Chapter 1 General Rules

Article 1

In order to ensure the orderly operation of delivering commodity contracts on the Tianjin Bohai Commodity Exchange (hereinafter referred to as the Exchange), and regulate physical delivery, the Rules are enacted subject to the Interim Measures of Bohai Commodity Exchange of Tianjin for Trading Market Supervision and Administration, Jin Zheng Fa [2009] No 32. and the Rules of Tianjin Bohai Commodity Exchange for Continuous Spot Trading Management.

Article 2

The delivery business of the Exchange shall be conducted in compliance with the detailed rules. The Exchange, traders, and designated warehouses must comply with the Rules.

Chapter 2 Delivery Procedures

Article 3

Delivery refers to a procedure in which the seller transfers ownership of the underlying commodity of the contract to the buyer and the buyer makes payment to the seller, subject to the rules of the Exchange for physical delivery and to the agreements of corresponding contracts.

Article 4

The Exchange has implemented a daily physical delivery declaration system.

Any trader who makes the delivery declaration must be a legal entity engaged in production, business operation, or consumption of the underlying commodity, duly incorporated with industrial and commercial administration, and qualified for declaration of commodity delivery.

Any trader who makes the delivery declaration but fails to perform the contract or is unable to perform the same in the event of successful delivery matching, shall assume corresponding responsibilities for breach of the contract.

Article 5

Physical delivery of the commodity must be accomplished within the time limit prescribed by the Exchange. The day when successful delivery matching occurs shall be defined as D1 the next 15 trading days shall be labeled as D1，D2，D3, … D15.

Article 6

Delivery procedures：

6.1 D1

6.1.1 Buyers and sellers holding the contracts of a listed commodity shall make delivery declaration for the commodity during the delivery declaration period between 16：00 – 16：15 pm of D1, and shall declare in the way prescribed by the Exchange.

6.1.2 The e-trading system of the Exchange shall match the buyers'''' and sellers’ delivery declaration automatically, based on the principles of “time priority, daily maximized delivery”.

6.1.3 Based on the delivery declaration results, the Exchange shall send physical delivery notices to the terminals of the traders whose delivery declarations have been successfully matched. In case of failure to match, the traders are entitled to receive compensation for deferred delivery in accordance with applicable rules of the Exchange.

6.1.4 Buyers and sellers whose delivery declarations have been successfully matched shall submit the delivery commitment, which is 20% of the value of the underlying commodity to be delivered (calculated based upon the settlement price on that day) in accordance with the applicable rules of the Exchange. At the same time, the Exchange shall release the margin of the corresponding contracts.

6.2 D2, D3

Buyers shall provide the intention for delivery. Buyers shall submit the Letter of Intention of the demand commodity to the delivery department via facsimile or other method allowed by the Exchange before 16:00 pm of D3, inclusive of the commodity name, the quantity and the designated warehouse. However, all traders must accept the Exchange’s delivery matching results if there is any conflict. 

6.3 D4

6.3.1 Buyer to pay

The buyer shall transfer the remaining 80% of payment to the specific clearing account with the Exchange before 14:00 pm of D4; the Exchange collects the payment on behalf of the seller.

6.3.2 Sellers are to submit the registered warehouse receipts.

The seller shall submit his legitimate and valid registered warehouse receipts to the Exchange before 14:00 pm of D4, and pay off the warehouse costs incurred up to D6.   

6.3.3 The Exchange allocates the registered warehouse receipts.

The Exchange shall allocate the registered warehouse receipts which the Exchange has received among buyers based upon the principle of “adjacent allocation and overall arrangement”.

6.3.4 The Exchange shall inform the buyers whose declarations are successfully matched of the detailed matching results via telephone, facsimile or other appropriate method.

6.3.5 The Exchange shall issue to the buyer the Bill of Lading against the registered warehouse receipts that the seller submitted and keep the corresponding registered warehouse receipts for records.

6.3.6 Sellers are to collect payments. After confirming the seller has paid off all the storage-related costs up to D6, the Exchange shall transfer the payment collected from the buyer to the seller’s specific clearing account before 16:00 pm of D4. Under some special circumstances, the Exchange may defer the delivery payment.

6.4 D5～D6

The buyer can pick up the goods against the Bill of Lading at the warehouse.

Article 7

In case of any disputes about the quality or the quantity of the underlying commodity, the buyer shall submit an application in written form within two business days after D4, i.e., D5 and D6, to the Exchange, and is obligated to submit the Quality Inspection Certificate issued by the designated Quality Inspection Institution within seven business days of delivery D4, i.e., between D5 and D11.

It shall be deemed that the buyer has reached unanimity of the commodity picked up if no claim for dispute is submitted within the specified time, i.e., D5-D6; the Exchange shall not accept any overdue applications.

The defaulted party responsible for the dispute regarding the quality or the quantity shall bear the inspection expenses, related costs as well as any immediate economic loss incurred therefrom.

Article 8

If no dispute about the commodity’s quality and quantity is received within 2 business days after D4 from the buyer, or the dispute has been settled, the seller shall issue the VAT invoice to the buyer before D15; after the buyer has verified the invoice, the Exchange shall refund the delivery commitment to the seller. 

Article 9

If the delivered commodity is used for another delivery in the future, the owner shall go through the same procedures again in accordance with the applicable rules. 

Chapter 3 Entry and Departure

Article 10

Sellers shall transport the underlying commodities into the designated warehouse before making a delivery declaration.

