Transactions & Delivery Approach

  China National Cotton Exchange Imported Cotton Online Supermarket
Transactions & Delivery Approach (Trial)

 

 

Chapter 1 General Provisions
Article 1 This Approach is made specially to extend the channels of distribution of imported cotton, reduce the cost of imported cotton transactions, improve the efficiency of market circulation of imported cotton, and give full play to the role of the open, fair and impartial platform of China National Cotton Exchange (Hereinafter referred to as “CNCE”) in accordance with the Contract Law of the People’s Republic of China, state laws, regulations and rules on e-commerce, relevant contract terms on ordering, testing, inspection of goods and settlement in imported cotton transactions.
Article 2 Imported cotton online supermarket transaction and delivery refers to a way of trading and delivery where the seller releases “the selling invitation” and the buyer releases “the buying invitation” via the online supermarket trading system of CNCE. After they reach an agreement through the online supermarket trading system and receive the confirmation of CNCE, both sides should complete the exchange of the payment for goods with imported cotton or that of the payment for goods with documents representing title within the time limit set in the e-contract.
Article 3 The seller in this Approach means a cotton enterprise registered beyond the territory of the People’s Republic of China and kept in record at the General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China (Type A enterprise), or a CNCE membership which is registered within the territory of the People’s Republic of China (Type B enterprise). Enterprises on the default list of International Cotton Association (ICA) or China Cotton Association (CCA) are not allowed to enter the trading system.
Article 4 Imported cotton here refers to bonded imported cotton and forward shipment imported cotton, of which bonded imported cotton (Hereinafter referred to as “Bonded Cotton”) refers to cotton that is stored in a bonded warehouse within the territory of China, yet the customs duties and VAT for such cotton have not been paid and customs clearance procedures have not been handled; forward shipment imported cotton (Hereinafter referred to as “Forward Shipment Cotton”) refers to cotton that is still outside the territory of China, yet to be shipped from a foreign warehouse, or on the way to some Chinese ports.
Article 5 The buyer or the seller can log in and commence trading in the Imported Cotton Online Supermarket by plugging in the encryption cards. Without the encryption cards, the buyer or the seller can still log in and browse by typing in username and password.
Chapter 2 Imported Cotton Information Release
Article 6 For Bonded Cotton, the Seller needs to store it in a bonded delivery (supervision) warehouse designated by CNCE, sign up for the Bonded Cotton warehouse receipt, and then release information on selling imported cotton through the imported cotton online supermarket trading system; for Forward Shipment Cotton, the Seller needs to pass CNCE qualification examination before releasing the information on selling imported cotton via the imported cotton online supermarket trading system.
Information to be released via the imported cotton online supermarket trading system includes: year of production, country of origin, place of delivery, time of delivery (shipment), quality description ( including grade, length, strength, Micronaire etc.), quantity, quantity allowance, payment, quality and weight settlement, arbitration clause, additional conditions, etc.
Article 7 The seller’s quotation in imported cotton online supermarket transactions: refers to the selling price of a batch of Bonded Cotton to be delivered by the seller in the designated delivery (supervision) warehouse; or the price for Forward Shipment Cotton that the seller accepts under corresponding terms on the transaction price (including but not limited to FOB, CNF, CIF terms) and relevant payment terms (including but not limited to terms on T/T payment, D/P payment and payment by L/C).of a batch of Bonded Cotton to be delivered by the seller in the designated delivery (supervision) warehouse; or the price for Forward Shipment Cotton that the seller accepts under corresponding terms on the transaction price (including but not limited to FOB, CNF, CIF terms) and relevant payment terms (including but not limited to terms on T/T payment, D/P payment and payment by L/C).
The price offered by the buyer refers to the price of the corresponding batch of Bonded Cotton to be accepted and picked up by the buyer at the designated delivery (supervision) warehouse, where the warehouse-out fee, the storage fees and insurance beyond the prescribed time limit shall be undertaken by the buyer; or the price of the forward shipment cotton that the buyer agrees to accept corresponding price terms and payment conditions.
Article8 The online supermarket trading system automatically invalidates quotations, submitted by the buyer and the seller, which has exceeded the period of validity. For the already invalidated quotations, the buyer and the seller may readjust the quotations and the term of validity of their quotations through the online supermarket trading system.
