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International Cotton Association Visits Vietnam To Urge Greater Adherence To Contract Sanctity
Dated - 28 Aug , 2012
 
 
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The UK-based International Cotton Association (ICA), the principal arbitrary body for the international cotton trade, visited representatives of Vietnam’s government and its textile industry last week to press for more action in securing contract sanctity, following a spate of arbitration cases that have arisen recently in the country. The ICA delegation included current president Antonio Vidal Esteve, managing director Kai Hughes and Richard Pollard, chairman of the ICA Rules Committee.

The ICA delagation also held talks with leaders of the European Union’s mission to Vietnam and the British embassy to explore means of encouraging compliance with the ICA bylaws and rule Vietnam.

According to Mr Pollard, around 44 arbitrations had been initiated over the past 18 months against Vietnamese cotton importers and the number of arbitrations might continue to rise in the coming months.

“Between August 2010 and March 2011, there was a violent spike in global cotton prices rising to a high of $2.20 per pound from an average price of 70 cents before falling sharply again to the usual rates. This placed Vietnamese cotton spinners, who had contracted to buy cotton at high prices, into grave difficulties in the falling market. Instead of talking with the suppliers to find a solution many Vietnamese firms simply broke their contracts with foreign cotton exporters,” Pollard said.

Pollard declined to name the Vietnamese spinning mills concerned citing confidentiality between the parties, but stressed that: “Those Vietnamese spinning mills which defaulted on contracts and refused to comply with ICA arbitration awards will be listed on the ICA list of defaulters together with associated companies. ICA members are not permitted to trade with companies on the default list putting Vietnamese cotton spinners at a significant disadvantage in the market.”

Mr Pollard added, “We are increasingly concerned about the high proportion of Vietnamese partners who are defaulting on their contracts. The recent fluctuations in cotton price was a global problem but in other countries buyers negotiated with sellers to reach a compromise solution. Thus we have to come to Vietnam to discuss the solutions and understand the country’s rules in settling international trade disputes and enforcing the awards of foreign arbitral institutions.”

According to the Vietnam Cotton and Spinning Association, Vietnam annually imports around 400,000 tonnes of assorted cotton products. The local crop only meets a tiny proportion of local mill requirements. The country earned US$16 billion garment and textile exports last year and has enjoyed 20% annual growth for the past 5 years.

Vietnam’s textile and garment industry employs more than 2.5 million people and contributed 15% of the country’s total export revenue of US$7.5 billion.

Source: WTIN
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