Liverpool cotton body urged to improve rules

Liverpool cotton body urged to improve rules

JAKARTA (JP): Indonesia has urged the Liverpool Cotton
Association Ltd (LCA) in England to improve its arbitration and
trading rules in anticipation of contract disputes in the cotton
trade with ASEAN countries.

Husein Aminuddin, chairman of the Indonesian Spinners
Association (Sekbertal), said at the annual meeting of LCA in
Liverpool recently that Southeast Asia was now facing one of its
toughest challenges, due to the impact of the currency and stock
market turmoil since July.

"Set against this background, it is clear that there is every
likelihood that contract disputes will increase in the cotton
trade with ASEAN countries," said Aminuddin, who is also an
associate director of LCA for Southeast Asia.

Aminuddin anticipated that LCA arbitration procedures would be
in greater demand and LCA should therefore be more alert to
ensure that its procedures were accessible and relevant to the
needs of the marketplace.

LCA, set up in 1842, is the world's leading international
cotton trade association with over 400 members in 60 countries.
LCA trading rules and arbitration procedures govern around 60
percent of all raw cotton traded internationally.

Indonesia and other Southeast Asian countries depend largely
on imported cotton to feed their textile industries. Indonesia
itself imports more than 850,000 bales annually, or 98 percent of
its needs.

Aminuddin urged LCA to review its rules on both delayed
shipments and delays in the opening of letters of credit because
spinning mills mostly operated on a just-in-time basis.

"Delays in shipment can be disastrous if they are longer than
the coverage provided by the smaller inventories that mills
prefer to hold," he said here over the weekend.

Citing Indonesian experiences, Aminuddin said that if a
shipper encountered a delay, then the buyer had no choice but to
accept it as something that was irreversible.

"LCA should therefore consider amending its rules to limit
shipment delays to a certain period of time after the agreed upon
shipment period. After this time, which I believe should be two
weeks, automatic penalties should result," he added.

Conversely, he argued, the same rules should be adopted for
the opening of letters of credit by buyers so as to protect
exporters from late payments.

Aminuddin also suggested that in order to speed up the dispute
resolution process, the buyers and sellers identify in their
contract and in the letter of credit the name of the surveying
company they would assign should a dispute arise regarding
shipment.

"This enhancement of LCA's standard contract should cut down
time delays, communication problems and paperwork involved in the
dispute resolution process," he said.

In a related development, Aminuddin urged Indonesian companies
to master LCA's trading rules and arbitration procedures to
prevent disputes or to minimize costs in case of a dispute.

"Sekbertal has just published a book on cotton trading
contracts and arbitration based on the proceedings from a seminar
in Jakarta in July held in cooperation with LCA," Aminuddin
added. (vin)