EXPORTS OF LEATHER PRODUCTS TO GERMANY

EXPORT-IMPORT MANAGEMENT
Project Report on

Exporting Leather Products to Germany

Submitted to: Prof. P.K. Chugan

Submitted By: Pankaj Poddar MBA (074141, Fb&e, 07-09)

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EXPORTS OF LEATHER PRODUCTS TO GERMANY

TABLE OF CONTENTS

Sr.No.

Topic

Page No.

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Introduction / History of leather Indian Export and Import Indian Leather Industry Scenario German Economy SWOT Analysis of Indian Leather Industry Product range Price Structure Selecting a Suitable Trading Partner Doing Business in Germany Registration with EPC / Council for Leather Exports Method of Costing Government Policies Registration / IPEC No. Statistics

3 5 7 10 15 17 21 22 24 27 28 29 30 31

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Introduction There came the long awaited dusk to the complacence of the Indian manufacturers (the village leather industry in particular) When the long slammed doors of global markets were opened to the leather industry. As already project by various economic wizards, the leather manufacturers met challenge with a renewed vigor and started capturing markets like Germany, U.S, Italy, U.K., and France. The very fact that a major market like Germany has been chosen to build up positive image for the Indian leather products and to promote joint ventures adds one more feather in the cap of leather industry in presenting a strategy so remarkable. History of Leather The primitive man, even more than 7000 years ago, made and used leather goods. He dried fresh skins in the sun, softened them by pounding in animal fats and brains, and preserved them by salting and smoking. Of course, the products were crude, made for protection than as fashion. The Egyptians and Hebrews developed around 400 BC, the process of vegetable tanning that involved simple drying and curing techniques Under the Arabs during the middle Ages, the art of leather making became quite sophisticated. Morocco and cordovan leathers were in great demand. The ancient puppet theatre in the southern India used primarily leather dolls. The tradition continues even today.

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Product definition as per ITC HS code ITC HS code for products with outer surface of leather, of composition leather or of patent leather is 42029190 42 stand for Chapter 42: Articles of leather; saddlery and harness; travel goods, handbags and similar containers; articles of animal gut (other than silk-worm gut) 4202 stand for Trunks, suit-cases, vanity-cases, executive-cases, brief-cases, school satchels, spectacle cases, binocular cases, camera cases, musical instrument cases, gun cases, holsters and similar containers; travelling-bags, insulated food or beverages bags.

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INDIAN Export & Import The export of leather and leather products in total during 2006-07 has reached 2849.61 millions U.S. $ as against 1558.60 millions U.S. $ in 199495 registering an increase of 16.59%.In 2001-02 export has reach 1.93 billion U.S. $ and in year 2005-06, the Indian export of leather goods reached to 2648.14 million US $.

In 2006, estimated exports stood at US$112 billion and imports were around US$187.9 billion. Textiles, leather products etc. are major export commodities. India's most important trading partners are the United States, the European Union, China, and the United Arab Emirates. More recently, India has capitalized on its large pool of educated, English-speaking people to become an important outsourcing destination for multinational corporations. India has also become a major exporter of software as well as financial, research, and technological services.

To give a brief idea of the Indian exports of leather products to the world, we have prepared this table showing you the country wise exports of Indian leather products on the basis of percentage, FOB value and units exported. Country Germany U.S.A. Italy Spain U.K. France Netherlands Sweden Canada Denmark Portugal Greece Belgium Quantity (In pieces) 1377428 1565807 973888 1117471 713954 531957 217110 169183 117794 162414 99341 86390 98851 FOB Value (Rs. In Crores) 327 300 260 253 136 100 40 33 30 28 23 22 18 % Share (value wise) 19.35 17.70 15.39 14.97 8.09 5.91 2.34 1.96 1.79 1.69 1.38 1.32 1.10

