Shenzhen Zhonghenglong Industrial Co., Ltd
2020 Supply Chain Due Diligence Management Compliance Report
Company name: Shenzhen Zhonghenglong Industrial Co., Ltd
Address: Rm.401，Block 1, 1970 Science Park, Minkang Rd., Longhua District, Shenzhen City, Guangdong Province
Year-end report: 2020 Supply Chain Due Diligence Management Compliance Report
Reporting date: January 10, 2021
Report principal: Cao Jian (Deputy General Manager of the company) Website: WWW.www.baykosit.com
I. Company profile
Shenzhen Zhonghenglong Industrial Co., Ltd (hereinafter referred to as the Company) is located in Shenzhen City, Guangdong Province. The Company takes “becoming the gold smelting enterprise with the highest process and technology level, the most safety and environmental protection and the strongest profitability in China” as its objective and is committed to promoting all management and technical innovations. It has a high-end, high-efficiency, energy-saving and environmentally-friendly complete industry chain of gold products.
Founded on March 18, 1997, the Company has existed till now and is an independent corporate enterprise. Relying on advantages of mineral processing process and technology of China, the Company adopts advanced process equipment and automated technology to specifically solve three technical problems, namely production energy conservation and environmental protection, comprehensive recovery of mineral resources, zero discharge of production wastewater, thus forming the recycling economy development mode of gold industry and building energy-saving, emission-reduction, low-carbon and environmentally-friendly green industry.
深圳市眾恒隆實業有限公司是華南地區最大的貴金屬精煉企業，是上海黃金交易所標準金錠、標準金條、標準銀錠提供企業，高效的生產工藝,高品質的貴金屬產品,以及環保和安全的三廢處理系統的現代化國際標準的提純精煉企業?，F有年生產的銀 (Ag)200噸 、黃金 (Au)300噸、鉑金 (Pt)、 鈀金 (Pd)20噸 以及處理各種貴金屬廢料 400 噸的生產設備和能力,而且各類產品均達到國家和行業規定的標準;環保和廢水、廢氣的排放也達到國家法律規定的標準。
Shenzhen Zhonghenglong Industrial Co., Ltd is the largest precious metal refining enterprise in South China and the approved enterprise of standard gold ingots, standard gold bars and standard silver ingots of Shanghai Gold Exchange. With efficient production process, high-quality precious metal products, environmentally-friendly and safe three-waste treatment system, it is a purification and refinement enterprise following modern international standards. At present, it has production equipment and capacity to annually produce 200 tons of silvers (Ag), 300 tons of golds (Au), platinum (Pt), 20 tons of porpezite (Pd) and process 400 tons of precious metal wastes. Besides, all products have reached national and industrial standards and environmental protection, waste water and waste gas discharge also reaches standards specified by national laws.
In 2019, the Company was selected as “Vice-Chairman of Gold Association of Guangdong Province” and “Standing Director of GEMS & Jewelry Trade Association of China”
In 2020, the Company won titles of “Best Enterprise of Standard Gold Ingots and Silver Ingots”, “Best Risk Control Member”, “Comprehensive Annual Excellent Member”, “Best Self-Operated Competitive Price Transaction Member” awarded by Shanghai Gold Exchange.
II. Condition overview of supplier
Main sources of raw materials of the Company are self-produced gold concentrates of all mines and alloyed golds purchased from society and all suppliers are low-risk suppliers.
III. Overview of compliance conditions
The Company has carried out supply chain investigation of due diligence for all suppliers and required that resources provided by all suppliers are legal and compliant.
Step 1: Establish strong company management systems
Compliance Statement with Requirement:
We have fully complied with Step 1: Establish strong company management systems.
The Company has strictly established strong management systems to ensure comprehensive implementation of supply chain due diligence work.
The Company has passed and introduced a supply chain responsible procurement policy which conforms to OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas with extension to environmental and sustainable responsibility. Such policy has been published on the official website.
The Company has strictly followed national laws and regulations on staff’s rights, environmental protection and fair trade and actively participated in supply chain due diligence work to ensure that sources of mineral golds and recycled golds conform to requirements. In addition, the Company has made commitments to refuse golds and silvers from high-risk areas subject to infringement upon human rights, conflict areas, bribery, money laundering, terrorism financing, illegal mining, world heritage site, adoption of mercury and cyanide not conforming to provisions of LBMA. The Company has circulated such policy to suppliers and revealed risks to require all supplier to affix seals and sign names and make commitments to strictly execute it.
2. Management structure
The Company has established internal management systems and defined management, functions and duties, internal audit and communication according to introduced policies. In addition, senior management review has been carried out.
