It’s not easy to listen to someone from another country talk about quality problems with U.S. products. Your initial reaction is that it must be part of ploy to beat down the price or gain other concessions.
Then you remember the reports that U.S. grain companies have been allowed to blend in foreign material up to the 2 percent level allowed for overseas shipments. And you remember a press release announcing that USDA had approved new industry-developed bale packaging specifications for U.S. cotton shipments.
Not being at the ports where ships are unloading or in the bale opening rooms of foreign textile mills, it’s difficult to judge whether the complaints made by Li Lin of the China Cotton Association at a World Cotton Quality Summit in Singapore are valid or not.
What we do know is that when the spokesman for a group representing the largest cotton market in the world speaks, members of the U.S. cotton industry listen. That was the case with the cotton merchants in the room when Li was speaking at the summit sponsored by Bayer CropScience.
Li said some of the cotton Chinese mills were forced to buy after last year’s production shortfall was a grade lower than they anticipated, contained too many short fibers and had high nep content.
More U.S. cotton merchants are spending time in places like Singapore and Bangkok and Beijing to find buyers or resolve problems with shipments now that exports have eclipsed domestic mill use in the United States.
Lately, merchants have been traveling to China to find out why the Chinese have not been opening letters of credit for shipments they thought were concluded. In international trade, opening letters of credit refers to a step in the process of transferring funds from buyer to seller.
The letters of credit problem is occurring against the backdrop of reports that China may be about to impose new import rules for farm products. The rules appear to mostly apply to grain, but could spill over to other commodities.
In April, Chinese authorities began rejecting soybean shipments from Brazil after finding cargoes of soybeans contaminated with a fungicide. The discovery would not be that surprising given the outbreak of soybean rust disease in Brazil.
The Chinese bureaucracy then ordered a halt to the unloading of all soybean shipments. Government officials negotiated an end to the ban on June 21 with Brazil agreeing to abide by China’s food safety regulations.
USDA officials have been meeting with Chinese government representatives for months to try to work through similar issues that have arisen around shipments of transgenic soybeans and cotton. U.S. negotiators have reported progress on some of the disputes.
China’s history of complaining about quality or food safety issues when its agencies overbuy or buy the wrong grades makes this latest round of complaints appears suspicious. U.S. trade representatives need to arrange a complaint resolution mechanism that can resolve such disputes and avoid these costly shipment stoppages in Chinese ports.