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Switzerland

65820 18 Source: Council of Leather Exports

1.06

At the current stage, in India leather industry is commanding a vast potential as a valuable foreign exchange earner. Be it pricing or quality, delivery schedules or frame work conditions, it is imperative for the Indian leather sector entrepreneur to fully aware with the what the markets demand and how the competitions adapts it self. The industry has also to pre-empt the global goings on end constantly initiate proactive measures. Special mentions of Germany need to be mentioned when we talk of export scenario of the leather goods. Germany has been the principal market for the Indian leather and leather products and continues to hold its position at the top commanding about the 20% share of the total Indian leather and leather products. Largest market for Indian leather industry is continuously nurtured and developed. “Leather Fashion”- A Hot Tip: When one talk of leather products coupled with their bulk exports, naturally the buzzword ―fashion‖ comes in question. In order to survive in market already filled with competitors, it is indispensable for an exporter to be at par with the latest fashion development in the country in which he is exporting the goods. When the fashion speaks for it self, it can play a stimulating role as spearhead of an entire industrial sector . A search for light, purity, clear lines has been acclaimed at the basis for fashion in the leather products. Elegance is the back with the timeless, thorough bred city –dwellers-inspirations that will characterize this look. City fashion has new focal points in this new trend towards elegance. Talking about the contemporary fashion, one cannot ignore the timeless crocodile and python prints in elegant cameo tones have a slightly old fashioned look that is now very fashionable.

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The Indian Leather Industry Scenario

Leather Industry in India, occupies a place of prominence in the Indian economy, in view of its massive potential for employment, growth and exports. There are a large number and variety of leather products available and sold in India. First and foremost this includes footwear, which constitutes the majority of the leather market. There after there is leather furniture, garments, fashion jewellery, Men and Women Leather Accessories etc Features of Leather Sector in India:
 

Employs nearly 2.5 million persons. A large part (nearly 60-65%) of the production is in the Small/Cottage Sector. Annual export value is about to touch about 2 billion US dollars. Amongst top 8 export earners for India. Endowed with 10% of the world raw material and export constitutes about 2% of the world trade. Has enormous potential for future growth.

  

There are also numerous types of leather available in India. But the ones most commonly used and preferred in Indian climate are Dry Mill, Cow Softy, Sheep Napa and Buff Calf. The process of making leather is as follows. The raw animal hide is sent to the tanneries, where it is cleaned, processed, dyed, dried and polished, after which it is available and ready for further use. Various Leather product companies buy leather in bulk from these tanneries and then use them in their respective products.

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Leather wear in India is basically for export though a very small quantity is available in the local market mainly in the north where the weather is conducive to leather wear and also in five star hotels where the tourists from all over the world buy leather garments. Most of the garments sold are designed as per international standards and the buyers are mainly foreigners who find the locally made garments very fashionable. The main leather garment centres for manufacture are Bombay, Kanpur, and Madras.

The

Indian

Export

Trade

Corporation

(IETC)-one

of

the

leading

manufacturers of very high fashion leather garments for men’s and women’s wear started its leather business in 1970 with snake skin items. They moved into women’s garments in 1985 and then to men’s wear in 1989. Their turnover of 100 pieces per month of women’s wear and 1500 pieces per month of men’s wear in leather gave them a turnover of Rs. 52,66,000 in 1989/90 to countries like USA. Germany, UAE, Switzerland and in India. ―Stylewise, Indians can compete with the rest of the world in design and detailing. WE have the best machines, accessories and leather and our production techniques too are very modern,‖ informs Pawan Sabharwal of IETC.

The Indian Leather Industry has captured world attention by way of its unique performance in the international arena. There has been an increasing emphasis on its planned development, aimed at optimum utilization of available raw materials for maximizing returns, particularly from exports. There has been a remarkable growth in exports from US $746.34 million during 1986-87 to US $ 1.93 Billion in 2001-02.

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India’s inherent strength lies in its strong raw material base, technical manpower, and proven quality control measures. India ranks first among the major livestock holding countries in the world, having 57% of buffalo, 16% of cattle, 20% of goat and 4% of sheep population. It is no denying fact that the legendary quality of India’s traditional leather craft, combined with modern production facilities and trained personnel, has put India on the world map for sophisticated leatherwear. The liberalized economic and developmental trade policies adopted by the government of India since 1991 and simplification of procedures have been instrumental to the growth of this industry. With an enviable reputation in international leather circles, and an ever-increasing global demand, Indian leather today ranks among the top export earners in the country. Indian leather products are exported to as many as 120 countries. The Indian leather industry is well set for rapid growth in coming years. The industry has undergone tremendous changes in the past two decades and the policy measures adopted by the government have started paying rich dividends. To add to this, thanks to cheap labour and raw material.

