The technical considerations of a purchase

Monday, July 30th, 2012

The Technical considerations of a purchase – raw cotton.

Brian Farrington Ltd has assisted a client who had a dispute over the purchase of raw cotton. That specific dispute was in regard to invoiced weight. We should bear in mind that many ‘items’ are purchased by weight, including fruit, castings, steel and coal. Specialist technical  knowledge is required to ensure the content is appropriate to circumstances. We will use raw cotton to highlight why procurement risk will exist to a greater or lesser degree, depending on technical knowledge.

The International Textile Manufacturers Federation offers important ‘Guidelines’ for purchasing raw cotton (1999), and we acknowledge
their excellent briefing on contractual considerations. The origin and growth of the cotton must be specified exactly by the buyer. For example CIS origin can cover Uzbekistan, Turkmenistan, Kazakhstan and Azerbaijan each with considerable differences in characteristics.

There is a risk of stickiness caused by insects or plant sugars. The weight of the cotton can be established in bales, tonnes, pounds, kilos or even the container load. When purchasing by a number of bales, the average weight of a bale must be specified. Bale weights vary from Pakistan;  bales of 170kg to Egyptian bales of 330kg, although most bales fall within the range 180 to 225kg. It is essential to specify clearly whether the contract weight is based on original gin weights, or certified shipping weights, or certified landing weights. This is where our client’s problems started .When bales were weighed they were consistently less than the advised weight. As the ITMF state “The weight at destination
will seldom be exactly as specified”
(our emphasis) . They then mention a 3% variation which can, of course amount to a significant amount of money.

When purchasing anything by weight –Caveat Emptor!