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 distributions, remain in Hong Kong.
• Hong Kong's fur clothing exports slid by 37% to HK$0.5 billion in the first half of 2009, after levelling off at HK$2.5 billion in 2008. Re-exports, accounting for almost 98% of all fur clothing exports from Hong Kong, dropped by 37%, whereas domestic exports fell by 19%.
• The Chinese mainland, for its part, is the dominant market for Hong Kong's exports of furskins, accounting for more than 95% of the total. A large proportion 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.

Industry Features

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.

At the end of 2008, the number of establishments involved in the import and export trade of fur consumer goods was 770, and the total employment related was 2,580.

Performance of Hong Kong's Fur Exports^

After levelling off at HK$2.5 billion in 2008, Hong Kong's fur clothing exports plummeted by 37% to HK$0.5 billion in the first half of 2009. Re-exports, accounting for nearly 98% of all fur clothing exports from Hong Kong, also declined by 37% whereas domestic exports slid by 19%.

The EU, Japan and the US are the three leading markets of Hong Kong's fur clothing. They together took up 75% of Hong Kong's total fur clothing exports in the first semester of 2009. Within this, Hong Kong's exports of fur clothing to the EU slid by 32%, with Italy recording a drop of 37%, while France, Germany and Spain showing respective declines of 22%, 18% and 14%. Meanwhile, Hong Kong's fur exports to the Japan declined by 18%, and sales to the US fell by 48%.

However, it should be noted that many 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 therefore not recorded by Hong Kong's trade statistics.

The Chinese mainland, for its part, is the dominant market for Hong Kong's exports of furskins, accounting for more than 95% of the total. In the first half of 2009, Hong Kong's exports of furskins amounted to HK$3.4 billion, demonstrating a year-on-year decline of 27%. A large proportion 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^

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 Scandinavian 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 highest in Italy, Spain, Germany, France and Austria.  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 around 280 exhibitors from 16 countries and regions in 2009. Exhibitors included furriers from Argentina, Canada, China, Finland, Germany, Greece, Italy, Japan, Korea, Namibia, Russia, Spain, Turkey, UAE, UK and US. In this event, the total confirmed business orders amounted to US$80 million.

Industry Trends

Under the shadows of a crumbling global economy and the general hesitation in luxury consumer spending, the fur industry is not immune to the global economic fallout. According to IFTF statistics, global fur sales witnessed a 13% slide to US$13 billion in 2008, after 9 years of continuous growth ending 2007.

Despite poor sales triggered by the recession, there still exists the ethical row over the fur trade. Fur industry is always criticised by animal rights protectors. And some fashion labels, like Calvin Klein, Polo Ralph Lauren and Tommy Hilfiger, have turned the furs down for their garments and accessories. 

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 Scandinavian countries and the US. The EU, as a whole, accounts for most of the world's farmed fur, 70% of global mink production and 63% of fox production. 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.

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.

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_2009.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.

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 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 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

Fur will continue to be used in a more extensive and innovative way. For example, applying fur on jeans, leather, denim sportswear, cashmere sweaters and knitwear are gaining in popularity, with fur being used as trimming. Besides, it can be dyed and weaved with other materials. Be that as it may, fur accessories with stylish design are well received by fashion-conscious consumers. With a broader range of products appealing to a wider audience, it is found that the average age of female consumers has dropped considerably.

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 improved 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^TM, 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.