Members of the International Cotton Association (ICA) have approved changes to the organization’s Bylaws & Rules that will affect counterparty trading for its members and impact the current cotton trading environment.
Effective June 1, ICA members are no longer able to trade with firms on the Association’s Advisory Notice List. That list – now designated the ICA List of Unfulfilled Awards: Part 2 – contains the names of firms that have defaulted on a contract and have an outstanding arbitration award against them.
“One of the biggest challenges for us is award enforcement and strengthening the effectiveness of our default list, as it is known in the trade,” said ICA President Mohit Shah. “ICA members are not allowed to trade with counterparties on this list.”
Under the revised Bylaws & Rules, members that choose to trade with firms on the list risk being expelled from ICA.
Shah noted that the organization is aware that some firms have been circumventing the list by setting up and trading through “phoenix companies” or by using trading houses.
“Since the introduction of the ICA Business Intelligence Team, we can now expose the firms involved in dishonorable trading practices and reveal their links with defaulters so that our members can see exactly who they are trading with and make safer trading choices,” explained Shah.
“Trading with any defaulter, even by association, completed compromises the ICA’s principles of contract sanctity,” he added. “The aim of this change is to stamp our dishonorable trading across the supply chain. Yet we appreciate that some of our members may have existing contracts with firms on the list or are trying to reach a settlement over an unfulfilled award. All we ask is that they inform us and work with us by being open and transparent about such trades.”
Source – International Cotton Association