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German Economy Germany is one of the world's most advanced market economies. It is the world's third largest economy in USD exchange-rate terms, the fifth largest by purchasing power parity and the largest economy in Europe. Competition and free enterprise are promoted as a matter of government policy. However, the state intervenes in the economy through the provision of subsidies to selected sectors and the partial ownership of enterprises in sectors of strategic importance. Although Germany, unlike countries such as France or Italy, is not a classical fashion country, fashion play a large role and its significance is growing. Germany, which is the single largest buyer of Indian leather items, with a 14.3 per cent share, increased its imports by 7.2 per cent, buying more of footwear — leather and non-leather — as well as saddlery and harness. Exporters of other leather items such as garments, leather goods, footwear components and leather, also increased over a period of time. Leather goods and garments are big business all over the world. These are being manufactured and exported by India and the Indian leather industry is poised to take the international markets by storm.

Total market size The German market for luggage and (leather) accessories was worth € 1,953 million in 2006. This represented a volume of approximately 119 thousand tonnes. Over the review period between 2002 and 2006, the market has increased by an equivalent 1.7% per annum in value, compared with the EU average of 3.2%.

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Germany was the largest luggage and (leather) accessories market in the EU in value. It was also close in value to the next three markets of Italy, France and the UK, although Italian and UK volumes were higher. On a per capita basis, it was also similar to Spain. Per capita consumption of € 23.7 was higher than the EU27 average of € 20.3. This suggests that Germans purchased more high quality items on average than elsewhere, or purchased more items generally. Despite the fact that German consumers are generally not as brand conscious as consumers in some of EU countries, handbags and other personal accessories such as belts have continued to experience sales increases, underpinned largely by increasing interest in fashion. This has been stimulated by major media coverage and close inspection of the accessories worn and used by celebrities. There are, however, some signs that the major focus on handbags is starting to become less intense, and greater interest is now being shown on footwear, both by consumers and by the media. The other major growth area has been in holders and carrying cases for electronic gadgets.

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Consumption of luggage and (leather) accessories in Germany, 2002-2006 2002 2004 2006 Population 2006 Value/ volume 1823 / 105 Value/ volume 1789 / 110 Value/ volume 1953 / 119 82.2 23.7 Consumption Capita (€), 2006

(in million) Per

German consumers are practical and usually feel there should be a clear reason for replacing luggage. They regard function, quality, comfort and a competitive price as most important, but fashion is becoming more of an issue when buying luggage. However, in handbags, belts, cross over bags and sports bags, design, fashion and brand awareness are still the most important, especially among women. Euro monitor have estimated the market to grow by 2.6% in 2007, and then by 3.2% and 5.2% in the subsequent two years. This market growth will be mainly driven by: a) More stimulation of fashion-based purchases by a celebrity-driven mass media. b) The continued interest in lower-priced fast fashion items that try to copy luxury brands and consumers who are no longer ashamed to buy or admit to owning such products. c) New markets for men and teens. For example, pouches for men, instead of briefcases, have become more popular. More variety in girls’ purses in different fabrics is expected.

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d) Fast changes in the technology sector will boost the small accessories segment, as consumers buy new mobile phones, portable audio systems, personal GPS systems, with or without holders. German luggage and (leather) accessories consumption by product, % value 2006

Market trends Environmental concerns continue to grow. Consumers are increasingly demanding to know how these products are produced. Bags for men have shown a great increase in interest by affluent working males of all ages, but particularly younger businessmen. They want small bags with much internal space, made of soft leather and with a number of different pockets. For women, designer bags are less popular. The latest trends are for individually styled bags with a high gloss finish, and more decorated bags

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with rivets, buckles, embroidery and chains, a move away from the simpler, more subdued styles. There are more women in business, which means that there is an increasing demand for briefcases. These briefcases are lighter and have more compartments nowadays. Designs are more female oriented, which not only applies to briefcases, but also to suitcases and small accessories. Restrictions generally on the size of hand luggage for air travellers is also stimulating more demand for lighter weight models. More money is being spent on accessories and all sorts of bags, and parents are also spending more on bags for their children. Part of this is due to greater influence from advertising. Image is also more prevalent in luggage (suitcases and briefcases), as its design or brand says something about the status or lifestyle of the owner. In the luggage and accessories business, marketing will be increasingly focussed on particular consumer target groups. For all luggage and (leather) accessories, there is more variety in non-leather material, e.g. made of nylon, fibre, PVC coated, textile or combinations of materials.

