CONTENTS: Indian Leather Industry The leather industry occupies a place of prominence in the Indian economy in view of its massive potential for employment, growth and exports. There has been an increasing emphasis on its planned development, aimed at optimum utilization of available raw materials for maximizing the returns, particularly from exports. The exports of leather and leather products gained momentum during the past two decades. There has been a phenomenal growth in exports from Rs.320 million in the year 1965-66 to Rs.69558 million in 1996-97. Indian leather industry today has attained well merited recognition in international markets besides occupying a prominent place among the top seven foreign exchange earners of the country. The leather industry has undergone a dramatic transformation from a mere exporter of raw materials in the sixties to that of value added finished products in the nineties. Policy initiatives taken by the Government of India since 1973 have been instrumental to such a transformation. In the wake of globalization of Indian economy supported with liberalized economic and trade policies since 1991, the industry is poised for further growth to achieve greater share in the global trade. Apart from a significant foreign exchange earner, leather industry has tremendous potential for employment generation. Direct and indirect employment of the industry is around 2 million. The skilled and semi-skilled workers constitute nearly 50% of the total work force. The estimated employment in different sectors of leather industry is as follows: Sector Flaying, curing & Carcass Recovery Tanning & Finishing Full Shoe Shoe Uppers Chappals & Sandals Leather Goods & Garments Structure of the industry The leather industry is spread in different segments, namely, tanning & finishing, footwear & footwear components, leather garments, leather goods including saddlery & harness, etc. The estimated production capacity in different segments is as under Product Leather Hides Skins Footwear & Footwear Components 64 million pieces 166 million pieces Capacity Total Employment 8,00,000 1,25,000 1,75,000 75,000 4,50,000 1,50,000 a) Shoes b) Leather shoe uppers c) Non-leather shoes/chappals etc Leather Garments Leather Products Industrial Gloves Saddlery 100 million pairs 78 million pairs 125 million pairs 6 million pieces 70 million pieces 40 million pairs 6000 pieces The major production centres for leather and leather products are located at Chennai, Ambur, Ranipet, Vaniyambadi, Trichi, Dindigul in Tamil Nadu, Calcutta in West Bengal, Kanpur in Uttar Pradesh, Jalandhar in Punjab, Bangalore in Karnataka, Delhi and Hyderabad in Andhra Pradesh. Raw material supplies There exists a large raw material base. This is on account of population of 194 million cattle, 70 million buffaloes, 95 million goats. According to the latest census, India ranks first among the major livestock holding countries in the world. In respect of sheep with 48 million sheeps, it claims the sixth position. These four species provide the basic raw material for the leather industry. The annual availability of 166 million pieces of hides and skins is the main strength of the industry. This is expected to go up to 218 million pieces by the end of year 2000. Some of the goat/calf/sheep skins available in India are regarded as speciality products commanding a good market. Abundance of traditional skills in training, finishing and manufacturing downstream products and relatively low wage rates are the two other factors of comparative advantage for India. Tanning and finishing capacity With tanning and finishing capacity for processing 1192 million pieces of hides and skins per annum spread over different parts of the country, most of which is organised along modern lives, the capability of India to sustain a much larger industry with its raw material resource is evident. In order to augment the domestic raw material availability, the Government of India has allowed duty free import of hides and skins from anywhere in the world. It is an attraction for any foreign manufacturer who intends to shift his production base from a high cost location to low cost base. Export Potential The leather industry, one of the major foreign exchange earners of the country recorded significant growth since the beginning of the decade. Today the share of the value added finished products in the total exports from leather sector are 80% as against 20% in 1970s. Category Finished Leather (Value in million US$) 1998-99 265.2 Leather Footwear Footwear Components Leather Garments Leather Goods Saddlery and Harness Total 290.2 243.7 368.6 429.0 33.4 1630.1 Country Germany USA Italy UK France Spain Russia Portugal Australia Denmark Netherlands Hong Kong Others Total 1998-99 15462 10826 8317 9744 3240 3103 1009 1240 1465 808 2127 258 9958 69558 (Value in million Rs.) Share in total exports in 1998-99 22.23 % 15.56 % 11.96 % 14.00 % 4.6 % 4.46 % 1.445 % 1.78 % 2.10 % 1.16 % 3.06 % 3.25 % 14.32 % 100 % Global Scenario : The global trade in leather and leather products has been increasing over the years from mere US$ 4 billion in 1972 to US$ 70 billion in 1997. Although the exports of Indian leather and leather products have grown manifold during the past decades, our country's share in global trade is around 3% among world imports of leather products. Whereas India's share in world imports of leather footwear is 1%. Major exporting countries of leather footwear are China (14% share), Portugal (6% share), Brazil (5% share) and Indonesia (4% share). India's share in world imports of leather garments is 6%. Major exporting countries of leather garments are China (36% share), Germany (9% share), Italy (7% share), Turkey (5% share) and Pakistan (4% share) India's share in world imports of leather goods is 7%. Major exporting countries are China (22% share), Italy (22 % share), France (7% share) and Greece (5% share), India's share in world imports of harness and saddlery is 8%. Major exporting countries of harness & saddlery are Germany (14 % share), U.K. (14 % share), China (12% share). Overall, India is facing fierce competition in international market from countries like China, Vietnam, Thailand, Indonesia, etc., which are emerging as major manufacturing countries. East European countries like Poland, Romania, Czech and Slovak Republics have re-emerged as major production centres particularly for footwear sector. These countries