Industry Warning: Follow Trade Rules to Protect Against Default Risk

Source:China Cotton Association  Date: 12/September/2019

Since May this year, affected by the global economy situation and China-US trade friction, cotton prices at home and abroad have fallen sharply. The China cotton price index (CCIndex 3128B) reached a minimum of 12,983 yuan per ton, down by 17% from the beginning of May. The drop in international cotton price is further than that in China. Recently, the China Cotton Association (CCA) has received a number of calls and letters from international cotton industry associations, reporting an increase in international cotton trade disputes, including shipment delays, modification of contract terms and rising arbitration applications.

 China Cotton Association is a member of the Committee for International Co-operation between Cotton Associations (CICCA). Together with other international cotton organizations, China Cotton Association is committed to maintaining the international cotton trade order. CCA believes that no matter the economic situation is good or bad, prices rise or fall, and enterprises should uphold the standards of good trading practices and the ethic of the sanctity of contracts.

CCA reminds its member enterprises and industry colleagues: first, contract fulfillment is essential. Rules and credit are the premise of the development of trade relations, in the case of disputes, it is essential to communicate and negotiate with foreign cotton merchants, in order to maintain the long time and steady relationship. The one-shot deal strategy will damage any future development of the enterprise. Second, default risk shall be prevented. According to China Cotton Association Industry Warning System Trial Method, should any enterprises violate the standards of good trading practices and be verified, CCA would put its name into its Industry Warning Catalogue (i.e. blacklist), notify the international cotton associations, and call on the whole industry to boycott. At present, the Chinese government is also accelerating the construction of social credit system in the cotton industry, so that those who keep their word will benefit while those who break their word will be limited. Third, please report to CCA if you have any information relevant. CCA represents the interests of different parties in the cotton value chain. It has the responsibility of self-discipline and safeguarding rights. It shall help enterprises to coordinate and solve problems to protect their legitimate rights through its working mechanism with the main cotton production country organizations.

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