New ICA Bylaws & Rules provisions will introduce additional compensation for extreme shipment and carry delays from 1 January 2027.
The ICA is introducing changes to its Bylaws & Rules to provide greater clarity and protection to buyers and sellers where contractual performance is
subject to extreme delays. The new provisions, which take effect on 1 January 2027, respond to concerns raised by ICA members and participants across the global cotton industry about the challenges created by prolonged delays.
Where parties agree that the ICA Bylaws & Rules apply to their contract, the new provisions will provide an additional liquidated damages mechanism once a defined period of extreme delay has been reached.
Under the new rules, where shipment has not been executed within 120 days of the contractual shipment date, an additional liquidated damages amount of 4% per month, calculated pro rata for each business day, may apply until shipment is executed, subject to the conditions set out in the Rules.
The provision applies where the buyer has provided the required operable Letter of Credit, shipping instruction or other payment instrument in accordance with the contract. The Rules also establish a corresponding provision where a buyer has not provided the required operable Letter of Credit, shipping instruction or other payment instrument within 120 days of the contractual date. The same liquidated damages of 4% per month pro rata will apply. This is in addition to any carry provision contained in the contract.
This creates a more balanced framework, providing both buyers and sellers with greater clarity around the consequences of extreme delays and the circumstances in which additional liquidated damages may apply.
Importantly, ICA Bylaws are mandatory but the Rules are not. The parties to a contract retain the ability to agree whether the ICA Bylaws & Rules, including these new provisions, apply to their contracts and shipments.
Eimear McDonagh, ICA President, said: “We have listened carefully to our members and to the wider cotton industry about the real challenges caused by prolonged contract delays. These changes are about providing greater clarity and certainty for everyone trading under ICA rules, and
strengthening the protection our ICA provides to both buyers and sellers.
This is not about penalising the normal delays that can happen in international trade. It is about having a clear and fair remedy when a delay becomes excessive. By setting clearer expectations around prolonged delays, we can give both buyers and sellers greater certainty, while maintaining
the balance and fairness that sit at the heart of our ICA.”
What does this mean in practice?
Where parties have agreed to apply the ICA Bylaws & Rules to their contract, the new provisions establish a defined mechanism for addressing extreme delays.
Once the relevant 120-day threshold has been reached, an additional liquidated damages amount of 4% per month pro rata may apply, subject to the conditions set out in the Rules.
The Rules also recognise circumstances where delays arise because a required payment or shipping instrument has not been provided. In such circumstances, the relevant period of delay will be treated in accordance with the provisions of the Rules when determining whether the 120-day threshold has been reached.
The amendments will apply to contracts governed by the ICA Bylaws & Rules from 1 January 2027.