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SWOT Analysis Strength of Indian leather industry  India has 10% of world’s total animal population so strong raw material base.  For better technology, Central Leather Institutes produces qualified leather technocrat.  Growing market.  Purchasing power increases world wide.  Increased consciousness about usage of leather products specifically among women (matching chappal, matching belt, matching clothes and hand bag, etc).  Support of the government duty draw back increased from 11% to 16%.  Indian leather industry has provided employment to 2.5 million people.  Annual export value poised to touch about 2 billion US dollars.  Amongst top 8 export earners for India.  Has enormous potential for future growth. Weakness of Indian leather industry  No quality specifications, poor quality accessories  Competition from low price markets like Pakistan, Ethopia, Indonesia and Kenya.  Did not project position of products, positioning is wrong not match to Italian target is just to match Pakistan.  No brand name.  Unorganized sectors.

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Opportunities and threats Germany is a very large market and the large population can provide a range of opportunities for exporters from developing countries. There is more demand for cross over bags, fashionable handbags, light and compact luggage and computer cases. In the middle-higher segments, German consumers are prepared to pay high prices for well-known brands and items made in France or in Italy. As an exporter from a developing country, we may therefore find more opportunities in the low-medium segments and approach the German market with less fashion-sensitive lines such as travel bags or small leather accessories. The growing market for fashionable handbags provides opportunities for exporters if they can produce at the prices demanded. However there is a danger in becoming too reliant on this sector of the market. If you are not able to supply quickly and change production at the short-term whim of the fashion market, we could find yourself exposed to the dangers of overtrading. The ageing of the German population offers opportunities for suitcases with ergonomic elements, especially with regard to comfort - easy to carry, easy to store - which is important for older people. Outsourcing also provides opportunities. German manufacturers have had to adapt their systems to remain competitive. They have forged partnerships with domestic and overseas suppliers. They will particularly appreciate input from suppliers who can demonstrate design flair and innovation. Try to avoid competition on price, but offer something different that is unique to your country in terms of design, material or craftsmanship.

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Product range: We are marketing a range of exquisite Leather accessories for men. To start with this range would include premium quality leather belts, leather wallets, Portfolios (Men’s Office Bags) and leather key chains. Finer details of our product range are explained in the following pages. Our product range would include: a} Leather Belts b} Leather Wallets c} Leather Portfolios d} Leather Key Chains e} Handbags / Business Cases f} Travel Bags The highest selling products in the men’s accessories range in the descending order are leather belts, wallets, portfolios and key chains etc. There are many players in the men’s leather accessories in the market and there is stiff competition among them. Following is a summary of major players in each product segment along with their price range.

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We chose these products out of the entire leather accessories range because they are the highest selling products in the order. Although, the ladies purse segment also makes very high sales, if we were to survive in this segment, we would have to keep a very large variety and mix of designs, which is not possible for us as a new entrant in the market. Hence we have kept limited variations and designs to start with. Before giving the variations, we shall explain the features of most commonly used leathers. The things which wie will be taking care to select the range for our products are as follows: a} It should be distinctive and easily remembered. b} It should not offend any particular section of the society. c} It should depict the features of the product.

Leather products that people use, is usually their fashion statement. It symbolizes their sense of style, their class. We were looking for a brand name which would appeal to our target costumers and satisfy their styling ego. Our products are truly a class apart and each of our product is a classic. Packaging of a product plays a vital role in determining its sales. It has to be attractive, so that it catches the eyes of the customer. Also at the same time, it has to be strong and sturdy because it has to travel long distances. Mostly in case of leather goods, when the products are on display they are not kept with their packaging, but naked. This is because a person wants to feel, check the product again and again before buying it. However when the customer buys it, it is given to him packed in a worthy box or appropriate packing. A person might buy a leather product for him self or to gift some

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one. If he buys for himself, the packaging is not of much use to him but if he has to gift it to someone he definitely opts for a one which has a good packing. Keeping in mind the above points, we have decided the packaging of our various products as follows. Belts Belts would be coiled vertically and packed in thin hard board boxes with the front side upper half having a transparent plastic window, from where we can see the product. The lower half of the front side would have a white label stuck on which the following details would be printed: code number, style number, Colour, size, M.R.P. The two sides would have the Brand name and the photographs of our other products printed on the box. This would be a good medium for advertising, as the one who buys or receives it also becomes aware of our entire product range. The back side would have our company details such as the name and address printed. The base colour of the box would be gold. Wallets The Wallets would be packed in hardboard boxes. The bottom and the sliding cover would be separate. The bottom would have case / groove in which the wallet would fit. The cover which slides in would be made of thick transparent plastic through which we can see the actual wallet. The Back of the box would contain the Brand name, product details and the photographs of our other products. The base colour of the box would be gold. Port Folios Portfolios would have a comparatively simple packaging as they are too huge and bulky to be packed in boxes. They would be packed comfortably in cream coloured soft cotton bags of the appropriate size. The brand name would be printed in bold letters on the bag. We would not print the photos on these bags as photo printing on cloth becomes quite expensive. This bag can

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afterwards be used for any other purpose. No body would throw a cotton bag and thus it would be a permanent reminder of the brand name.

