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Tag: EU Denim Imports

  • EU GSP – Changes In Rules Of Origin From LDC Countries Incl. Bangladesh – Jan 2011

    EU has recently notified the changes in the rules of origin from certain LDC countries which will simplify the procedure of granting the GSP benefits to the exporting countries and will also benefit other countries involved in supplying raw materials to the country exporting the final product.

    There are basically three formats under which EU provides GSP benefits to exporting countries :

    • The standard GSP : , which provides preferences to 176 Developing Countries and Territories on over 6200 tariff lines;
    • GSP + : The special incentive arrangement for sustainable development and good governance, known as GSP+, which offers additional tariff reductions to support vulnerable developing countries (currently 16) in their ratification and implementation of 27  international conventions in these areas;
    •  Everything But Arms (EBA) arrangement, which provides Duty-Free, Quota-Free access for all products for the 49 Least Developed Countries (LDCs). Under this arrangement , started in 2001, EU granted duty free access for all products except arms without any quantitative restrictions . These countries are :

    Afghanistan  Angola  Bangladesh Benin  Bhutan Burkina Faso Burundi Cambodia  Cape Verde Central African Republic Chad  Comoros Islands (Islands)  Congo, Democratic Republic of  Djibouti  East Timor Equatorial Guinea Eritrea  Ethiopia  Gambia Guinea  Guinea-Bissau  Haiti  Kiribati  Laos  Lesotho  Liberia  Madagascar Malawi  Maldives  Mali  Mauritania  Mozambique  Nepal Niger  Rwanda  Samoa  São Tomé & Principe  Senegal  Sierra Leone  Solomon Islands  Somalia  Sudan  Tanzania  Tuvalu  Togo  Uganda  Vanuatu  Yemen  Zambia

    As per the new notification of EU regarding change of rules or origin, it seems that all the above countries are going to benefit and can export duty free to EU even if only stage of processing (ie garment making in case of apparel) has happened in that country. Consequently , these countries will be able to import fabrics from any country in the world and export apparel duty free to the EU. A maximum content of 70% of non-originating material can be used for getting the GSP benefit. However, this percentage will differ from product to product.

    There is also a possibility that the following countries also get the benefit of zero duty export based on the second criteria of vulnerability . These countries are : Tajikistan, Uruguay, Turkmenistan, Peru, Panama, Paraguay , Nigeria, Fiji, Dominican Republic , Kenya and some others. This list keeps on updating each year and has to be referred with the EU to see the latest status.

    Who is going to Benefit ?

     

    1. Apparel Exporters in LDCs : The main winners of this change would be the garment exporters in these LDC countries – specially Bangladesh, Cambodia , Lesotho etc. 
    2. Fabric Exporters in nearby countries : Fabric exporters to Bangladesh from countries like India, Pakistan, China, Thailand, Indonesia would be greatly benefitted as currently they are at a disadvantageous position against the local mills in Bangladesh who enjoy easy sales due to the GSP benefit that is received by garment exporters using their fabrics.
    3. EU Importers : The importers of apparel in EU would be benefitted due to reduced costs of apparel . Or rather , we should say that they would benefit from the costs of apparel which do not increase as much as they would normally due to the highly increased cotton costs.
    4. Other industries in Bangladesh etc LDCs : Eg the plastic industry in Bangladesh would greatly benefit from using imported materials to export plastic products to EU.

    Who can be the losers ?

     

    1. Bangladesh textile mills : The textile industry can be the biggest loser as it loses its main advantage ie the GSP benefit. It will now have to compete with the strong textile industry in India, Pakistan, China and other countries in the open market. To take an example, currently most denim mills in Bangladesh  enjoy a sold out position and some mills do not actually have a marketing department ! . This situation is likely to change.  However, we have seen before that the powerful textile lobby of Bangladesh has fought against the benefits being passed on to other countries . Eg , under current rules, EU allows the fabric of India and Pakistan to be used for getting GSP benefit. But Bangladesh, under pressure from its textile lobby , has not passed this benefit.  It is now  fighting hard against changes also and it is anybody’s guess how much they will be successful.  But the chances of reversion of EU decision or the capacity of the Bangladesh Textile Mills to put a spanner in the works seems limited as they are pitted against all the other industries in Bangladesh including apparel – who are benefitting from this development. However, this  loss of profit for the Bangladesh textile mills could be for short term period . In the longer run, it would help the industry to upgrade itself and compete with the best in the world. In any case, they will continue to enjoy the logistic benefit .
      Taking some examples, we can also see that the textile industry in Bangladesh may also benefit from the changed rules in some sectors :