Article 9 The seller/the buyer shall be responsible for the authenticity and legality of the “selling invitation”/"buying invitation" it submits. The verification, made by CNCE, of the information released by the seller/the buyer shall be formal verification, and shall not be viewed as a confirmation or warranty of the authenticity and legality of the “selling invitation"/"buying invitation".
Chapter 3 Business Contract
Article 10 Upon the conclusion of an imported cotton transaction through the online supermarket trading system, CNCE will produce an e-contract having such contents as year of production, country of origin, place of delivery, time of shipment, quality description (including grade, length, strength, Micronaire, etc.), quantity, quantity tolerance, payment, arbitration clause, additional conditions, etc., and will supervise the execution of the same as the contract witness.
CNCE being not a party involved in the e-contract here shall assume no contractual obligations.
E-contract is legally of equal effect with paper contract, and CNCE is responsible for keeping secret the e-contract (Hereinafter referred to as “Contract”) signed by and between both parties to a transaction. Without legal authorization, no organization or individual is allowed to refer to it.
 
Chapter 4 Trading Hours and Measurement / Charge Unit
Article 11 The trading hours of Bonded Cotton and Forward Shipment Cotton in the online supermarket are 13:30-16:30 during national legal working days.
Article 12 CNCE may decide to adjust the business hours of the online supermarket of marketable cotton, including the off hours, the hours of delay to open the online market, the hours of delay to close the online market, the hours of advance to close the online market or the hours to suspend online market transactions when it deems it is necessary.
Article 13 The business procedures required after the conclusion of an imported cotton online supermarket transaction shall be handled only on the national legal working days prescribed by the state.
Article 14 For Bonded Cotton, the measurement unit in the online supermarket transaction contract is “metric tons” and the unit of trading shall be the net weight of each batch of cotton on the packing list. The charge unit of the contract shall be us cent/pound (excluding customs duties and VAT, 1 ton equals 2,204.62 pounds). The minimum unit of change of each quotation by the buyer and the seller shall be 0.05 us cent/pound.
For Forward Shipment Cotton, the measurement unit in the online supermarket transaction contract is “metric ton” and the charge unit of the contract shall be us cent/pound (excluding customs duties and VAT, 1 ton equals 2,204.62 pounds). The minimum unit of change of each quotation by the buyer and the seller shall be 0.05 us cent/pound. Each contract may apply to an integral multiple of 100 tons.
Chapter 5 Trading Procedures
Article 15 Imported cotton online supermarket trading procedures:
 (1) Both the buyer and the seller enter the online supermarket trading system and confirm that they will abide by relevant provisions.
 (2) The seller releases the “selling invitation” in CNCE memberships’ self-help management system (Hereinafter referred to as “the Self-help Management System”) according to the Bonded Cotton warehouse receipt which indicates cotton being in the designated supervision (delivery) warehouse or the information of Forward Shipment Cotton, and bonded cotton not loaded in the designated supervision (delivery) warehouse of CNCE. CNCE verifies such information. If the seller is Type A enterprise, it is optional for them to authorize CNCE to release the information of the cargos and the lowest quotation in written form.
 (3) The buyer releases in the self-help management system the “buying invitation” which refers to the buyer’s acceptable quotations for bonded cotton in the CNCE’s or non-CNCE’s designated supervision (delivery) warehouse, or quotations for Forward Shipment Cotton. CNCE verifies such information.
(4) After passing the verification, such “selling invitation” and “buying invitation” will be made open in the online supermarket trading system by CNCE for the buyers’ and the seller’s free selection. The term of validity of a “selling invitation” and a “buying invitation” must be marked out and specified to hour.
(5) Both the buyer and the seller shall be responsible for the authenticity and legality of the “buying invitation” and the “selling invitation” submitted. The verification, made by CNCE, of the information released by the seller shall be procedural, and shall not be viewed as a confirmation or warranty of the authenticity and legality of the “selling invitation” and the “buying invitation”.
(6) Both the buyer and the seller deposit the margins in the account designated by CNCE.
(7) The buyer or the seller can send the “buying invitation” or the “selling invitation” for any released “selling invitation” or “buying invitation”.