Key Chains Key chains would be packed in small boxes of appropriate sizes similar to the wallet. The sliding boxes would have a transparent cover on the top and the details printed on the back. Here we would not be providing the photos on the back of the box as the space available is too less. Leather Jackets Our leather jackets are of high quality standards. In our tanneries, right from procuring the raw material to production of finished goods, each and every process is highly explicit. For the same reason, we have branded our product “EXPLICIT”. This gives us an added advantage in the quality conscious market of the United States of America. In India, leather jackets are manufactured mainly for fashion. It is not used for the purpose of shielding oneself from cold. But in case of the United States of America, it is not only used as trendy attire, but also to protect the masses from cold. It is chilling in the United States of America for most part of the year. Therefore, we had to make some changes in the manufacturing process of the product to suite the needs of the people in the United States of America. We also had to concentrate on the thickness of the jacket, rather than just concentrating on the designing. However, in this market, we have not looked down upon the designing part of the jackets.

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Price structure Luggage and (leather) accessories’ margins have been falling in Germany in recent years, particularly at the bottom end of the market, as a result of intense competition in the supply end and more competition between retailers. There are now signs that margins are stabilising and prices are slowly starting to increase again. Although there are some national differences, margins tend to be similar in most markets. There are also differences in margin levels between different product types, with higher retail margins for more fashion-related products, and lower margins for more functional or lower quality products. In each trade channel different margins and prices apply, with a total markup (including VAT) of 3 up to 4 of the export (CIF) price. The margin figures quoted in Table 2.2 are calculated as a percentage of the price purchased from whom they buy in the chain, not as a percentage of the CIF price. These margins also vary depending on which market segment is being approached. The higher the market segment, the higher the margins that can be commanded. Department stores or clothing and variety chains ask for large-volume discounts, which are then passed on to their affiliated stores. Overview of margins in luggage and accessories Low Importers/wholesaler s' margins Agents' margins Retailers' margins Mark-up Export (CIF) price price Consumer 3.0 4.0 30% 6% 95% 50% 12% 120% High

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VAT of 19% is added to retail prices. Selecting a suitable trading partner This is a very important part of the export process. The relationship we can establish between yourself and your partner is as important as finding a contact that is suitable for you in terms of the range of products that we can supply. The essential element of any trading relationship is trust. The best way to find a trading partner is usually to contact the main trade sources. The German Leather Goods and Luggage Association and the German Leather Industry Association are important contacts (see Chapter 6 for contact details). The best place to meet potential trading partners is at a trade fair, such as the International Leather Goods Fair in Offenbach. Participating in trade fairs can be expensive, so it would be better to first visit an exhibition a few times before making a commitment. During a visit you can extensively look around at the stands of the main players and get a better idea of the latest fashions. At trade shows we have an opportunity to talk to potential partners on a face-to-face basis and better judge whether we would like to work with them. We could also identify potential partners from the exhibition website beforehand or from a catalogue. When selecting them (e.g. importer or wholesaler), we will try to find out: a) What type of luggage or accessories they sell (focussed on comfort, material or fashion). b) To which target groups they sell. c) In which areas they are well represented in their country. If they are exporting, to which other EU countries they sell.

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d) To whom they sell e.g. small or large retailers, department stores, buying groups etc.. We could also find this out by looking at their website or try to find a company profile through other hosted sites e.g. of a local Business Support Organisations or trading platform, or by finding their company brochure. Although we may initiate a communication by post or email, it is recommended that there is some personal communication before a trading partner is selected. Personal communication is still the most important form of communication. This communication can include sending samples, inviting them to see the production facilities, and other meaningful ways of gaining and maintaining their interest. Market access requirements As a manufacturer in a developing country preparing to access Germany, we should be aware of the market access requirements of your trading partners and the German government. Requirements are demanded through legislation and through labels, codes and management systems. These requirements are based on environmental, consumer health and safety and social concerns. We need to comply with EU legislation and have to be aware of the additional non-legislative requirements that your trading partners in the EU might request.

