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)