(8)  Within the period of validity of the quotations made by both sides, a transaction will be closed if the buying price offered by the buyer is higher than or equal to the selling price offered by the seller, and the system will automatically produce a Transaction Confirmation Notice to both sides and an e-contract (Refer to Appendix 1 and Appendix 2 for the detailed form of contract).
Generation of the Transaction Confirmation Notice shall be viewed as the contractual confirmation and relationship, and shall have the immediate legal binding force to both the buyer and the seller. The e-contract shall be regarded as supplement and perfection of the Transaction Confirmation Notice.
(9) According to the result of the transaction between the buyer and the seller, CNCE forms a legally effective contract binding on both sides. The buyer and the seller shall sign and stamp the printed e-contract within 3 working days. The signed and stamped contract is just the proof for the transaction. The juristic contractual relationship generated at the same time with the Transaction Confirmation Notice and e-contract.
(10) After the contract is signed and stamped, both sides start handling contract implementation procedures. The buyer needs to fulfill its payment obligation to the seller within the prescribed time limit in the contractual type of payment, and the seller needs to, as required by the contract, arrange cargos shipment and delivery and prepare corresponding documents for the buyer to declare the cargo at the customs office and take delivery of them.
 (11) Before the transaction is concluded, the seller/the buyer may adjust or cancel any unmatched “selling invitation”/ “buying invitation” at any time through the online supermarket trading system.
 
Chapter 6 Margins and Charges
Article 16 Buyers and sellers engaged in CNCE’s imported cotton online supermarket transactions are required to deposit, before the transaction, a certain amount of money in the account designated by CNCE as the margins.
Margins refers to the money paid by the buyers and the sellers according to the standards set by CNCE to guarantee contract fulfillment, settlement, quality and weight in imported cotton online supermarket transactions, and for the deduction of fees for concluding transactions and services.
Article 17 When the buyer’s quotation is lower than the seller’s quotation, no margins will be collected from the buyer; when the buyer’s quotation is equal to or higher than the seller’s quotation, CNCE will provisionally withhold the buyer’s margins at the standard of 1,000 yuan/ton; when the seller adjusts its quotation which makes its quotation lower than the buyer’s offer, the margins will be provisionally collected from buyer’s at the standard of 1,000 yuan/ton as well. The transaction cannot be concluded if the buyer’s margins is less than enough to be deducted at the standard of 1,000 yuan/ton, but only concluded after the buyer makes up for the margins upon system notification.
To ensure the seller’s implementation the contract and normal compensation for CIQ claim, an amount of margins will be collected from the seller at the standard of 1,000 yuan/ton; for Bonded Cotton which has been placed under the supervision of CNCE, after the seller applies for offsetting part of the margins with the warehouse receipt, an amount of margins will be collected from the seller at the standard of 300 yuan/ton.
After an online supermarket transaction is concluded, no transaction cost will be collected from the seller, but a commission charge will be collected by CNCE from both sides at the standard of 20 yuan/ton and such amount will be deducted and transferred from the margins account.
Article 18 CNCE may, according to the changes in price quotations, adjust the standards of the margins to be collected from the buyers and the sellers engaged in imported cotton online supermarket transactions, and shall announce such adjustments at least one working day in advance.
Article 19 In online supermarket transactions, if one party takes the default behavior described in Article 8, CNCE will deduct a penalty from the defaulting party’s account of margins at the standard of 1,000 yuan/ton and transferring the sum to the other party after CNCE’s verifying and confirmation, and CNCE will bear no extra liabilities. The remaining matters relating to the breach shall be settled by both sides in accordance with relevant terms and conditions in the contract, and CNCE may coordinate as a neutral contract witness.
Article 20 For Bonded Cotton and Forward Shipment Cotton, the buyer must submit, to CNCE, relevant proofs of payment which conform to contractual terms and have been confirmed by the seller (including but not limited to bank T.T/remittance form, copy of the documentary letter of credit and foreign CNCE purchase/remittance receipt, etc.), and CNCE shall immediately release the buyer’s margins upon verifying the proofs of payment submitted by the buyer to be correct. In the event that the buyer fails to submit relevant proofs of payment within the time limit set by CNCE, unless otherwise it submits evidence on the change in the payment way, which has been confirmed by the buyer and the seller in writing, the buyer shall be viewed as breaching the contract, which then leads to the termination of the contract.