Article 11

Procedures of Entry:

11.1 Application for the entry of commodity

11.1.1     Traders shall submit an Application for Entry to the designated warehouse before sending their goods.

11.1.2     The designated warehouse has approval authority of the application and shall decide within one business day of taking both the warehouse’s capacity and commodity owner’s willingness into consideration. The designated warehouse shall designate a specific time for the commodity entry.

11.2 Entry of commodity

Traders shall deliver their commodities at the agreed time to the designated warehouse as specified in their application form.

The designated warehouse shall make inspection and verification of both the arrived commodity and any required documents, in accordance with the rules of the Exchange.

Commodity owners are supposed to be present while their commodity is being received and inspected by designated warehouses; otherwise, it will be deemed that the commodity owners accept the inspection result given by designated warehouses. 

The commodity owner shall arrange the commodity entry accordingly as per the warehouse’s request, and then the designated warehouse shall issue a standard-formed warehouse receipt of the Exchange with the warehouse’s seal previously saved in the Exchange.

Article 12

Based on the warehouse receipts, traders can submit the Application for Registered Warehouse Receipt to the Exchange for the Registered Warehouse Receipt. Having been approved and registered by the Exchange, corresponding warehouse receipts become Registered Warehouse Receipts.

Article 13

The commodity referred to in the Registered Warehouse Receipt can only be claimed against the Bill of Lading issued by the Exchange. The designated warehouse shall release the commodity after verifying the Bill of Lading.

Article 14

The commodity can be picked up and sent out by the owner himself, by a designated third party, or by the designated warehouse. Under circumstances where the commodity is sent out by the designated warehouse, the commodity owner is supposed to be present when the commodity is being sent out. Otherwise, it is deemed that the warehouse has delivered the commodity accurately and successfully.

Article 15

While releasing the commodity, the designated warehouse shall make relevant stamps on the Bill of Lading to match the records of the warehouse, and maintain the documents in safekeeping for future reference.

Chapter 4 Delivery of the Listed Commodities

Article 16

Please refer to the e-trading contracts for the minimum delivery units and quality specifications of listed commodities.

Article 17

Location of delivery: the designated warehouses.

Article 18

Please refer to the specific delivery rules prescribed otherwise for the listed commodities.

Chapter 5 Delivery Fee

Article 19

The buyer and seller shall pay the respective delivery fees to the Exchange for the physical delivery. Please refer to the contract specifications of listed commodities for delivery fee details.  

Article 20

The fee details and standards for the entry, storage and departure of the goods are formulated by the designated warehouses and approved by the Exchange.

Article 21

Fees of designated warehouses are calculated as below:

21.1 Storage fees are calculated per day. Storage fees and other warehouse-related fees incurred from D1 to D6 shall be paid by sellers, while any storage fees and other warehouse-related fees incurred after D7 (inclusive) shall be paid by buyers.

21.2 Designated warehouses issue legitimate settlement documents to commodity owners according to, but not limited to, the actual expenses. Commodity owners are supposed to make a lump sum payment after verification.

Article 22

The following occurrences shall be considered to cause a default contract:

22.1 Where the seller fails to surrender sufficient Registered Warehouse Receipts as required within the prescribed time limit for delivery;

22.2 Where the buyer fails to make full payment for commodities as required within the prescribed time limit for delivery;

22.3 Where any commodity delivered by the seller fails to meet the specified requirements;

22.4 Where the seller fails to issue the corresponding VAT invoice within the prescribed time limit.

Article 23

Formulas used to calculate the amount of defaulted contracts:

Number of seller-default contracts = quantity of Registered Warehouse Receipts that the seller is supposed to submit - quantity of Registered Warehouse Receipts already submitted by the seller

Number of buyer-default contracts = (payment that buyer is supposed to make – payment that buyer has already paid) /（1-20%）/ settlement price / trading unit

Article 24

In the case of default, the Exchange shall notify both parties via telephone, facsimile, email, or in both parties’ presence, and make an announcement in an appropriate way on the day of default.

Article 25

In the occurrence of a default, the defaulting party shall pay 20% of the defaulted contract''''s value as a penalty, and the Exchange shall take further steps as explained below:

25.1 If the defaulting party is the Seller, the Exchange shall terminate the delivery process and make a corresponding refund to the Buyer.

25.2 If the defaulting party is the Buyer, the Exchange shall terminate the delivery process and return the corresponding number of Registered Warehouse Receipts to the Seller.

Article 26

In an occurrence where both parties default, the Exchange shall terminate the delivery process and charge each party 5% of the defaulted contract value as a penalty, which will act as risk reserves for the Exchange.

Article 27

Traders and designated warehouses involved in default cases are obligated to provide relevant evidence. If a trader refuses to provide relevant evidence, the proof of default is irrelevant to whether the trader provides evidence or not.  

Article 28

In occurrence of any dispute about the result of the commodity’s inspection, both parties shall negotiate the settlement. The case can also be submitted to a designated Quality Inspection Institution by the Exchange for a second inspection, the result of which shall be the basis of the dispute settlement. 

Chapter 6 Supplementary Provisions

Article 29

Regulations for the generation, circulation and cancellation of Registered Warehouse Receipts shall be otherwise formulated.

Article 30

In case of any violation of these rules, the case shall be treated in accordance with the Disciplinary Measures Against Violations on Tianjin Bohai Commodity Exchange.

Article 31

The Exchange reserves the right to interpret the Detailed Delivery Rules of Bohai Commodity Exchange.

Article 32

This Regulation shall become effective as of the date of promulgation.

Tianjin Bohai Commodity Exchange Ltd.

2009-12-15