Hong Kong Industry Profiles

Overview

• 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 fur items, tariff-free treatment starting from 1 January 2006.

• Hong Kong is the world's major source of quality fur garments and accessories. The majority of Hong Kong's furriers have set up production facilities on the Chinese mainland amid higher production costs in Hong Kong. Still, many major sub-sectors of the fur industry, particularly sales and distribution, remain in Hong Kong.

• Hong Kong’s fur clothing exports expanded by 31% to HK$600 million in the first five months of 2011, after surging by 28% in 2010. Re-exports, accounting for over 98% of all fur clothing exports from Hong Kong, grew at the same pace as total exports during January-May 2011, whereas domestic exports were up by 18%.

• The Chinese mainland, for its part, is the largest market for Hong Kong's exports of furskins, accounting for more than 96% of the total exports. A large proportion of Hong Kong's furskin exports are re-exports from overseas countries to the Chinese mainland for the purpose of production of fur clothing there.

Industry Features

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On the back of higher production costs and stringent environmental regulations in Hong Kong, most of Hong Kong's furriers have set up offshore production facilities on the Chinese mainland, leading to a decline in the number of manufacturing establishments in Hong Kong. While there is insignificant presence of manufacturing establishments, fur traders remain very active in Hong Kong. They are specialised in trade-related services such as sales and marketing, quality control, logistic arrangements and fur designs.

Performance of Hong Kong’s Fur Exports^

Gaining 28% in 2010, Hong Kong’s fur clothing exports expanded further by 31% to HK$600 million in the first five months of 2011. Re-exports, accounting for over 98% of all fur clothing exports from Hong Kong, grew at the same pace as total exports, while domestic exports saw a 18% jump.

Taking up nearly two-thirds of Hong Kong's fur clothing exports in the first five months of 2011, the EU, Japan and the US were the three leading export markets of Hong Kong's fur clothing. In terms of performance, Hong Kong's exports of fur clothing to the EU grew 34%, with France, Germany and Italy recording respective increases of 85%, 28% and 26%. Meanwhile, sales to Japan soared 39%, whereas the exports to the US plunged by 14%.

However, it should be noted that a large proportion of fur produced by Hong Kong furriers in their factories on the Chinese mainland are not shipped out from Hong Kong. Some of them are shipped via the ports in the Chinese mainland. For instance, Russia is a prime market for fur. But certain Hong Kong furriers deliver products from their factories on the Chinese mainland to Russian buyers by land transport. Transactions under such mode of transport are not recorded by Hong Kong's trade statistics.

In the meantime, Hong Kong's exports of furskins amounted to HK$3.8 billion during Jan-May 2011, representing a year-on-year growth of 21%. The Chinese mainland, for its part, is the dominant market for Hong Kong's exports of furskins, accounting for more than 98% of the total in the first five months of 2011. Indeed, most of Hong Kong's furskin exports are re-exports from overseas countries to the Chinese mainland for the purpose of the production of fur clothing there.

Performance of Hong Kong’s Exports of Fur Clothing and Furskins^

Note:

^ Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.

# Over 1,000% increase

Sales Channels

An overwhelming majority of fur clothing produced in Hong Kong and/or their plants on the Chinese mainland are sold to overseas markets. Most Hong Kong furriers are OEM manufacturers, which produce high-quality apparel for renowned brand names. However, a growing number of furriers have recently developed their own designs and brand names. For example, Asia Fur Company Ltd. has developed its own brands, Altioli and Giuliana Amioli, which target the international markets, including the US, Europe, Russia, Japan and Korea.

Traditionally, North America, Western Europe, the Nordic countries and Russia are the major markets for fur garments. In recent years, sales of furs have greatly expanded to other markets like Japan, South Korea and the Chinese mainland.

The EU, as a whole, is the largest market for fur garments. Among all member states, sales of fur are the highest in Germany, Italy and Spain.  In the US, there are approximately 1,500 fur retailers and 100 fur manufacturers. Most of them are small, family-run businesses which have been passed from generation to generation. In addition to the traditional fur retailers, fur (particularly fur trims) is also sold through designers' boutiques, department stores and fashion houses.

Trade fairs and exhibitions remain common places for buyers and suppliers of clothing to congregate. The Hong Kong International Fur & Fashion Fair, organised by the Hong Kong Fur Federation, is the largest and most prestigious trade event in Asia, accommodating over 280 exhibitors from 17 countries and regions in 2011. Exhibitors included furriers from Argentina, Canada, China, Finland, Germany, Greece, Italy, Korea, Namibia, Russia, Spain, Turkey, UAE, UK and US. In this event, the total confirmed business orders grew tremendously to US$ 233 million, up more than 50% from US$133 million last year.

Industry Trends

Evidently, the gradual recovery of the global economy has renewed desire for luxury, including fur products. According to International Fur Trade Federation (IFTF) statistics, global fur sales grew at a steady rate of 5.4% to US$14.1 billion in 2010, following last year’s budding uptrend. Besides, the positive results brought by recent trade shows, such as MIFUR and Hong Kong International Fur & Fashion Fair, have created expectation of growing orders for the coming years.