      Example 1 :  Chapter 58  Special woven fabrics; tufted textile fabrics; lace; tapestries; trimmings; embroidery etc. For these products, either the weaving can be done in Bangladesh or Printing accompanied by at least two preparatory or finishing operations (such as scouring,  bleaching, mercerising, heat setting, raising, calendaring, shrink resistance processing, permanent finishing, decatising, impregnating, mending and burling) can be done  where the value of the unprinted fabric used does not exceed 47,5 % of the ex- works price of the product. This may raise possibility of  increased production of some textile items in Bangladesh.

      Example 2 :  A yarn, of heading 5205, made from cotton fibres of heading 5203 and synthetic staple fibres of heading 5506, is a mixed yarn. Therefore, non-originating synthetic staple fibres which do not satisfy the origin rules may be used, provided that their total weight does not exceed 10 % of the weight of the yarn.

    2. Garment industry in India and other Non-LDC countries : The impetus that the garment industry in Bangladesh receives or for that matter Cambodia receives, will be at the cost of the garment industry in the vicinity countries. India is already unable to compete with Bangladesh in garment exports and when the duty free advantage comes into place, India’s garment exports will be further eroded as buyers flock to the LDC countries to source their goods. India, China, Indonesia, Vietnam and some other countries could be big losers in the garment export game. Pakistan may not be that affected as it has the currency advantage with it.

    Calculating The Benefits

    If the garment exported from Bangladesh using Pakistani / Indian  fabric was priced at $6 / pc  (CIF) previously ,  it attracted a duty of 72 cents @12% . The whole of this duty amount would now be saved. Currently , for denim fabrics, the mills in Bangladesh enjoy a premium of about 20-50 cents per mtr over other suppliers from Pakistan, India, Indonesia etc. This translates into a benefit of about 30 to 70 cents per garment.  Once the new rules of origin are in place, this margin will actually be reduced to very little or almost nil. Hence the denim mills in the surrounding countries can expect an increase in the prices of their denim fabrics from 10 cents to 25 cents per mtr assuming that the importer in EU will try to take away  50% of advantage by way of reduced garment prices.

    And it is not only the denim industry that is going to be affected. Lets take some examples of exports from Bangladesh for products other than apparel which also open up possibilities for exporters.

    The EU notification no. 1063/2010 for the change of rules is given here in a presentation . You can also search within this document or just select fullscreen to see complete document.

    EU -Rules of Origin Changes for GSP From 2011

  • Imports of Japanese Denim into EU from 1999-2006

    Lets have a look at the import figures of Japanese denim into EU over a period of 7 years from 1999 to 2006

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    YEAR Import Value(Million Euros) Quantity(100 kgs) Value/Kg (Euros)
    1999 9.96 9895 10.06
    2000 5.19 4847 10.72
    2001 2.80 2504 11.19
    2002 3.56 4637 7.68
    2003 5.66 6035 9.38
    2004 14.37 15811 9.09
    2005 14.49 14357 10.09
    2006 8.98 9120 9.85

         TOTAL IMPORT  : About USD 65 million
    over 7 years          

    Source : Eurostat       

        

    Now what are the trends that we notice?

    Years 1999 to 2001 : the exports from Japan fell continously.
    Years 2002 and 2003: the exports increased at a good rate.
    Years 2004 : exports increased exponentially.
    Year 2005 : maintained the sales of 2004
    Year 2006 : again witnessed a fall in exports

    The hype for the Japanese denim started to surface in 2003 -2004 when Premium denim labels were starting to become a craze in the US and it EU. Japanese denim became a byword for many of these labels. Hence we see a great surge in the exports from Japan.
    However, in 2006, the downtrend has begun and it remains to be seen whether it continues in 2007 also. The figures of the growth of Premium denim labels market in the US and EU seems to growing at a slower pace in 2006 than in 2005 and hence it is affecting the market.