pose major challenge to Indian exporters as they enjoy geographical advantage. SWOT Analysis of Indian Leather Industry STRENGTHS • Existence of more than sufficient productive capacity in tanning. • Easy availability of low cost of labour. • Exposure to export markets. • Managements with business background become quality and environment conscious. • Presence of qualified leather technologists in the field. • Comfortable availability of raw materials and other inputs. • Massive institutional support for technical services, designing, manpower development and marketing. • Exporter-friendly government policies. • Tax incentives on machinery by Government. • Well-established linkages with buyers in EU and USA. WEAKNESSES • Low level of modernisation and upgradation of technology, and the integration of developed technology is very slow. • Low level of labour productivity due to inadequate formal training / unskilled labour. • Horizontal growth of tanneries. • Less number of organised product manufacturers. • Lack of modern finishing facilities for leather. • Highly unhygienic environment. • Unawareness of international standards by many players as maximum number of leather industries are SMEs. • Difficulties in accessing to testing, designing and technical services. • Environmental problems. OPPORTUNITIES • Abundant scope to supply finished leather to multinationals setting up shop in India. • Growing fashion consciousness globally. • Use of information technology and decision support software to help eliminate the length of the production cycle for different products • Product diversification - There is lot of scope for diversification into other products, namely, leather garments, goods etc. • Growing international and domestic markets. THREATS • Entry of multinationals in domestic market. • Stiff competition from other countries.(The performance of global competitors in leather and leather products indicates that there are at least 5 countries viz, China, Indonesia, Thailand, Vietnam and Brazil, which are more competitive than India.) • Non- tariff barriers - Developing countries are resorting to more and more non – tariff barriers indirectly. • Improving quality to adapt the stricter international standards. • Fast changing fashion trends are difficult to adapt for the Indian leather industries. • Limited scope for mobilising funds through private placements and public issues, as many businesses are family-owned. COMPANY PROFILE: OBJECTIVE: To study the export and import procedure and documentation of leather (both raw and finished) in ALFA IMPEX TANNING INDUSTRY and to analyse the problems involved in the procedure as well as provide suggestions regarding these problems. METHODOLOGY: The research work was conducted over duration of 4 weeks at ALFA IMPEX TANNING INDUSTRY, CHENNAI. This work is based on data collected from secondary sources. As the Government of India already fixes the procedure and legal requirements for exports and imports, they are collected from the DGFT website and EXIM Policy Booklets and on the basis of books providing valuable information. For a satisfactory result a detailed explanation has been made in this report. FLOWCHART OF EXPORT ORDER PROCESSING FLOWCHART OF IMPORT ORDER PROCESSING EXPORT PROCEDURES: EXPORT DOCUMENTATION: AN INTRODUCTION TO EXPORT DOCUMENTS: IMPORT PROCEDURE IMPORT DOCUMENTATION DOCUMENTS EXPLAINED PROBLEMS FACED IN THE PROCESS OF DOCUMENTATION FINDINGS: During the training period, the company I worked in dealt with several export documents. I realized that documents have a crucial role in export and import. An export firm has to deal with several organizations like bank, CHA, shipping company and various Government and non Government agencies, licensing authorities, board, institutions. All documents are interrelated and it is not possible to move to the next step without completing previous documents. There are so many discrepancies in transacting with banks, custom authorities, etc. The banks making payments on behalf of its foreign customers must verify that all the documents and drafts confirm precisely to the term and conditions of the L/C, the requirement of credit cannot be waived off or altered by the paying bank without specific authority from the issuing bank. To avoid delay in payments, the beneficiary should prepare and examine all the documents carefully before presenting them to the paying bank. Paying banks find that the following discrepancies in documents and the L/C occur most frequently. • • • • • • Invoice value of drafts exceed amount over lower under L/C. Drafts are presented after the L/C has expired. Drafts are presented after shipment has expired. Amount of insurance coverage does not include risk required by L/C. Insurance documents are not endorsed and countersigned. Date of insurance policy or certificate is later than the date on the bills of lading. CONCLUSION: I worked with the company as a trainee and found that documentation is the basic and most significant part of foreign trade. The entire business depends on the accuracy of documentation. Effective documentation helps in maintaining the proper flow of all business transactions. Documentation is equally important to both the exporter as well as the importer. Moreover the procedure of import and export is also complex and error at any level can be carried forward resulting in the incurring of loss to the respective parties. Thus it is highly essential for the procedure of import and export to be very clear to the people involved in foreign trade. SUGGESTIONS: Each discrepancy in documents may result in the incurring of heavy loss to an organization. So extra care should be taken while preparing documents and receiving documents from any department. The following precautions should be taken while dealing with document: • The right document should be at the right place. • Each and every document should be checked within the proper time period. • Documents should be prepared with extra care to avoid errors. • Caution should be taken while receiving any documents from other departments. BIBLIOGRAPHY: The following sources have been referred to for obtaining the information required for the completion of this project. www.dgft.com • www.export911.com • www.google.com • www.wikipedia.com • www.exim.com • Import Export Portfolio by Disha Madan • Export Policy and Procedure by M. L. Mahajan • Export Marketing by Rathore and Rathore •