2.1 Rules and regulations
The Company has formulated Supply Chain Due Diligence Management System, Supply Chain Policy, Supply Chain Risk Mitigation Management Measures according to the policy, mainly clarifying organization structure of supply chain due diligence, duties and definitions of high-risk areas. In addition, the Company has formulated high-risk supply chain evaluation standard, investigation handling procedure, transaction monitoring, document retention and other contents. Above systems are issued in the form of read-head documents upon approval by General Manager Office Meeting and under document control.
2.2 Duties and authorities
The Company has set up Compliance Director, Compliance Risk Control Officer and Compliance Officer.
The post of Compliance Director is held by Zou Jiahao, Deputy General Manager of the Company. He is responsible for supply chain due diligence work of the Company, establishing and improving whole supply chain due diligence management system, supervising supply chain due diligence process, cooperating in handling abnormal conditions in supply chain due diligence and approving compliance reports.
The post of Compliance Risk Control Officer is held by Cao Jian, Deputy General Manager of the Company. He is responsible for formulating and updating supply chain due diligence policies and systems, formulating high-risk supply chain evaluation standards and executing supply chain due diligence measures, guiding, coordinating and reporting company risk evaluation, response and implementation conditions, supervising, checking and assessing implementation of all departments, reporting abnormal conditions in supply chain due diligence and organizing training.
Compliance Officers are respectively Gan Wude, Manager of Receiving and Dispatching Department, Zhu Jingbin, Manager of Financial Department, Gan Weirong, Manager of Business Department, Liu Cunyong, Manager of Delivery Department, Su Quan, Manager of Purification Department, Wu Weicong, Manager of Smelting Department, Zou Shixin, Manager of Detection Center. They are responsible for strictly executing supply chain due diligence measures and high-risk supply chain evaluation standards, collecting and keeping documentary evidence of sufficient supply chain, establishing supplier due diligence archives and carrying out field investigation for important suppliers regularly.
3. Strong internal traceability system
The Company has established a set of supply chain traceability system to collect and maintain supply chain information of each batch of products and allocate unique numbers to each batch of products.
3.1 Supply chain traceability system
The Company has carried out credit inquiry for all suppliers. After passing credit inquiry, suppliers should sign contracts and social commitment letters of suppliers to undertake that raw materials are legal and conform to due diligence policies; each batch of materials sent by suppliers is provided with incoming acceptance sheets to indicate product type, weight before and after smelting, estimated grade, acceptance personnel and supplier signature and confirmation. After smelting and sampling test, standard golds are formed with unique numbers allocated for transaction via Shanghai Gold Exchange.
3.2 Data maintenance
Before businesses are conducted, ID cards, authentication data, business licenses, qualification verification data, supplier due diligence forms, acceptance sheets, laboratory sheets, final statements of each batch as well as other related records should be kept for over 5 years.
The Company has included supply chain due diligence management training to the annual training plan of the Company and organized training for personnel at important posts and compliance officers of the Company about requirements and contents of supply chain due diligence management, thus ensuring actual implementation of supply chain due diligence management.
3.4 Compliance officer
The Company has designated all department heads to be compliance officers to take charge of all matters about supply chain due diligence management. Particularly, compliance officers review supply chain due diligence and evaluate whether supply chain due diligence is sufficient. If necessary, they will collect additional documents or information to ensure compliant implementation in high-risk supply chain or transaction. In addition, compliance officers are responsible for employee training of responsible supply chain, preparing and updating supply chain policies and providing senior management with appropriate information for fulfilling duties.
3.5 Payment via official bank channels
When goods payments are made, Business Department of the Company will initiate joint signature procedure for fund matters and make payment via online banking related to the corporate account. In addition, Business Department will print bank slips and keep them as voucher attachments.
4. Strengthen cooperation and help the gold supply trading party to establish due diligence capacity
The Company has established a long-term relationship based on trust and mutual recognition with suppliers to require that all suppliers must strictly execute OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas with extension to environmental and sustainable responsibility.
While signing procurement contracts with suppliers, the Company requires suppliers to sign Supply Chain Responsible Commitment Letter to undertake that gold sources are legal and compliant and refuse minerals from specified high-risk areas. Suppliers of all mine types need provide mining licenses. Big clients to which the Company sells golds or silvers are required to file invoices of downstream clients to evade risk of false tickets.
5. Establish confidential grievance mechanism
The Company has published telephones and emails on the platform of official website and allows employees and external stakeholders to express concern over supply chain or any new identified risk. During the whole process of grievance, the Company will protect employees’ privacy and keep information of informers confidential to eliminate any retaliation.
Step 2: Identify and assess risk in the supply chain
Compliance Statement with Requirement:
We have fully complied with Step 2: Identify and assess risk in the supply chain.