Farmed furs are the mainstay of the fur trade, accounting for some 85% of the industry turnover according to IFTF. The world's leading bases of fur farms are the Nordic countries and the US. The EU, as a whole, accounts for 64% of the world’s farmed fur, while the US produces another 11%. The world's largest fur auction houses are in Copenhagen, Helsinki, Oslo, St. Petersburg, Seattle and Toronto.

Fur can be worked in a range of different ways to make it lighter to wear, suiting the demands of a modern lifestyle. Some of the techniques used by furriers and manufacturers to lighten the garment are shearing, plucking, knitting, leathering and weaving. The most important centres for manufacturing/sourcing are Canada, the Chinese mainland, Greece, Hong Kong and Russia. Other centres exist in France, Germany, Italy, Korea, Japan, Spain, Turkey, the Ukraine and the US.

There always exists the ethical row over the fur trade, and the fur industry has long been criticised by many environmental groups, such as People for the Ethical Treatment of Animals (PETA) and Greenpeace. Nowadays, quite a few designers prefer to use fake fur (also referred as faux fur) to highlight their green endeavours. While some fashion labels, like Calvin Klein, Polo Ralph Lauren and Tommy Hilfiger, have turned furs down for their garments and accessories, scientific research into the welfare of farmed fur-bearing animals has been ongoing, particularly in the Netherlands, Russia and the Nordic countries.

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 fur items, tariff-free treatment starting from 1 January 2006.

Detailed information, including the origin rules for fur clothing and fur skins, is available from the following hyperlink: http://www.tid.gov.hk/english/cepa/tradegoods/files/mainland_2010.pdf.

Trade Measures Affecting Exports of Fur Clothing

Fur farming is strictly regulated in many countries. In the EU, Council Directive 98/58 sets down rules covering the welfare of all farmed animals, including fur farmed animals. Directive 93/119 deals with the slaughter and killing of farmed animals including fur animals. In the US and Canada, fur farming operators have to follow strict Codes of Practice and conform to the state/provincial or national regulations in respect of animal welfare.

A ban on fur farming came into effect in England and Wales on 1 January 2003. The Fur Farming (Prohibition) Act was passed in the British parliament in November 2000, which made it illegal to keep animals solely or primarily for the value of their fur. In March 2002, Scotland passed similar law, which was also effective on 1 January 2003.

To ensure that consumers can be fully informed of which type of fur they are buying at the point of purchase, the British Fur Trade Association (BFTA), along with 17 EU members of IFTF, plus Norway and Switzerland, has introduced a fur-labelling scheme (BFTA Fur Labelling Scheme). Under the scheme, a separate label is prominently secured to the manufacturer or retailer's label, and will identify clearly the species of fur in English with its scientific Latin name.

On 11 May 2011, the European Parliament gave its approval to a compromise agreement regarding a proposed Regulation in which the use of animal-derived materials will soon have to be shown on labels of garments sold in the EU. The obligation, which will affect Hong Kong’s sellers of textile goods, is aimed at ensuring that consumers can distinguish between real and fake fur and leather products. The proposed Regulation on textile labelling is now expected to be approved by the European Council at a forthcoming meeting, and will come into force 20 days after its publication in the EU’s Official Journal. This may take place during the second half of this year.

On 19 May 2009, legislation (H.R. 2480 and S. 1076) was introduced in the US to amend the Fur Product Labeling Act (FPLA) by requiring the labeling of all fur garments, regardless of value. The bills as proposed would close a loophole in the FPLA that exempts any garments with a "relatively small quantity or value" of fur, meaning any animal fur valued at US$150 or less used as trim, from labeling requirements.

Furriers 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 include 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 utilisation 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.

Product Trends

The lingering economic uncertainty worldwide has clearly brought some changes into the world of fashion, when many designers try not to offer too glamorous clothing, but focus more on affordable and simpler designs. Coming in less dramatic ways, fur is expected to be used more by designers to enhance details of their designs or collections, while fur accessories with stylish design are becoming better received by fashion-conscious consumers.

Considering the impact of gradually rising temperature brought by global warming, short fur coats with subtle trimming have become a leading trend lately. For example, fur boleros, furry vests and short/three quarter/long sleeve cropped jacket are the chic styles which are prevailing in the market. In relation to this, the business of fur restyling and alteration has also seen phenomenal growth in recent years, especially over the course of the recent economic bad times when consumers greatly tightened their budget, preferring alteration to new purchase.

The popularity of fur accessories partly attributes to the availability of new techniques in fur manufacturing. Nowadays, fur has the lightness and versatility that make it even more attractive to consumers. The softness and durability of fur are improved by new and advanced processing techniques, making fur as another garment fabric. Therefore, fur can be cut into silhouettes and dyed in fashionable colours.

Also noteworthy is the growing consumer consciousness of environmental conservation and animals’ welfare and rights. An increasing number of people want to know that their purchase comes from a source where ethical standards are in place. Catering for this trend, the fur trade is phasing in a new labelling programme, the Origin Assured Label or OA™, which informs customers the origins of the products and local regulations or standards governing fur production. It is believed that amid the improvement of the regulations governing environmental reservation and animal protection, fur which is biodegradable and less pollutive in the production process can be a sustainable material. In fact, recycling fur has started to grab the attention of producers and consumers.