For Forward Shipment Cotton, after the buyer confirms that the title has been transferred to it by the seller, CNCE will release the seller’s margins at the standard of 700 yuan/ton; before the CIQ certificate is issued, CNCE will provisionally withhold the seller’s margins at the standard of 300 yuan/ton and will release the full amount of the seller’s margins after the seller completes the compensation for the buyer’s CIQ claim in accordance with the CIQ certificate or both sides confirm, in writing, the payment of compensation for CIQ claim.
For Bonded Cotton, after the buyer confirms that the title has been transferred to it by the seller and before the CIQ certificate is issued, CNCE will provisionally withhold the seller’s margins at the standard of 300 yuan/ton and will release the full amount of the seller’s margins after the seller completes the compensation for the buyer’s CIQ claim in accordance with the CIQ certificate or both sides confirm, in writing, the payment of compensation for CIQ claim. In the event that the seller fails to fulfill the obligation of paying compensation for CIQ claim, CNCE will deduct a commission charge from the seller’s margins and transfer the remaining margins to the buyer’s account.
Article 21  For the forward shipment cotton, when the buyer has not make the payment or the seller has not deliver the cargo, based on the Cotlook A index on the day transaction be conducted, cotton price declines or grows to the level very near to the standard of the margins due to market fluctuations, CNCE is entitled to require the buyer and the seller to pay more margins to a risk controllable level. If the buyer or the seller fails to pay the full amount of the margins within the time limit prescribed by CNCE, CNCE has the right to dispose of the transacted cotton, and the economic losses hence caused shall be undertaken by the buyer or the seller.
Chapter 7 Quality, Settlement and Payment
Article 22 Of the imported cotton transacted in the online supermarket, the quality and weight of Bonded Cotton shall be subject to the quality and weight inspection certificate issued by certification and inspection authorities, and the buyer shall lodge a claim against the seller based on the CIQ certificate in accordance with relevant Chinatex Cotton Purchase Contract Terms (dated 1 January 1982 and the Amendment dated 4 January 1989); if the buyer has physically checked the cargo and then makes no claim for quality in advance, the buyermay lodge a CIQ claim against the seller for short weight according to the certificate issued by certification and inspection authorities. 
The quality and weight of Forward Shipment Cotton shall be subject to the quality and weight inspection certificate issued by CIQ, and the buyer shall lodge a claim against the seller based on the CIQ certificate in acco-rdance with relevant Chinatex Cotton Purchase Contract Terms. Should any party have any objection against the CIQ report, it may apply for the reinspection according to the Rules of the Resinspection for Import and export commodity by No. 77 of AQSIQ, and settle the account again based on the results of the result of reinspection.
Bonded Cotton or Forward Shipment Cotton, if the cotton to be traded is USA green card cotton, the quality inspection results from the HVI data issued by USDA shall be the basis for settling accounts; in case no claim for quality is lodged, the CIQ quantity inspection results shall prevail.
No matter it is Bonded Cotton or Forward Shipment Cotton, when a claim is lodged by the buyer based on the CIQ inspection results, the claim shall be against the technical indicators prescribed in the contract. Those not listed among the quality indicators shall not be claimed. 
If the conducted transaction is for Egyptian cotton, the quality and quantity settlement is based on Alexandria Cotton Exporters’ Association Law No.211 of 1994 and the Ministerial Decree No.507 of 1994.
Article 23 For Bonded Cotton, if the buyer confirms by written form to declare it at the customs office and take delivery of it from the warehouse, unless otherwise stipulated by and between the buyer and the seller and with the exception of force majeure, the buyer shall complete the procedures of customs declaration and taking delivery of the goods (from some warehouse in inland China) within ten (10) working days since the date of effective bill of lading issued by the seller or within fifteen (15) days (from some warehouse in Xinjiang), and the warehouse storing such Bonded Cotton shall timely handle warehouse-out procedures. Should the buyer fail to take delivery of the goods within ten (10) working days (from some warehouse in inland China) or fifteen (15) working days (from some warehouse in Xinjiang), unless otherwise agreed by both sides, the buyer shall undertake relevant insurance, storage fees, etc. If the buyer confirms to not declare it at the customs or take delivery of it from the warehouse, it shall begin to undertake warehousing fees, insurance, etc. since the 10th day after the date of effective bill of lading issued by the seller.
