While the US hide trade is selling hides which have not yet actually been removed from the animals, they are aware that this situation cannot last much longer. It is not just a question of getting the hides to their destination in time to meet the various customs handbook deadlines, but they must also allow for the leather to be processed and then manufactured into finished goods for re-export.
With hides sales to China soaring, it is only to be expected that the price of hides would rise. What is surprising, however, is that the price rises are only of the order of $4-5 on average per piece. The lowest price rise this year was in the order of $1 for heavy native heifers, the highest being $5.50 for Colorado steers.
By the end of April, US export sales to China amounted to 47% of all exports worldwide which compares with 36% a year earlier. At that point, exports of US hides and skins totalled 7,510,700, against 6,921,100 in 2005.
There were reports of a major Chinese tannery being forced to close in late April.
As a result the hides sold to them had to be re-sold. However, this occurred without any negative effect on the market.
No-one knows what will happen when the customs handbooks eventually expire and the new regulations fully take over. It seems to be a common sense assumption that the vast quantities of hides currently destined for China are not backed by actual leather orders, so stock piling must be the order of the day.
This begs the question, when will China need to replenish their supplies? It is being referred to as the million dollar question.
Few are prepared to hazard an answer. Don Ohsman, in his View from America this month, says it will be when the industry least expects it. Ron Sauer says that the picture will only become clear in 2007.
US leather industry statistics have just been released by Leather Industries of America. These show that in 2005, 19,200,128 hides were exported while 1,355,960 were imported.
Cattle hide availability
Slaughter
Commercial 32,387,700
Farm (preliminary) +148,000
Imports +1,355,960
Exports -19,200,128
Availability 14,691,532
Note: slaughter does not include renderings (approximately 1.5% of cattle population)
Source: USDA Livestock summary USITC
When it comes to protective measures of any kind, the leather trade becomes a trifle schizophrenic. What is good for one sector of the industry can be bad for another. When the EU levied anti-dumping measures on leather shoes from China and Vietnam there was an outcry both for and against.
For example, European footwear manufacturers were demanding protection from an upsurge in imports of cheap Asian footwear which was putting them out of business. European retailers, on the other hand, welcomed low cost merchandise which made them more competitive in the High Street.
American response
A joint statement was issued by Cotance for the European industry and Leather Industries of America, the Footwear Distributors and Retailers of America and the American Apparel and Footwear Association. They wanted to declare their opposition to trade distorting export taxes and export restrictions on hides, skins and wet-blue leathers that they believe are proliferating and causing significant damage to international trade.
They want to see the elimination of tariff peaks and high import duties for leather across the globe through the harmonisation and eventual elimination of import barriers that have equally significant trade distorting and deviating effects and which work to the detriment of sustainable development in the leather trade. The only export restrictions they find acceptable are those concerned with public health and safety.
Public safety issues, probably, lie at the heart of the Berry Amendment Provisions which will require that the US Defense Department (DoD) buy in 100% US content and labour when it comes to products judged essential to the country’s military readiness.
This, of course, is a huge disappointment for overseas tanners who have invested heavily in military leathers and who are now excluded from tendering for military contracts.
On December 21, 2005, the Senate approved the DoD Authorization Bill, clearing it for the president’s signature. This includes a provision stating that leather is included in the Berry Amendment. This was required for clarity because leather had not been previously listed and rulings tended to be somewhat arbitrary.
The clarification will give US tanners and domestic footwear manufacturers the assurance that there is no longer any room for an alternative interpretation by DoD officials. The Berry Amendment requires that the military buy all of their sewn products from US companies that manufacture in the US with all US components. While waivers are frequently issued on the grounds that certain products are not available from US companies, the provision allows suppliers the opportunity to respond to such waivers if they have the capacity to provide the item.
