Cotton importers challenged to use arbitration body

Cotton importers challenged to use arbitration body

JAKARTA (JP): An associate director of the Britain-based
Liverpool Cotton Association (LCA) yesterday challenged
Indonesian cotton importers to file complaints against foreign
exporters with the LCA's arbitration body.

Husein Aminuddin, also the chairman of the Indonesian
Spinners' Association, denied yesterday that LCA's arbitration
procedures were one-sided and lengthy.

"Who, among these claimants, has ever gone to the LCA for
arbitration? They should try first and only then give their
opinions," Aminuddin told The Jakarta Post.

He acknowledged there were set procedures before a claim could
be legally taken to arbitration.

In cases on quality claims, the procedures include producing
reports from a laboratory, approved by the two parties in
dispute; both parties jointly appointing an independent surveyor
to examine the validity of the claims; and both parties jointly
deciding whether the samples taken for laboratory testing should
be done to part (at least 10 percent) of a shipment, or to the
entire shipment.

"Cotton importers that want to file a claim against exporters
must do so according to the rules and conditions stipulated in
the contract signed by both parties," he said.

Earlier this year, a number of textile companies claimed they
had received imports of defective cotton from the United States.

The biggest company hit, PT Argo Manunggal, said some 4,700
bales of its California-Arizona cotton were infected by cavitoma,
a type of fungus which was reportedly found in cotton shipments
from October to December last year.

Almost all the affected companies said they were reluctant to
go to the LCA for arbitration, saying the body would disadvantage
them. They considered arbitration was a last resort.

Of the companies, PT Putra Sejati Spinning Mills has been the
only one to consider taking a claim to arbitration at the LCA. As
of July, however, no progress on Putra Sejati's case had been
reported.

No agreement

Meanwhile, sources say that Argo Manunggal has failed to reach
an amicable agreement with one of its U.S.-based suppliers.

Aminuddin said yesterday that if laboratory tests -- conducted
under the rules stipulated by the LCA -- proved that cotton
imports were defective, the importers would be able to sue the
exporters.

"But you need to get test reports. Do that, and you have a
solid case in your hands," he said.

Aminuddin also spoke on the need to include fiber strength as
a factor that should be considered in cotton trade.

"Advances in technology, which have resulted in high-speed
spinning and weaving machines, require the utilization of cotton
which has a high degree of fiber strength," he said.

Aminuddin said the LCA should pay attention to this issue as
it could easily result in disputes between cotton sellers and
buyers. So far, he said, the LCA had no mechanism to resolve
disputes over fiber strength at arbitration.

Fiber strength issues are currently facing spinning mills in
Southeast Asia, South Korea, Hong Kong and Taiwan.

Cotton consumption in Southeast Asia has increased rapidly in
the last couple of years. It will make up 4.4 million bales of
total world consumption of 86.6 million bales in 1996/1997. (pwn)