For Forward Shipment Cotton, according to the stipulations in imported cotton sales contract, the seller shall timely issue relevant documents for buyer’s customs declaration, delivery of goods/taking delivery of goods within the set time limit; the buyer handles the procedures of declaring the goods at the customs office and taking delivery of them based on the documents provided by the seller; and both sides shall be responsible for the truthfulness and effectiveness of the transferred documents.
Chapter 8 Liabilities for Breach of Contract
Article 24 The seller shall be viewed as defaulting the contract if it conducts one of the behaviors below.
  (1) Request to cancel the transaction unilaterally without any reasonable reason after the “Transaction Confirmation Notice” is received.
 (2) Fail to fulfill the altered contract where evidence exists to prove that both sides agree to alter the e-contract;
 (3) Other non-compliance behaviors.
Article 25 CNCE shall take below measures accordingly against the seller’s non-compliance behaviors.
 (1) Suspend contract fulfillment.
 (2) Temporarily withhold the seller’s margins or inventory receipt, and forbid the seller to handle procedures to withdraw the margins.
(3) Urge the seller to undertake due liabilities for breach of the contract according to contract stipulations:
pay a penalty to the buyer, take remedy measures, continue fulfilling the contract, compensate the buyer for the losses arising due to the seller’s breach of contract.
 (4) When necessary, CNCE may deduct the penalty  directly from the seller’s account before transferring it to the buyer according to the Approach here and the stipulations between both sides in advance.
Article 26 The buyer shall be viewed as breaching the contract if it conducts one of the behaviors below:
 (1) Request to cancel the transaction unilaterally without any reasonable reason after the “Transaction Confirmation Notice” is received.
 (2)  Be unable to complete payment for the goods in the way of payment stipulated in the contract within the set time limit after both sides have signed the contract, and fail to reach any agreement with the seller on the solution.
 (3) Fail to fulfill the altered contract (there is evidence to prove that both sides agree to alter the e-contract).
 (4) Other non-compliance behaviors.
Article 27 CNCE shall take below measures accordingly against the buyer’s non-compliance behaviors:
 (1) Suspend contract fulfillment.
 (2) Temporarily withhold the buyer’s margins and forbid the buyer to handle procedures to withdraw the margins.
 (3) Urge the buyer to undertake due liabilities for breach of the contract according to contract stipulations: pay a penalty to the seller, take remedy measures, continue fulfilling the contract, compensate the seller for the losses arising due to the buyer’s breach of contract.
 (4) When necessary, CNCE may deduct the penalty directly from the buyer’s account before transferring it to the seller according to the Approach here and the stipulations between both sides in advance.
 
Chapter 9 Supplementary Provisions
Article 28 The Approach shall be interpreted and modified by CNCE. Any dispute between the seller, the buyer and CNCE over the understanding, interpretation and execution of the terms and conditions here shall be settled through negotiation; in case no agreement could be reached, the buyer or the seller may bring the case before people’s court with jurisdiction in the location of CNCE. Execution of the Approach shall continue during the negotiation over dispute or the litigation.
Article 29 Any dispute or defaulting behavior arising from the implementation of this Approach in online supermarket transactions shall be coordinated by CNCE. In case no agreement could be reached between both sides even with the coordination of CNCE, CNCE might deduct a certain amount of margins stipulated by the contract, restrict the seller / the buyer’s business in CNCE, and announce the latest default list onto the public as a punishment.
Article 30 During the procedure of transaction and performing the contract, when any provision in the relevant contract has confliction with China National Cotton Exchange Imported Cotton Online Supermarket Transactions & Delivery Approach, the Approach shall prevail.
Article 31 This Approach shall come into effect since May 28, 2013. In case of any inconsistence or conflict between relevant provisions or notice, issued by CNCE prior to the above date of effective, and this Approach, the provisions here shall prevail.


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