Financial Daily from THE HINDU group of publications
Friday, Sep 13, 2002
Agri-Biz & Commodities
Cotton shippers blacklist `defaulter' textile mills Stop exports to TN spinners seeking dues
COIMBATORE, Sept. 12
COTTON imports may no more be an easy option for most textile mills, especially those in Tamil Nadu. For, international shippers affiliated to the Liverpool Cotton Association (LCA) for import sourcing cotton have blacklisted many of them.
A good number of textile spinners from Tamil Nadu, especially those in Dindigul and Tiruppur regions, figure in the `defaulter mill' list circulated by the LCA-affiliated shippers as those who did not honour their contractual obligations in their import-indent (letter of credit terms) entered during the 2000-2001 season, local cotton trade sources told Business Line.
These shippers have sounded their principal agents and brokers in India to avoid offering any fresh cotton shipment to the mills figuring in the list and the LCA-affiliated shippers have come together strongly on implementing the `defaulter' list this year.
Though the exact number of units listed as `defaulters' is not known, the trade sources peg the figure anywhere between 25 and 30. The agents have been asked not to offer any fresh shipment to these mills until they settle the claims awarded against them through the aribitration proceedings initiated last year and come clear of litigations.
It is also said the claims slapped by the LCA arbitration panel on these defaulter-mills for not meeting the contractual terms ranged between $50,000 and $4,00,000. In one instance, the claim raised by one of the shippers against single mill came to $1 million.
While a few have appealed against the LCA panel, many mills against whom the shippers initiated arbitration proceedings neither opted to appeal nor tried to settle the issue, thereby forcing the shippers to come out with its list of defaulters.
Sources said the cotton shippers' bodies had also indicated to Indian cotton importers that they would go only by the LCA contractual norms and they had made it clear that the East India Cotton Association's contract rules and regulations was not acceptable to them.
The `defaulter mill' list is a consequence of the spate of delivery-quality related disputes witnessed during the 2000-2001 cotton season when many domestic textile spinners chose to source cotton through import route. The importers then charged that the international cotton shippers did not meet adequately their complaints on quality of the cotton supplied as well as compensating for the losses they suffered.
The Indian importers too voiced concern that the dispute settlement under the LCA arbitration procedure proved to be seller-biased and too expensive for Indian litigants. However, the local agents and brokers who acted as intermediaries for their overseas cotton shipper-firms held the view that the cases of importers who booked shipments in a declining market failing to honour the contracts fearing further price fall for cotton in international market complicated the dispute.
The southern textile spinners have been demanding changes in LCA's arbitration rules for quite sometime and bringing cotton contract under the Indian Arbitration Act so as to get the Indian trade's view points heard in the event of any disputes. Early this year, these mills moved through the Indian Cotton Mills Federation and the Central Government to pressure LCA to accommodate Indian textile industry's viewpoint and incorporate the cotton buyers' interests in their contract format.
To facilitate these efforts, various cotton bodies from the South prepared a model cotton contract format and presented it for acceptance by the Centre through ICMF but nothing tangible has happened so far. A deliberation on this was also initiated before the members of the committee for international cooperation between cotton associations (CICCA) by the Indian textile industry a few months ago in Delhi but its outcome too is said to be not satisfactory for the Indian importers.
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