Profiles of Hong Kong Major Manufacturing Industries |
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Profiles of Hong Kong Major Manufacturing Industries |
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Last updated: 31 July, 2008
Leather Consumer Goods Overview
Industry Features*
*Industry statistics refer to production in Hong Kong only.
Note: ^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the full picture of the export business managed by Hong Kong companies. * Insignificant Sales Channels The majority of leather goods manufacturers in Hong Kong are small and medium enterprises (SMEs) which predominantly produce on an OEM basis for leading brands in North America, Western Europe and Japan. An increasing number of manufacturers are involved in product design and development, engineering, modelling, tooling and quality control. However, many of them still prefer selling to overseas importers and distributors, who in turn market to wholesalers and retailers. Rather than relying heavily on OEM/ODM contracts, a number of larger leather consumer goods companies have their own wholesale and retail network. Certain suppliers, such as Goldlion and Le Saunda, have already been selling their brandname products in Hong Kong as well as other markets, like the Chinese mainland. With an aim to foster local footwear design talent and encourage more Hong Kong footwear suppliers to enhance the design components of their products, Hong Kong Leather Shoe and Shoe Material Merchants Association, sponsored by Hong Kong Trade Development Council (TDC), organises the Hong Kong Footwear Design Competition every year. To establish business contacts with overseas buyers, Hong Kong manufacturers and traders have involved themselves actively in international trade shows led or sponsored by TDC, including GDS Shoe Fair (Dusseldorf), Dalian International Garment Fair and MOTEXHA (UAE). Some of them, particularly those selling handbags, wallets and other accessory items, also participate in trade fairs for gift items such as Birmingham International Spring Fair, Ambiente Frankfurt and the Tokyo International Gift Show (Tokyo). Industry Trends In pursuit of lower production costs, higher profit margins, expanding capacity and product range extension, leather consumer goods manufacturers in Hong Kong have shifted a significant part of their production facilities to the Chinese mainland. Leather industry is highly specialised and vertically integrated. Relocation may also provide the advantage of being more accessible to the raw materials and facilitating the retailing and distribution. In view of soaring production costs, manufacturers have further invested heavily in advanced automated machinery and operation systems to streamline the whole production process. Environmental concerns also pervade the industry. Since leather processing usually involves production technology and chemicals that cause environmental pollution, the industry is considered as one of the most polluting industries, and the Cleaner Production Promotion Law requiring manufacturers on the mainland to improve their production processes and product designs for better environmental protection is imposed. Following the imposition of the 'Discharge Standards of Pollutants for Leather and Fur Making Industry' to reduce the total discharge volume of pollutants by 11% within five years, more stringent environmental policies are expected. In the Guangdong Province, the authority intends to cluster the heavily polluted leather factories together in industrial parks for more efficient waste management. Against the backdrop, upgrading the environmental technologies, like introducing unharmful chemicals, recycling, effluent treatment and sludge handling, will be necessary. In another development, some US retailers and manufacturers are under attack by lobbying groups for selling products from countries using leather skinned off from dead animals that have been subject to excessive pains and distress when in transit or/and being killed. For example, following protests by PETA (People for the Ethical Treatment of Animals), some big companies have reportedly decided to boycott the leather obtained from the animals that suffer from intolerable conditions when in transit to slaughterhouses. CEPA Provisions The mainland and Hong Kong agreed in October 2005 to further liberalise the mainland market for Hong Kong companies under the third phase of the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA III). Under CEPA III, the mainland agreed to give all products of Hong Kong origin, including leather consumer goods, tariff-free treatment starting from 1 January 2006. Detailed information, including the origin rules for leather consumer goods items, is available from the following hyperlink: http://www.tid.gov.hk/english/cepa/files/mainland_2007.pdf. Trade Measures Affecting Exports of Leather Consumer Goods Overall speaking, trade measures for leather consumer goods are quite prohibitive. In many overseas markets, leather consumer goods are subject to high import tariffs. Although the common EU quota system on footwear established in 1994 was progressively phased out by January 2005, an anti-dumping duty of 16.5% has been levied on certain leather footwear from the mainland since October 2006. In Japan, footwear made wholly or partially from leather falls under the Tariff Quota (TQ) System as established by the Customs Tariff Law. In addition, footwear is also subject to high import tariffs in Japan. Tariff Rates of Selected Leather Consumer Goods in Major Countries
Leather consumer goods manufacturers are obliged to observe international restrictions on the preservation of endangered species. The Washington Convention (Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)) restricts or prohibits the trade of species listed in the Appendices to the Convention. Appendix I includes species threatened with extinction. Trade in specimens of these species is permitted only in exceptional circumstances. Appendix II includes species not necessarily threatened with extinction, but in which trade must be controlled in order to avoid utilization incompatible with their survival. Appendix III contains species that are protected in at least one country, which has asked other CITES parties for assistance in controlling the trade. Hong Kong manufacturers also face challenges from the regulatory environment overseas. For health reasons, the EU has adopted a Directive aimed at prohibiting the trading of clothing, footwear and other textile and leather articles which contain azo-dyes, from which aromatic amines may be released. Product Trends “Biodegradable” and “eco-friendly” products are grabbing the attention of the leather consumer goods industry. For instance, chromium salts, the chemical used in the tanning process, have the potential hazard of causing cellular damage. Many Western countries have therefore made stringent requirements on chrome-tanned leather and its products. Some infant shoes importers are demanding chrome-free leather shoes. Increasingly, leather consumer goods are viewed as fashion accessories. The trend, from smart over clean chic, neo sports up to romanticism, is expected to sweep the market. Plain, clear and versatile are also new attributes to fashion. There is also a trend for formal dressing combining the elegance and grace of leather. This will give rise to greater demand for leather shoes and bags alongside with the rise of feminism. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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