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Doing business in Germany German fashion companies are notorious for their attention to detail and subsequent enforcement of trading terms. If you can make a success of a trading relationship in Germany, you are likely to succeed in most other EU countries. Developing a relationship The most important ways to develop a business relationship are to either exhibit at one of the main luggage and accessories fairs, or to make a direct approach to wholesalers or major retailers. In Germany, many business people still prefer a formal style of communication, both in the way a presentation is put together, and in the way contact is made. A very aggressive price driven approach will not be effective, although price is very important in the German market. It is also important to appreciate from the outset the importance of holding on to your customers. Many buyers are not always loyal and it is much easier to lose a customer than to find a new one. Trade Fairs The main trade fair for the luggage and (leather) accessories industry in Germany is called the International Leather Goods Fair and takes place in Offenbach each year in March and September (http://www.messeoffenbach.de). The Leather and More Fair, each April and October, could also be of interest. The GDS Fair in Dusseldorf is an International Event for Shoes and Accessories, also twice a year in March and September (http://www.gdsonline.com).

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Promotion Advertising in trade magazines can sometimes be an effective means of reaching a small target group. The main trade publication for the leather industry is the monthly Leder & Häute (http://www.cor-communication.de). Another important publisher is Sternefeld, who issue a leatherwear report (http://www.sternefeld.de) and publish the magazine STEP (http://www.stepverlag.de), which includes coverage of accessories, as well as footwear. TM Fashion Trendmagazin provides information on trends and developments in the fashion industry (http://www.tm-fashion-portal.de). Having a website Being online is fundamental, especially when taking into account that trust and credibility are major challenges for DC exporters, a good website can overcome this issue. A website offering well-defined products, competitive advantages (e.g. USP, quality, cost reduction and delivery reliability) and a list of other customers helps create a trusting environment. Useful contacts There is information on the luggage and (leather) accessories industry in Germany at the website of the German Leather Industry Association (http://www.vdl-web.de) and the Leather Goods and Luggage Association (http://www.lederwarenverband.de). Some manufacturers featured may be looking to develop relationships with developing country exporters. Other useful contacts include: • The Association of Leather Goods Retailers (http://www.lederwareneinzelhandel.de). • The Association of Textile Retailers (http://www.bte.de). • The Leather Training, Testing and Research Centre

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(http://www.lgr-reutlingen.de). Registration with export promotional council. In order to enable us to obtain benefits / concessions under the prevailing foreign trade policy, we have registered ourselves with the Council of Leather Exports. This organization is the export promotion council for all leather articles to be exported. Though, registration to this organization is not mandatory, we opted for this in order to benefit from it. It helps in finding customers, conducting exhibitions and many other things. Council for Leather Exports The council for Leather Exports was set up in July 1984.A non-profit company registered under the Indian Companies Act, 1956, the Council functions under the Ministry of Commerce, Government of India. The council is entrusted with export promotion activities and overall development of the Indian leather industry. The Council’s activities also include promoting Foreign Direct Investment and Joint Ventures in the Indian Leather industry. The CLE serves as a bridge between Indian leather exporters and buyers all over the world. Council’s services to the Indian Leather Industry:  Collecting, Collating and disseminating world market intelligence.  Updating the information on global trends in fashion and design, product development.  Dissemination of information of commercial and technological nature through seminars and magazines.  Organizing participation of Indian exporters in international fairs and buyer-seller meets.  Sponsoring sales-cum-study teams and trade delegations.

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 Inviting foreign experts for providing technological inputs to Indian leather exporters.  Organizing international leather fairs in India.

Council’s services to overseas buyers include:  Serving as a focal point for disseminating information on Indian manufacturers and exporters.  Organizing visits of buyers’ delegations dealing with trade information.  Liaising with various international organizations dealing with trade information.  Providing trade and commercial information on Indian leather industry

Method of Costing Pricing methods are usually related to pricing objectives and prices fixed. There are different methods of calculating prices such as cost plus pricing, marginal cost pricing etc. For exporting leather goods, we will opt for cost plus pricing method which is described as follows: Cost Plus Pricing : It is simple and popular method of pricing, under this method average cost of production and marketing is calculated first. Such cost includes the cost of raw materials, cost of manufacturing, cost of packing, cost of distribution, selling cost, taxes and so on. In addition , certain percentage of profit is added to this cost and price per unit is fixed. Selling price per unit: Total unit cost + Expected margin of profit per unit. Apart from this, there are several costs that are related to when products are exported. These costs are as follows

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EXPORTS OF LEATHER PRODUCTS TO GERMANY

 Expenses incurred on product modification.  Packing and marking of export products.  Loading at factory for onward journey.  Transportation to dock for ocean journey.  Cost of preparing shipping documents.  Handling charges and fees at the port.