The Company has formulated high-risk supply chain evaluation standards and specified handling procedure for identified risks to sufficiently identify and evaluate risks in the supply chain. Up to now, no high-risk supply chain is found.
1. Identify risk of supply chain
According to OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas with extension to environmental and sustainable responsibility, gold smelting companies should identify related risks and pay close attention to golds from areas subject to infringement upon human rights, armed conflicts, illegal mining, mining and utilization of mercury and cyanide not conforming to LBMA provisions and originating from world heritage sites and golds used for bribery, money laundering, terrorism financing. The Company has established supplier archives for all suppliers and investigated risk conditions of companies. Supplier archives have been established before signing contracts.
2. Evaluate risk of supply chain
The company has acknowledged the low-risk finding and finding was addressed and that the refiner will utilize the KYC process before opening supplier accounts, going forward.
2.1 Supply chain due diligence
The Company has carried out supply chain due diligence with the following measures:
(1) Qualification verification. All gold smelting companies carry out supply chain due diligence management for all suppliers. Before cooperation, cooperation partners are required to provide corresponding qualification verification documents, with business licenses provided for corporate clients, ID card copies provided for individual clients, mining licenses provided for mine clients.
(2) Establishment of supplier archives. The Company has made detailed investigation about basic conditions of suppliers, shareholder information, raw material types and producing areas, types of planned refined precious metals, mode of settlement with suppliers, overview of supplier and other information and extended supply chain investigation to upstream as far as possible, thus determining risk level finally. The Company will terminate cooperation with suppliers involving high-risk standards.
(3) Establishment of incoming register. The Company has investigated and registered dates, weights, sources of raw materials and main upstream suppliers for current batch of incoming materials from suppliers and judged risk level of incoming materials.
(4) Establishment of work process of annual investigation report of suppliers. The Company has carried out special due diligence for top three suppliers in annual incoming materials of golds and silver except banks to formulate an annual investigation report of suppliers, covering overview of supplier, qualification information, type and weight of incoming materials, overview and list of upstream suppliers, producing areas and types of raw materials, existence of foreign golds, etc.
(5) Establishment of work process of special investigation report of clients. While visiting clients, the Company has traced sources of raw materials and conveyed due diligence management policies of gold smelting companies to suppliers. In addition, the Company has required them to sign names on policy document.
(6) Cooperation with entrusted processing plants in due diligence management. The Company has traced sources of raw materials of entrusted processing plants and helped them to establish supplier due diligence management systems.
(7) Due diligence for product whereabouts. The Company has carried out due diligence of product whereabouts for clients purchasing golds weighing over 30kg at one time or 100kg in total and clients purchasing silvers weighing 2000kg at one time or 5000kg in total during gold and silver sales. With role of network fully played, the Company has inquired information about supplier qualification condition, noncompliance, litigation, penalty by using Tianyancha, China Trial Information Network and other websites and will terminate cooperation with suppliers having high-risk behaviors.
2.2 High-risk supply chain
According to related provisions of OECD, the following high risk supply chain evaluation standard is made in combination with actual conditions of the Company:
(1) Mineral golds or recycled golds are from, transited via or transported via high-risk areas subject to conflicts or infringement upon human rights;
(2) It is asserted that mineral golds are from a country with limited known reserves, limited resources or estimated output;
(3) Recycled golds are from known high-risk areas subject to conflicts or infringement upon human rights or there are reasons to doubt that recycled golds are transited via this area;
(4) Companies in the supply chain or other known upstream companies are located in a high-risk country with money laundering, crime and corruption;
(5) Beneficiary owners of companies in the supply chain or other known upstream companies are politically sensitive persons;
(6) Companies in the supply chain or other known upstream companies actively participate in high-risk business activities, such as weapons, gambling, gambling industry, antique and artwork, diamond, religion and religious leaders;
(7) Mineral golds are from small mines with incomplete formalities and illegal mining in the country and golds are manually mined;
(8) Mineral golds or recycled golds are produced with mercury or cyanide, which does not conform to LBMA provisions;
(9) Mineral golds or recycled golds are from world heritage sites or domestic natural ecology protection zones, which does not conform to requirements of environment and sustainable development laws;
(10) Other high-risk conditions.
When any one of above evaluation standards objectively exists, the supply chain is judged as high-risk supply chain. Compliance officers should immediately prepare materials to be reported to Compliance Risk Control Officer who will report to Compliance Director. The Compliance Director will approve to take countermeasures to stop transaction and eliminate risks. As of the time of document issue, 99 clients fail to promptly update data, including 33 corporate clients and 63 individual clients. At present, the cooperation relationship has been suspended and the account has been frozen. After their data are supplemented, risk evaluation will be conducted. The Compliance Department will decide whether to restore the cooperation relationship and unfreeze the account.