    Also, an important fact is that the Japanese labels are themselves becoming stronger and consuming more denim locally. Brands like Evisu, have developed a large fan following in the US and EU and hence more of Jeans made from these denims is being exported to these countries.

    Prices: The prices are given in Euros/kg and look to be more or less stable over a 7 year period except in 2002 when they were at their lowest. However, a better picture may emerge when we see the prices in Euros/mtr (we shall be providing that shortly).

  • Export of W/G Jeans from India to EU 2000 to 2006

    I have previously given the figures of the exports of M/B Denim trousers from India into EU.
    Now, the figures for Women/Girls Cotton Denim Trousers are given below.
    These figures clearly show some trends and we can have a look at them

    EXPORT OF W/G JEANS FROM INDIA TO EU 2000-2006

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    YEAR Units Exported Value in Euros Price/Jeans (Euros)
    2000 563592 4478589 7.9
    2001 1351961 9467001 7
    2002 1915561 14016407 7.3
    2003 1215116 9451086 7.7
    2004 802137 5211775 6.4
    2005 3037462 15975346 5.2
    2006 2894183 17257882 5.9

    From the above we can see some trends clearly.
    1. Pre 2005 year(quota period) - the prices were much better than post quota.
    2.Post 2005 - the volumes have jumped up substantially - but only in 2005.
    3.2006 has been a stagnant year in terms of growth in exports. Though the prices have improved in 2006 - which maybe partly due to usage of better quality of fabrics in the Trousers as the basic denims are not much in demand.

    Lesson for Indian exporters : The opening of quota has made things more competitive and the exporters have to compete with countries like Bangladesh, Vietnam etc and the prices will not be so easy to achieve as that in the quota period.

  • Import of M/B Jeans from India and Bangladesh into EU

    Its very interesting to compare the import figures for 6 years of Men/Boys Jeans into EU from two South-Asian countries -India and Bangladesh..First lets see the figures and then we will discuss the same

    YEAR .. INDIA .. BANGLADESH
    2000 .. 377718.. 11710979
    2001 .. 617787.. 18325115
    2002 .. 921928.. 21693769
    2003 .. 538237.. 29984007
    2004 .. 411354.. 39949584
    2005 .. 1599732.. 42292334
    2006 .. 3350670.. 52180749
    Total 7.81 million 112.29million

    Its amazing to see how much ahead Bangladesh is in terms of exports of M/B Jeans to EU. In the year 2000, Bangladesh exported about 11.7 million pieces of jeans . This figure is far above the figure of export of jeans from India in the year 2006 !! – which is 3.3million..
    The total exports from Bangladesh from the year 2000 to 2006 have been about 112 million pieces whereas the total from India is about 7.8 million..Though we can understand the period till 2004 when the quota restricted the exports from India . However, the period after that shows that : 1) India is not probably competitive when compared to Bangladesh and is unable to get the volume orders. 2)The infrastructure required for this volume of exports is still not available in India..

    It will probably take another 4-5 years by which India will come somewhere close to Bangladesh in terms of exports of Jeans to EU …

  • Denim imports into US and exports to US from EU

    Everyone knows that the US denim industry has been sliding continuously due to rising costs due to which the US denim is becoming uncompetitive.
    But while this is true for the competition coming from the Asian countries, where does US stand against the EU ? EU fabric is not cheap and the American fabric should be able to compete with them. But it does not ….
    US Denim fabric loses out to the denim from EU on fashion. The US denim mills are not fashion oriented and are not able to compete with the EU on this count. Specially fabrics from countries like Italy has been making its mark in the US with niche high street brands going for either Japanese Denim or the Italian denim fabrics. The figures below will tell the story:

    Imports of Denim from USA in EU25
    Year Kgs Amount(Euro) Linear Mtrs Av.Price(Euro/kg) Av.Price(Euro/Mtr)
    2000 12155100 69153986 17364429 5.69 3.98
    2001 12826500 72871055 18323571 5.68 3.98
    2002 11576500 66774079 16537857 5.77 4.04
    2003 6162600 31563427 9480923 5.12 3.33
    2004 729000 3263745 1121538 4.48 2.91
    2005 181900 754907 279846 4.15 2.7
    63108165
    Total Imp. from USA = Approx 63 million mtrs
    Exports to USA = from EU25
    Year Kgs Amount(Euro) Linear Mtrs Av.Price(Euro/kg) Av.Price(Euro/Mtr)
    2000 3315900 17394492 4737000 5.25 3.67
    2001 1893600 17664059 2705143 9.33 6.53
    2002 2471500 24918142 3530714 10.08 7.06
    2003 2949000 25715051 4536923 8.72 5.67
    2004 5332000 45405347 8203077 8.52 5.54
    2005 5169400 45306088 7952923 8.76 5.7
    31665780
    Total Exp. to USA = Approx. 32 million mtrs

    Major points to note :
    a)Till the year 2000, EU and the US were almost neck to neck in terms of the prices of their fabrics.However, US was leading by a big margin in volumes.
    b)The graph of USA started to fall from the year 2003 – when both prices and volumes fell sharply.
    c)When we come to the year 2005 , we find that the US exports have become almost a trickle and even with these small volumes , the prices are less than 50% of that of EU prices.
    d)However, EU has not been able to achieve the kind of volume exports that US was able to do in previous years – mainly because EU deals more in fashion items which are used in smaller quantities.

  • Denim Exports to EU and Imports from EU into Turkey

    Turkey has been gaining in strength in terms of its denim industry over the last 5 years. It has replaced some Asian countries in terms of its importance for this product for EU.
    Turkey has not only created a big denim production base, but it has become an important Conversion base – where denim is imported from EU for conversion into garments which are re-exported. Some of these garments also find their way into the local market which is quality concious and fashion oriented..
    What is most surprising is that if we see the figures of Exports from Denim into EU and Imports of Denim into Turkey from EU, we will find that the cumulative figure of Denim Imports into Turkey exceeds that of exports from Turkey!. However, if we only see the year 2005 , we will find that exports from Turkey have increased substantially, indicating that the increase in production base and lowered prices were helping it to export more to the EU.
    Another surprising point to note is that the average prices of importsof denim into EU from Turkey have been higher that of exports to Turkey from EU. The reason for the same is a lot of seconds fabrics from EU gets imported into Turkey and that reduces the average prices.Secondly, lot of denim from Asian countries finds its way into EU and through EU into Turkey(because of certain limitations of imports directly into EU).The prices of this fabric is generally much lower. This also reduces the average prices of fabrics going to Turkey from EU. Seethe interesting figures below:

    Imports of Denim from Turkey in EU25
    Year Kgs Amount(Euro) Linear Mtrs Av.Price(Euro/kg) Av.Price(Euro/Mtr)
    2000 9705800 64452320 13865429 6.64 4.65
    2001 15894700 110765207 22706714 6.97 4.88
    2002 12557500 96453733 17939286 7.68 5.38
    2003 11677200 75792432 17964923 6.49 4.22
    2004 17753500 109013704 27313077 6.14 3.99
    2005 17513800 105435532 26944308 6.02 3.91
    126733736
    Total Imp. from Turkey = Approx 126 million mtrs
    Exports to Turkey from EU25
    Year Kgs Amount(Euro) Linear Mtrs Av.Price(Euro/kg) Av.Price(Euro/Mtr)
    2000 11664800 63751723 16664000 5.47 3.83
    2001 15640700 97620439 22343857 6.24 4.37
    2002 24634000 145474562 35191429 5.91 4.13
    2003 17356400 86188188 26702154 4.97 3.23
    2004 18482600 89748643 28434769 4.86 3.16
    2005 10240900 58456436 15755231 5.71 3.71
    Total Exp. to Turkey = Approx. 145 million mtrs

    Source:Eurostat

    And as we have seen before in the case of exports from India and Pakistan, the year 2001 was the best year for exports of denim to EU. Year 2005 has shown some improvements , but the average prices are nowhere near the prices that existed at that time.

