Commercial Agreement
Contractual pricing tables establish sliding scale financial penalties for raw materials that do not meet the specified quality standards. This pricing framework, known as a price de-escalation schedule, determines the exact discount applied per unit of deviation from the contract baseline. It is used in raw cashmere and wool contracts.
Risk Mitigation
Buyers use these schedules to protect themselves from paying premium prices for substandard fiber. If a shipment’s mean fiber diameter exceeds the agreed limit, the price drops according to the pre-negotiated scale. This mechanism reduces the financial risk of receiving raw material that is harder to spin.
Quality Penalties
The schedule outlines specific price reductions for every fraction of a micrometer that the fiber is too coarse. For example, if the baseline is set at fifteen micrometers, each increase of zero point one micrometer might trigger a percentage deduction from the invoice value.
Contract Settlement
Having a clear schedule in the purchase contract avoids protracted disputes between the supplier and the mill. Once the laboratory certificate is issued, the final invoice is adjusted automatically according to the agreed schedule. This transparent process ensures that transactions are completed quickly and fairly for both parties involved.
The presence of such schedules also encourages suppliers to maintain strict quality control during their dehairing and sorting operations, as the financial consequences of delivering coarse fiber are clearly defined.