Government

Policies:

Sometimes, the government offers export incentives and special concession to exporters for export promotion. The purpose of such incentives is to raise the competitive capacity of domestic manufacturers and exporters. Due to such incentives and concession, an exporter can change less price in the foreign markets. The possible loss due to prices will be covered out of the benefit available through the incentives. Thus, export prices are influenced by export incentives offered by the government. In India, duty drawback is an important export incentives offered to exporters. They make Indian goods competitive in foreign markets. Sometimes, the government may dictate the margin by the producers or distributors. This affects export pricing. In addition, custom duties fixed by the government and trade agreement made by the government policies including incentives, subsidies, regulation of margins custom duties and international agreement.

Reserve Bank Code Number: Reserve bank code number for commercial export will be undertaken by firm in India only after it has obtained the Reserve Bank Code Number. This is a requirement under foreign exchange regulation act. For obtaining the code number, the firm is required to apply to the division office of RBI have jurisdiction over the area where the firm is located.

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EXPORTS OF LEATHER PRODUCTS TO GERMANY

The application for this purpose is prescribed from CNX (Code Number for Exchange), where is to be submitted in duplicate along with a report from the bank where the firm is opened a current account. Besides providing the detail about the nature of organization and product intended to export, the applicant requires permanent Income Tax Number, it will be required to apply for the same and a reference to this effect is to be given in the CNX form. RBI is too initiated with in fifteen days of the allotment of the income tax account number. On completion of these formalities, RBI will allocate code number to the firm. If the application is in order, RBI wills allot code number. The code number is permanent there is no need to renew or revalidate it. the number shall be cited invariably on export forms used for declaration of exports.

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EXPORTS OF LEATHER PRODUCTS TO GERMANY

Registration: To obtain the benefits available to the registered export s under the import policy, an exporter should get himself registered by making an application on the prescribed form with an Export Promotion Council related to his main product line export. If there is no EPC, registration may be done with the Regional Licensing Authority concerrned.some of the important registering authority are export promotion council, commodity boards, The Marine product and proceeds Food Product Export Development Authorities, Jute Commissioner, Khadi and Village Industries Commission, State Directors of Industries, Development Commissioner for Foreign Trade Zone/Export Processing Zone, and the federation of Indian export organization. Importer-Exporter Code Number: Every person or exporting goods is required to obtain an Importer Code Number from the Regional licensing Authority Concerned. Customs authorities shall not allow clearance of goods to an importer or exporter who does not process a valid Importer-Exporter Code Number. Application for allotment of Importer-Exporter Code Number should be made duplicate, in the prescribed form to the regional import trade control licensing authority concerned. Code number allotted to a person is valid import/export of any commodity by that person. It is compulsory For the importer/exporter to quote his code number in the relevant bill of entry /shipping bill.

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EXPORTS OF LEATHER PRODUCTS TO GERMANY

STATISTICS

EXPORT OF LEATHER AND LEATHER PRODUCTS FROM INDIA DURING APR-MAR- 2006-07 VIS-A-VIS APR-MAR-200708 (Value in Million Rs) CATEGORY APR-MAR APR-MAR % VARIATION 2006-07 2007-08 FINISHED LEATHER 32760.69 30877.20 -5.75% LEATHER FOOTWEAR 44087.76 46856.08 6.28% FOOTWEAR 9947.84 10713.89 7.70% COMPONENTS LEATHER GARMENTS 14023.29 13849.39 -1.24% LEATHER GOODS 31958.86 31602.54 -1.11% SADDLERY AND 3725.32 4260.16 14.36% HARNESS NON-LEATHER 1934.08 1848.07 -4.45% FOOTWEAR TOTAL 138437.84 140007.33 1.13% Source : DGCI &S

(Value in Million US$) APR-MAR APR-MAR % VARIATION 2006-07 2007-08 FINISHED LEATHER 724.00 766.93 5.93% LEATHER FOOTWEAR 974.33 1163.82 19.45% FOOTWEAR 219.84 266.11 21.05% COMPONENTS LEATHER GARMENTS 309.91 343.99 11.00% LEATHER GOODS 706.28 784.95 11.14% SADDLERY AND 82.33 105.81 28.53% HARNESS NON-LEATHER 42.74 45.90 7.39% FOOTWEAR TOTAL 3059.43 3477.52 13.67% CATEGORY