  • Denim fabric imports into EU from Pakistan (2000-2006)

    Pakistan has over a period of time become an important exporter of denim fabrics to EU. Though exporters from Pakistan is more focused on exporting the Denim Garments to EU, still their exports of Denim fabrics are also substantial. I have compiled the details of the exports from Pakistan of the Denim Fabrics into EU over a period of 6 years – from 2000 to 2006. This gives a fair idea to understand in which direction these exports are directed..

    Year KGs Euros Linear Mtrs Price(Euro/mtr) Price(Euro/kg)
    2000 2627200 9678028 3753143 2.58 3.68
    2001 4133200 16743736 5904571 2.84 4.05
    2002 6086400 24608690 8694857 2.83 4.04
    2003 4281400 13033102 6116286 2.13 3.04
    2004 4768900 15400309 7336769 2.10 3.23
    2005 4348900 13780881 6690615 2.06 3.17
    2006 3076500 10210064 4733077 2.16 3.32
    43229319
    Source:Comext

    Note : The denim imports shown above are covered under the HS code 520942.

    The following trends can be noticed(which were there even in the figures for exports of denim from India) :
    a)Year 2002 was the best year in terms of quanities exported and the average prices.
    b)Year 2003 shows a steep fall in the prices .
    c)Year 2006 shows slight improvement in prices over 2005     . However, the volumes are continuously falling – showing that the market for the fabrics in EU is DYING.

    A total volume of about 43 million mtrs over a period of 6 years? Not a very big volume I believe..

  • Denim imports into EU from India (2000-2006)

    EU has always been an important market for the exporters of Denim Fabrics from India. The denim exports have seen many good days when the volumes and prices were good and other times when the prices and volumes have not been so good.

    Lets analyze the years from 2000 to 2006 and see how India has been doing in terms of exports of denim into EU.
    The data below shows the imports of denim into EU15 and EU25 separately . It can be easily seen tha the best year for exports of denim into EU from India was 2001 and the worst has been 2006.

    Untitled Document

    DENIM IMPORTS FROM INDIA INTO EU (2000-2006)          
      Imports(kgs) Import Value(Euros) Euros/kg Linear Mtrs(approx.) Price(Euros/mtr approx.)
    2000 5387300 16188216 3 7696143 2.1
    2001 14566300 47779142 3.28 20809000 2.3
    2002 10763400 44381375 4.12 15376286 2.89
    2003 5085700 17054902 3.35 8476167 2.01
    2004 5203500 17413044 3.35 8672500 2.01
    2005 5207700 18371301 3.53 8679500 2.12
    2006 3508300 12590578 3.59 5847167 2.15
            75556763  
            Total - Approx 75.5 million metres  
    DENIM IMPORTS FROM INDIA INTO EU 25 (2000-2006)          
      Imports(kgs) Import Value(Euros) Euros/kg Linear Mtrs(approx.) Price(Euros/mtr approx.)
    2000 6137900 19713872 3.21 10229833 1.93
    2001 15758700 54045631 3.43 26264500 2.06
    2002 12099000 51190656 4.23 20165000 2.54
    2003 6219300 24072030 3.87 10365500 2.32
    2004 5902200 20185673 3.42 9837000 2.05
    2005 5761100 20479804 3.55 9601833 2.13
    2006 3971600 14270219 3.59 6619333 2.16
            93082999  
            Total- Approx. 93 million mtrs  

    Source:Eurostat

    Some clear trends emerge :
    a)The year 2001 was the best in terms of volumes of exports.
    b)Year 2002 was the best in terms of prices
    c)Prices have improved in 2005 and 2006 but the volumes have gone down - the reason is the reduced exports of basic fabrics and increase in fabrics like Ring Spun etc which are costly. However, they are not giving volumes to India since countries like Turkey and Brazil are capturing the same.
    One more thing which clearly emerges is that EU IS NOT A VERY IMPORTANT MARKET FOR DIRECT EXPORTS OF DENIM esp as seen in the last two year's volumes.However, the EU still remains important because of important decision makers(buyers) of various brands sitting there, who may get their orders shipped outside of EU.