ASSIGNMENT

Leather Import Export

(Submitted in the partial fulfillment for the degree of Masters in Business Administration)

Submitted to: Mr. Amanpreet Singh

Submitted by: Anurag Bishnoi Roll no: 5460 MBA-II (B)

SCHOOL OF MANAGEMENT STUDIES

PUNJABI UNIVERSITY, PATIALA

Leather export import in India

Leather is a durable and flexible material created via the tanning of putrescible aniamal rawhide and skin, primarily cattlehide. It can be produced through different manufacturing processes, ranging from cottage industry to heavy industry.

History
The history of leather tanning in India dates back to 3000 BC. Tanning in the rural areas is done by indigenous techniques, making the use of this material easier.

The most popular Indian leather products include footwear and hand bags. The footwear comes in various designs of traditional embroidery, brocade or textile. Bright colors and unique designs are used. The all time favorite, kholapuri chappals of Maharashtra, are soft and very comfortable to wear. A special type of thickish shoes, called mojadis are designed in Rajasthan. They are decorated with silk, beads and metal embroidery. Jaipur is famous for its fancy and sophisticated footwear.

Bengal is famous for its handbags in batik style with cracks, bold curves, and traditional motifs. Being very ornamental, Kashmiri leather items are very popular among buyers the world across. The red leather embroidered with gold and silk is done in Madhya Pradesh. In Hoshiarpur (Punjab), appliqu work is made in colored leather pieces. Leather with silvery finish or metallic gold is done in Karnataka.

The post liberalization era has opened up floodgates of opportunities for the Indian leather industry. With global players looking for new sourcing options (in addition to China), the country is uniquely positioned to gain a bigger share of the global market. Renowned brands from the US and Europe are planning to import leather and leather products from India. Global players who took part at the India International Leather Fair, 2005, consider India as the market to be in.

Overview of the Industry

The Leather Industry holds a prominent place in the Indian economy. This sector is known for its consistency in high export earnings and it is among the top ten foreign exchange earners for the country. With an annual turnover of over US$ 7.5 billion, the export of leather and leather products increased manifold over the past decades and touched US$ 3.84 billion in 2010-11, recording a cumulative annual growth rate of about 5.87% (5 years). The Leather industry is bestowed with an affluence of raw materials as India is endowed with 21% of world cattle & buffalo and 11% of world goat & sheep population. Added to this are the strengths of skilled manpower, innovative technology, increasing industry compliance to international environmental standards, and the dedicated support of the allied industries. The leather industry is an employment intensive sector, providing job to about 2.5 million people, mostly from the weaker sections of the society. Women employment is predominant in leather products sector with about 30% share.Though India is the second largest producer of footwear and leather garments in the world, India accounts for a share of close to 3% in the global leather import trade of US$ 115.58 billion (2009). The major production centers for leather and leather products in India are located in Tamil Nadu - Chennai, Ambur, Ranipet, Vaniyambadi, Vellore, Pernambut, Trichy, Dindigul and Erode ; West Bengal - Kolkata ; Uttar Pradesh - Kanpur, Agra, Noida, Saharanpur; Maharashtra - Mumbai ; Punjab - Jallandhar ; Karnataka - Bangalore ; Andhra Pradesh - Hyderabad ; Haryana - Ambala, Gurgaon, Panchkula, Karnal and Faridabad; Delhi; Madhya Pradesh - Dewas ; Kerala - Calicut and Ernakulam / Cochin

Strengths of Indian leather sector

Own raw material source - 2 billion sq ft of leather produced annually Some varieties of goat / calf / sheep skins command premium position Strong and eco-sustainable tanning base Modernized manufacturing units Trained / skilled manpower at competitive wage levels World-class institutional support for Design & Product Development, HRD and R & D. Presence of support industries like leather chemicals and finishing auxiliaries Presence in major markets - Long Europe experience Strategic location in the Asian landmass

Emerging strengths

Design development initiatives by institutions and individuals Continuous modernization and technology up gradation Economic size of manufacturing units Constant human resource development programme to enhance productivity Increasing use of quality components Shorter prototype development time Delivery compliance Growing domestic market for footwear and leather articles

Products
Hides, skin, leather footwear, leather shoe uppers, non-leather footwear, leather garments, leather goods, industrial gloves, saddler & harness.