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EXPORTS OF LEATHER PRODUCTS TO GERMANY

EXPORT

OF

LEATHER

AND

LEATHER

PRODUCTS

FROM

INDIA

DURING

APRIL-MARCH 2000- 2001 VIS-À-VIS APRIL-MARCH 2001-2002 ( Value in million US$ ) Category April-March 2000-01 FINISHED LEATHER LEATHER FOOTWEAR FOOTWEAR COMPONENTS LEATHER GARMENTS 381.49 April-March 2001-02 457.37 % VARIATION 19.89%

381.37

394.19

3.36%

238.09

233.34

-2.00%

460.45

378.62

-17.77%

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EXPORTS OF LEATHER PRODUCTS TO GERMANY

LEATHER GOODS SADDLERY HARNESS NON-LEATHER FOOTWEAR TOTAL AND

440.37 42.66

406.52 35.50

-7.69% -16.78%

19.11 1963.55

26.09 1931.63

36.49% -1.63%

Source: DGCI & S, Kolkata

INDIA'S EXPORT OF LEATHER AND LEATHER PRODUCTS DURING LAST EIGHT YEARS (Value in Million US$)

COUNTRY U.S.A. GERMANY

199495 277.43 361.84

199596 295.62 400.38

199697 298.75 362.88

199798 251.40 363.41

199899 252.71 364.19

19992000 258.24 293.59

200001 342.78 307.17

200102 286.67 304.02

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EXPORTS OF LEATHER PRODUCTS TO GERMANY

U.K. ITALY SPAIN HONG KONG FRANCE

185.39 193.07 35.77 59.28 82.38

200.93 221.26 50.75 59.46 88.73 38.65 23.7 47.58 27.81 40.74 22.84 12.70 29.13 13.15 20.25 12.76 10.34 18.37 21.52 5.09 3.91 5.27 2.40 2.37 4.95 2.03 80.30

204.92 182.99 46.97 59.07 72.34 38.48 20.21 30.22 23.34 36.91 19.63 11.20 25.70 13.52 21.14 11.80 12.22 18.18 13.36 5.52 4.16 6.33 2.02 2.75 4.59 1.46 67.61

219.26 221.53 54.96 53.93 79.01 43.83 31.91 50.99 21.73 36.83 21.69 12.76 25.10 10.91 22.78 13.22 4.25 20.16 14.31 5.91 3.73 6.92 2.05 3.01 4.17 1.79 70.36

235.79 197.16 69.23 53.26 79.77 49.78 29.39 25.19 18.82 35.39 18.77 15.40 26.29 15.54 21.49 16.82 2.07 17.22 7.30 6.98 3.72 5.75 2.70 4.17 4.79 1.54 73.66

266.29 165.47 66.72 55.22 84.36 44.17 24.41 27.97 28.30 31.84 21.42 19.79 24.28 15.11 16.13 14.75 5.96 14.65 8.36 7.49 4.68 4.50 3.65 2.63 5.28 2.64 86.45

270.09 241.07 100.75 98.32 90.68 55.56 37.44 31.53 28.37 28.33 26.66 25.39 23.43 18.97 18.61 17.35 16.70 15.01 13.33 9.03 8.93 5.96 5.25 4.36 3.77 3.36 115.35

248.31 262.49 100.98 120.92 89.51 60.39 36.97 15.74 22.47 27.03 27.73 19.79 19.39 20.07 16.92 21.08 27.03 16.36 15.32 9.14 13.84 6.37 2.88 7.92 3.36 5.77 123.16

NETHERLANDS 28.75 PORTUGAL RUSSIA DENMARK AUSTRALIA CANADA SWEDEN S. AFRICA U.A.E. SWITZERLAND BELGIUM KOREA REP. AUSTRIA JAPAN SAUDI ARABIA CHINA GREECE IRELAND FINLAND NEWZEALAND INDONESIA OTHERS TOTAL 18.38 57.24 27.57 36.25 16.96 7.70 24.46 14.10 17.86 11.82 15.21 20.04 21.53 4.50 7.85 3.82 2.23 4.56 3.47 1.32 85.38

1626.16 1762.99 1618.27 1671.90 1654.89 1604.35 1963.55 1931.63

Source: DGCI & S, Kolkata

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EXPORTS OF LEATHER PRODUCTS TO GERMANY

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