and the Rules of the Exchange and assist the owners of the commodities during load-out process;

(7)        maintain the confidentiality of all delivery-related confidential commercial information;

(8)        participate in the annual reviews organized by the Exchange;

(9)        pay the delivery deposit;

(10)      cooperate with Designated Quality Inspection Agencies during sampling, on-site inspection, and other procedures;

(11)      promptly notify the Exchange in the event of any change in its name, legal representative or principal, registered capital, paid-in capital, shareholders or ownership structure, warehouse premises, or business premises; any litigation, arbitration, dispute, or other event that may endanger deliverables; or any collateralization of the land or buildings of its warehouse or any guarantee to external parties; and

(12)      perform other obligations provided in the Futures Delivery Rules, Standard Warehouse Receipt Rules, the various product-specific rules of the Exchange, and the delivery warehouse agreement.

Chapter 4    Daily Operations

Article 13        The daily operations of a delivery warehouse may be divided into the three phases of commodity load-in, commodity storage, and commodity load-out.

Article 14        A delivery warehouse shall ensure that the commodities designated for futures delivery have priority in load-in and load-out.

Article 15        Deliverables shall be stored in a manner that meets the technical specifications of the People’s Republic of China, the corresponding industry, and the Exchange.

Article 16        Each delivery warehouse shall implement a labeling system for deliverables and ensure the labels conform to the rules of the Exchange.

Article 17        A delivery warehouse shall properly preserve the commodity inspection and testing results in accordance with the rules of the Exchange and, upon commodity inspection, acceptance, and load-in, enter the relevant data through the Exchange’s warehouse management system.

Article 18        A delivery warehouse shall forbid any client without the relevant Pick-up Notice to enter the warehouse to examine the deliverables in storage.

Article 19        A delivery warehouse shall store and stack deliverables in such manners and methods as to be compliant with the relevant technical specifications.

Article 20        The facilities used to store deliverables shall meet the prescribed conditions with both interiors and exteriors kept clean.

Article 21        A delivery warehouse shall manage the deliverables in accordance with the corresponding storage and care requirements and the delivery warehouse agreement, ensure the quality and safety of the deliverables, and maintain an accurate and detailed storage record.

Article 22        A delivery warehouse shall not change the storage location or stack location of deliverables without the permission of the Exchange, or will be held liable by the Exchange for committing a violation and shall be solely liable for any loss arising from such unauthorized movement.

Article 23        A delivery warehouse shall process the load-out of commodities in a timely and careful manner and shall duly complete the following checks:

(1)        verify the accuracy and validity of the pick-up verification code and of the identity certificate and authorization letter for the pick-up person; and

(2)        verify whether the information on the Pick-up Notice is fully consistent with the commodities to be loaded out.

A delivery warehouse shall actively cooperate with owners on shipping the commodities and shall not delay the shipping process without justification.

A delivery warehouse shall provide updates on the shipping process, warehouse number, storage location, and the shipping destination of commodities through the system or channel designated by the Exchange.

Chapter 5    Supervision

Article 24        The Exchange has the right to organize the inspection, self-inspection, or cross-inspection of delivery warehouses; may appoint a Member or a third party to inspect delivery warehouses; and will organize the annual review of delivery warehouses.

(1)        “Inspection” refers to the thematic or comprehensive examination carried out by the Exchange at any time it deems necessary, during which it may access and copy the documents, materials, systems, information, and data relevant to the matters under inspection and question the relevant individuals, for the purpose of checking whether the daily operations of the delivery warehouse are compliant with the various rules of the Exchange;

(2)        “Self-inspection” refers to the examination carried out by each delivery warehouse on itself in accordance with the requirements of the Exchange, with the results of inspection then submitted to the Exchange;

(3)        “Cross-inspection” refers to the thematic examination carried out by one delivery warehouse on another in accordance with the requirements of the Exchange, with the results of inspection then submitted to the Exchange;

(4)        “Inspection by Member or third party” refers to the thematic examination carried out by a Member or an independent organization designated by the Exchange on a delivery warehouse in accordance with the requirements of the Exchange, with the results of inspection then submitted to the Exchange;

(5)        “Annual review” refers to the review carried out on a delivery warehouse by an accounting firm or another organization designated in accordance with the relevant rules by the Exchange.

Any delivery warehouse that is found, during such an aforementioned inspection, to have committed a violation or have failed to perform its obligations, or is found during an annual review to be non-compliant with the requirements for delivery warehouses, may be subject to such penalties from the Exchange as mandatory rectifications within a prescribed time limit, reduction of the storage capacity for futures deliverables, suspension of all or part of its delivery business, and cancellation of its delivery warehouse status. Any resulting loss shall be borne by the delivery warehouse.

The relevant delivery warehouse, Member, and third party shall maintain the confidentiality of all documents, materials, systems, information, and data of the subject delivery warehouse that have not been formally made available to the public but have come to its knowledge during an inspection or cross-inspection, or shall bear the corresponding legal liabilities.

Article 25        A delivery warehouse is prohibited from:

(1)        managing deliverables in contravention of the requirements of the Exchange;

(2)        moving or disposing of deliverables without permission;

(3)        influencing or attempting to influence the futures price in collusion with a Member or client by such methods as taking up the storage capacity without load-in;

(4)        requesting to register for standard warehouse receipts before the completion of load-in, receipt of inspection and testing results, or completion of the requisite inspection and testing items;

(5)        overcharging for delivery services;

(6)        creating obstacles for clients or refusing to work with clients during the load-in or load-out of deliverables;

(7)        refusing or obstructing the lawful and compliant supervision and examination by the Exchange;

(8)        engaging in fraud which has affected the normal conduct of futures delivery activities; or

(9)        engaging in any other activity that violates the rules of the Exchange.

Article 26        Each delivery warehouse shall pay a delivery deposit to the Exchange as a guarantee for its performance of the relevant obligations. The Exchange will return the interest on the delivery deposit, accrued annually at the bank current-deposit rate published by the People’s Bank of China for the corresponding period, to the delivery warehouse after determining that it has fulfilled its obligations prescribed in these Rules.

A delivery warehouse is liable for compensation if, for reasons attributable to itself, a holder of a standard warehouse receipt cannot exercise or fully exercise its right under the receipt. Any shortfall in such compensation will be made up first by the delivery deposit the delivery warehouse has paid to the Exchange and, if a shortfall still exists, by the Exchange in accordance with applicable rules, upon which the Exchange will obtain the right of recovery against the delivery warehouse.

The specific amount of the delivery deposit will be specified in the delivery warehouse agreement.

Chapter 6    Ancillary Provisions

Article 27        Any violation of these Rules will be handled in accordance with the Rules of Zhengzhou Commodity Exchange on Violations.

Article 28        The Exchange reserves the right to interpret these Rules.

Article 29        These Rules take effect on December 1, 2022.

 

 

(This English version is for reference ONLY. In case of any inconsistency between the different language versions, the Chinese version prevails.)