Highlights of Leather Product Segments:

Tanning Sector Annual production 2 billion Sq.ft. Accounts for 10% of world leather requirement. Indian colors continuously being selected at the MODEUROPE Congress Footwear Sector Second largest footwear producer after China. Annual Production 2065 million pairs. Huge domestic retail market 1950 million pairs (95%) are sold in domestic market. Footwear export accounts for 45.05% share in Indias total leather & leather products export. The Footwear product mix Gents 54%, Ladies 37% and Children 9%

Leather Garments Sector Second largest producer with annual production capacity of 16 million pieces. Third largest global exporter. Accounts for 10.43% share of Indias total leather export

Leather Goods & Accessories Sector including Saddlery & Harness Fifth largest global exporter. Annual production capacity - 63 million pieces of leather articles, 52 million pairs of Industrial gloves & 12.50 million pieces of Harness & Saddlery items. Accounts for 23.44% share of Indias total export

Productwise Brands sourced from India:

Footwear Acme, Ann Taylor, Bally, Charter Club, Clarks, Coach, Colehann, Daniel Hector, Deichmann, DKNY, Double H, Ecco, Elefanten, Etienneaigner, Florsheim, Gabor, Geoffrey Beene, Guess, Harrods, Hasley, Hush Puppies, Kenneth Cole, Liz Claiborne, Marks & Spencer, Nautica, Next, Nike, Cole Haan, Nunn Bush, Pierre Cardin, Reebok, Rockport, Salamander, Stacy Adams, Tommy Hilfiger, Tony Lama, Versace, Yves St. Laurent, Zara, Johnston & Murphy, Docksteps, Timberland, Armani, Geox, Diesel, Ted Baker, Lacoste, Kickers, Calvin Klein, Sioux, Brasher, Zegna, Massimu Dutti, Buggatti, Lloyd, Christian Dier, Salamander, Camper, Bata, Espirit, French Connection, Legero, Mercedez, H & M and many more famous brands Leather Garments Armani, Zegna, Abercrombie & Fitch, Marco Polo, Mango, Colehaan, AndreMaarc, Guess Pierre Cardin, Tommy Hilfiger, Versace, DKNY, Liz Claiborne, Ann Taylor, Nautica, Kenneth Cole, Charter Club, Daniel Hector Leather Goods / Accessories Coach, Liz Claiborne, Harrods, Yves St, Laurent, Tommy Hilfiger, Etienne Aigner, Geoffrey Beene,Marks & Spencer, Guess, Next, Pierre Cardin, Prada, GAP, Levis, H & M, British Home Stores, Banana Republic, Furla, American Eagle Outfitters, Bracciliani, Walmart etc.

Besides, major brands are sourced from India, MNC brands are sold in India and Indian brands sold in India. MNC Brands Sold Indian Brands sold in India in India Aldo, Bally, Clarks, Ecco, Florshiem, Ferragammo, Hush Puppies, Lee cooper, Lloyd, Marks & Spencer, Red Tape, Bata, Liberty, Nike, Nine West,New Balance, Khadims, Lakhani, Metro, Reebok, Rockport, Stacy Adams, Action Tods, Geox , Louis Vuitton

% Share of Leather Products in Export Performance (2010-11)

% share of various countries in Indias Leather & Leather Products Exports (2010-11)

Major Markets: The major markets for Indian leather products are Germany with a share of 14.34%, UK 12.80%, Italy 11.52%, USA 8.72%, Hong Kong 8.11%, France 7.07%, Spain 6.31%, Netherlands 3.98%, Belgium 2.02%, U.A.E.1.92%, Australia 1.30%. These 11 countries together accounts for nearly 78.09% of Indias total leather products export.

Indias Export of Leather & Leather Products to the European Union touched US$2517.51 mn in 2010-11, accounting for a share of 65.48% in Indias total leather export trade of US$ 3844.86 mn.

SWOT Analysis of the Indian leather industry

Strengths

High Growth Ready availability of highly skilled and cheap manpower Large raw material base Policy initiatives taken by the Government Capability to assimilate new technologies and handle large projects

Opportunities

Continuous product

emphasis

on and

Threats

development

Rising potential in the domestic market Growing fashion consciousness globally Use of information technology and decision support software to help eliminate the length of the production cycle for different products

design upgradation

Major part of the industry is unorganised Limited scope for

mobilising funds through private placements and public owned)

issues are in of

(many family-

businesses Difficulty high

obtaining private

Use of e-commerce in direct marketing

bank loans resulting in cost borrowing Stricter standards

international competition from

High

Weaknesses

East European countries

and other Asian countries

Lack of warehousing support from the government International price fluctuation Huge labour force resulting in high labour charges Lack of strong presence in the global fashion market Unawareness of international standards by many players

Lack of communication facilities and skills

Marketing of leather and leather products in Germany & the EU

The leather sector offers a good potential which Indian entrepreneurs can exploit in Germany and other EU markets characterized by ever growing competitiveness in terms of price and quality, on one hand, and the environmental considerations, on the other. With a strong foothold that the Indian leather industry has had for long in these markets, and its advantage of raw material and labour resources, Indian leather exporters can, and should, mount a concerted marketing campaign to wrest a share consistent with their inherent strength and potential. This has to be done against the background of the well-known salient features of the German market:

The world's second largest import and export market A difficult buyers' market with hyper competition and high expectations

A dynamic multi-faceted market with rapid technological development and innovations A market where a considerable amount of buying power is devoted to satisfying individual needs

A market influenced by the rising average age of the population and low birth rate A market where environment awareness and eco-friendly production becomes more and more a pre-requisite for successful marketing of products

Top ten Indian leather exporters

Tata International Ltd. Florind Shoes Ltd. Punihani International Farida Shoes Ltd. Mirza Tanners Ltd. T. Abdul Wahid & Company Hindustan Lever Ltd. Super House Leather Ltd. RSL Industries Ltd. Presidency Kid Leather Ltd.

COUNCIL FOR LEATHER EXPORTS The Council for Leather Exports (CLE) is the single largest and Apex trade promotion orgnisation of the strong and rapidly growing Indian leather & leather products industry. CLE is committed towards the overall development of Indian leather sector and achieve higher export growth to enhance Indias share in global leather trade. CLE is functioning under the aegis of Ministry of Commerce & Industry, Govt. of India. It is the notified Export Promotion organization for entire leather & leather products industry.

Core Objectives of CLE:

Develop & strengthen the leather industry both industrial development as well as export growth.

Undertake concerted and aggressive export promotion and market development activities to extend global reach of Indian leather & leather products.

Assist importers anywhere in the world towards their sourcing needs of Indian leather & leather products.

Provide necessary assistance/guidance to overseas entrepreneurs in establishing business collaborations and strategic alliances with Indian companies.

Serve as a vital link between the Government and the leather industry, representing important policy measures, focusing on overall health and growth of the entire sector.

Activities and Services of CLE

Disseminating market information, trends, policy matters and publishing information on commercial, technical and technological developments in the Indian leather industry

Facilitating export-import trade through redressal of various procedural hurdles by representing to authorities concerned.

Participating in major international leather trade fairs & specialized trade shows across the globe.

Organizing Buyer-Seller Meets and Mega Leather Shows, B2B meetings in potential markets etc.,

Promoting, facilitating & attracting joint ventures, technical collaborations & strategic alliances, FDIs etc into the Indian leather sector.

Inviting Resource persons / Experts to the trade Fairs, Seminars & Workshops held in India, for exchange of information, knowledge, ideas and strategies.

Mooting Delegations to overseas countries with a view to identify the sources for raw materials for augmenting availability of leather for production in India.

Perform facilitation and Coordination activities towards implementation of various leather sector infrastructure strengthening, Human Resource Development programmes of Government of India.

Facilitate in availing assistance under Integrated Development of Leather Sector (IDLS) for Modernization & Technology up gradation of production units

Highlights of Union Budget 2011-12

. The following are the major measures announced for the leather sector in this budget.
o

SCHEME OF MEGA LEATHER CLUSTERS: Setting-up of Seven Mega Leather clusters during the year 2011-12, by extending the Mega Cluster Scheme for development of leather products.

To encourage use of green processes, full exemption from basic excise duty is being granted to enzyme based preparations for pre-tanning falling under tariff no. 32029030 (Central Excise Notification tariff- No. 4/2011 dated 1st March 2011).

Duty Free Import Scheme : The 3% Duty Free Import Scheme (DFIS) is implemented by Council for Leather Exports as per which certain notified inputs are allowed to be imported to the extent of 3% of FOB value of export realization in the previous year by manufacturer-exporters of leather garments and other leather products including footwear. In this DFIS scheme, certain new inputs have been added and also the description of certain existing inputs have been widened. Accordingly, the amendments have been made vide Customs Notification No. 21/2011(tariff) dated 1st March 2011.

Leather sector shall be allowed re-export of unsold imported raw hides and skins and semi-finished leather from Public bonded warehouses, without payment of any export duty. This will facilitate the logistics for establishment of such warehouses and easy access to raw material for the leather sector.

o o

Finished Leather export shall be entitled for Duty Credit Scrip @ 2% under FPS. Additional 2% bonus benefits over and above the existing benefits under Focus Product Scheme would significantly benefit the Leather Sector

Policy decision by the government to buffer the export of leather

After the global recession the government at this juncture, wants to provide adequate confidence to the exporters to maintain their market presence even in a period of stress. A Special thrust needs to be provided to employment intensive sectors which have witnessed job losses in the wake of this recession, especially in the fields of leather and leather product With a view to continuously increasing our percentage share of global trade and expanding employment opportunities, certain special focus initiatives have been identified/continued for Market Diversification, Technological Up gradation, Support to status holders, in Leather industry

