Arbitration seen as last resort in cotton dispute

Arbitration seen as last resort in cotton dispute

JAKARTA (JP): Textile companies which were recently hit by
defective cotton imports from the United States have decided to
deal with the issue on a bilateral basis, considering that the
use of an arbitration body may be disadvantageous to them.

A group of executives from several textile companies,
including PT Argo Manunggal, PT Gokak Indonesia, PT Sandang II
and PT Putra Sejati Spinning Mills Ltd., said in a interview with
reporters over the weekend that a dispute settlement through an
arbitration body will be their last resort to tackle the problem.

Sidik Murdiono, the executive vice president of PT Argo
Pantes, the holding company of Argo Manunggal, said that the
company has not yet reached a stage where an arbitration body is
needed.

Heinz Schadach, an adviser to Putra Sejati, acknowledged that
Liverpool Cotton Association Ltd. -- the international
arbitration body for cotton-trade disputes -- is presently
controlled by the seller's interest with little influence from
the buyer's side.

"Arbitrators are appointed by the body and cannot be chosen by
the parties in dispute... The situation right now will not be
favorable for Indonesia, which is, in fact, the biggest cotton
consumer in the world," he said.

Schadach pointed out that an arbitration process requires
plenty of time and money, so it would be easier and more
efficient if an arbitration body was established closer to
Indonesia.

"This way, the body can also better serve the interests of the
consumers," he added. "But the establishment of such a body can
only be done if cotton-consumer companies unite to protect their
common interests".

The problem of cavitoma-infected cotton fiber bought by Argo
Manunggal -- one of Indonesia's largest textile companies -- from
Calcot Ltd., of California, started early this year when the
importer found the aspergillus flavus fungus in a shipment of
cotton fiber in the October-December period of last year.

The Unites States supplies about 45 percent of Indonesia's
annual needs of 2.4 million bales (1.2 billion pounds) of cotton.

The yellow-colored cavitoma, which can be detected by
examining cotton samples under ultra-violet light, was found
among the 20,545 bales of cotton fiber shipped during that
period.

The cavitoma produces excessive waste cotton, lower fiber
strength and higher occurrences of broken yarn in the spinning
process.

The defective cotton, which is categorized as California-
Arizona cotton, is said to originate from the Yuma and Imperial
Valley in California.

Aside from Argo Manunggal, other companies which claimed to
have received shipments of defective cotton are Sandang II and
Gokak Indonesia.

Minister of Industry and Trade Tunky Ariwibowo has reportedly
sent a letter to the U.S. Department of Agriculture requesting
for the latter's cooperation in resolving the problem before it
affects Indonesian textile companies.

Yusran M. Munaf from the Directorate of Textile Industry
affirmed yesterday that if the companies manage to settle the
dispute on their own, the government will not intervene.

"But if the negotiations become deadlocked, or when the
dispute starts to violate the rules of free trade, the government
will have to enter," he said.

Some 40 textile firms, which are members of the informal
Indonesian Cotton Consumers group, also met last week to discuss
the issue.

Yashroop Mal Lodha, the president of PT Bitratex Industrial
Corp., said that Indonesian textile companies must have a
stronger say in the issue.

Japanese and Korean firms, for instance, immediately reject
shipments of defective cotton fiber, he said.

"We must let the shippers know that we will not be their
dumping place," he said. (pwn)