2.3 High-risk category
The Company has formulated Supply Chain Risk Mitigation Management Measures. When golds or silvers are found to come from high-risk areas in supply chain due diligence, such transaction should be stopped and reported to Compliance Director for approval and reporting to government authorities; when golds or silvers are found to come from high-risk areas in supply chain due diligence, smelting of mineral golds and recycled golds should be suspended immediately until the supplier provides additional data or information proving that such condition does not exist within 6 months. In case related evidence is still not provided within 6 months, such transaction should be stopped immediately and reported to related personnel.
Data provided include:
(1) Government documents proving that there are no behaviors related to systematic or extensive human right infringements during purification, transportation or trading of mineral golds and recycled golds, such as legal certificates issued by related public security or commercial departments in places where suppliers are located;
(2) Supporting documents proving that suppliers do not provide illegal armed organizations with direct or indirect supports;
(3) Supporting documents proving that suppliers do not cover up country of origin of mineral golds or recycled golds through fraud, such as certificate of origin issued by related government authorities;
(4) Supporting documents proving that there is no money laundering or terrorism financing;
(5) Supporting documents of domestic small mines;
(6) Supporting documents proving that mined golds conform to LBMA provisions in mercury or cyanide utilization standards.
(7) Policies and guidelines as well as systems related to environment and sustainable development, reports of environmental assessment of related authorities;
2.4 Transaction monitoring
The Company supervises all transaction conditions to ensure that transactions are consistent with supply chain due diligence.
The Company has checked supply chain due diligence with unique number of each batch of incoming materials and traceable production. Complete documents and data are kept for procurement and warehousing of all raw materials. For warehoused gold concentrates, weighting sheets, moisture sheets, grade sheets, settlement sheets, financial vouchers are kept. For warehoused alloyed golds and silvers, incoming acceptance sheets, grade sheets, settlement sheets, financial vouchers are kept. Data to be collected and kept by all department during daily work have been clarified. Delivery Department, Detection Center and Financial Department keep related documents and regularly send related data to archives room for filing, with retention period over 5 years.
3. Report risk evaluation to senior management
The Company has established risk evaluation report systems. Compliance officers report due diligence work of the department to Compliance Risk Control Officer each month. When golds and silvers are found to come from high-risk areas in supply chain due diligence and it is evaluated as high-risk supply chain, such transaction should be stopped and reported to Compliance Director for approval and reporting to government authorities.
Step 3: Design and implement a management strategy to respond to identified risks
Compliance Statement with Requirement:
We have fully complied with Step 3: Design and implement a management strategy to respond to identified risks.
The Company has strictly designed and implemented strategies to respond to identified risks. No high-risk supply chain is found in 2020 and no risk mitigation measures of supply chain are taken.
The Company has formulated Supply Chain Risk Mitigation Management Measures and manages it as a document where handling methods of violations found in supplier evaluation and implement of daily businesses are specified and handling procedure of high-risk behaviors of suppliers and duties of all levels of organizations of personnel of due diligence management are clarified.
Doubtful high-risk incoming materials should be individually registered and the refinement workshop should be informed to suspend operation to avoiding mixing them with materials from other clients.
Step 4: Arrange for an independent third-party audit of the supply chain due diligence
Compliance Statement with Requirement:
We have fully complied with Step 4: Arrange for an independent third-party audit of the supply chain due diligence.
The Company has strictly followed requirements for carrying out independent third-party audit for due diligence of refiners.
Since 2021, the Company has employed an independent third-party audit agency to audit due diligence management conditions each year and issue an audit report.
Step 5: Report on supply chain due diligence
Compliance Statement with Requirement:
We have fully complied with Step 5: Report on supply chain due diligence.
The Company has strictly followed requirements for annual report of supply chain due diligence.
The Company annually publicizes on-site audit condition summary and evaluation reports, due diligence management certificates, supply chain management systems, supply chain due diligence policies of previous year.
IV. Management conclusion
On the whole, in the reporting year as of December 31, 2020 of the fiscal year, Shenzhen Zhonghenglong Industrial Co., Ltd has implemented effective management systems, procedures, processes and practices. Shenzhen Zhonghenglong Industrial Co., Ltd is committed to continuous improvement and all corrective measures will be regularly monitored.
V. Other report comments
If users of this report wish to provide any feedback to Shenzhen Zhonghenglong Industrial Co., Ltd with respect to this report, feel free to contact related departments of the enterprise by www.www.baykosit.com.