1. Technological Upgradation
To usher in the next phase of export growth, India needs to move up in the value chain of export goods. This objective is sought to be achieved by encouraging technological upgradation of our export sector. A number of initiatives have been taken in this Policy to focus on technological upgradation; such initiatives include: EPCG Scheme at zero duty has been introduced for leather and leather products

2. Support to status holders

The Government recognized Status Holders contribute approx. 60% of Indias goods exports. To incentivise and encourage the status holders, as well as to encourage Technological upgradation of export production, additional duty credit scrip @ 1 % of the FOB of past export shall be granted for specified product groups including leather and specific sub sectors. This duty credit scrip can be used for import of capital goods by these status holders. The imported capital goods shall be subject to actual user condition.

3. Leather and Footwear

(a) Duty free import entitlement of specified items is 3% of FOB value of exports of leather garments during preceding financial year. (b) Duty free entitlement for import of trimmings, embellishments and footwear components for footwear (leather as well as synthetic), gloves, travel bags and handbags is 3 % of FOB value of exports of previous financial year. Such entitlement shall also cover packing material, such as printed and nonprinted shoeboxes, small cartons made of wood, tin or plastic materials for packing footwear. (c) Machinery and equipment for Effluent Treatment Plants shall be exempt from basic customs duty. (d) Re-export of unsuitable imported materials such 12 as raw hides & skins and wet blue leathers is permitted. (e) CVD is exempted on lining and interlining material notified at S.No 168 of Customs Notification No 21/2002 dated 01.03.2002. (f) CVD is exempted on raw, tanned and dressed fur skins falling under Chapter 43 of ITC (HS). (g) Re-export of unsold hides, skins and semi finished leather shall be allowed from Public Bonded warehouse at 50% of the applicable export duty.

Export of Imported Goods

Hides, Skins and semi finished leather may be imported in the Public Bonded warehouse for the purpose of DTA sale and the unsold items thereof can be re-exported from such bonded warehouses at 5 0% of the applicable export duty. However, this facility shall not be allowed for import under Private Bonded warehouse.

Zero duty EPCG Scheme Zero duty EPCG scheme allows import of capital goods for
pre production, production and post production (including CKD/SKD thereof as well as computer software systems) at zero Customs duty, subject to an export obligation equivalent to 6 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from Authorization issue-date. The scheme will be available for exporters of engineering & electronic products, basic chemicals & pharmaceuticals, apparels & textiles, plastics, handicrafts, chemicals & allied products and leather & leather products

Leather export for 2012 look bleak

Indian leather exporters, who sell to global brand names such as Wal-Mart, Calvin Klein, Esprit and French Connection, anticipate difficult times ahead as the signing of new contracts is nosediving and economic uncertainty continues to grip the European Union. Leather exports saw healthy growth in 2011, but exporters expect the crisis of 2012 to be worse than the downturn of 2008. This is because four years ago, it was the United States that was hit; this time round, it is the EU which accounted for 65.48 per cent of Indian leather exports in 2010-11 that is in crisis. Though the current growth trends are impressive, there is some apprehension about future export prospects due to the continuing economic slowdown in the European Union. 90 per cent of buyers have stopped giving big orders they dont want to stock products anymore. Nor have exporters been able to find alternative markets. Latin American countries like Brazil, Argentina and Chile were showing some promise, but due to pressure on their currencies there is a slowdown in that region too. And the Russian and Scandinavian regions are very closed and difficult to crack.. Adding to the woes is the increase in global leather prices, and in raw material, freight and labour costs, which have dented exporters margins. Cost of production has gone up by 50 per cent. Exporters said gross margins have crashed from 40 per cent to less than 25 per cent in the ladies handbag segment, from 25 per cent to 12-15 in the wallets segment, and from 10-12 per cent to seven to eight per cent in the industrial hand gloves segment. Labour costs have increased by 50-60 per cent in recent times and raw materials prices by 25-40 per cent, and for exporters who are sending cargoes by air the hit is higher

Future Outlook
The Government of India had identified the Leather Sector as a Focus Sector in its Foreign Trade Policy 2004-09 in view of its immense potential for export growth prospects and employment generation. Accordingly, the Government is also implementing various Special Focus Initiatives under the Foreign Trade Policy for the growth of leather sector. With the implementation of various industrial developmental programmes as well as export promotional activities; and keeping in view the past performance, and industrys inherent strengths of skilled manpower, innovative technology, increasing industry compliance to international environmental standards, and dedicated support of the allied industries, the Indian leather industry aims to augment the production, thereby enhance export to US$ 9.00 bn by 201314, and resultantly create additional employment opportunities for overall one million people.