Standard procedure – inside China’s leather market

China has become one of the largest markets in the world for the consumption of imported or domestic fashion and luxury goods, in which leather products such as footwear, bags and wallets are always important core product categories. According to data from China Leather Industry Association (CLIA), the export value of the China leather industry was $39.72 billion for the first six months of 2014. This was an increase of 5.7% compared with the same period in 2013. The import growth is much faster than the export growth due to the strong demand of Chinese consumers.

Opportunities are ahead but, at the same time, business risk due to local market supervision and compliance with quality requirement should be minimised. In terms of market supervision, China has strict product quality surveillance and spot-check systems led by various government bodies such as the Administration of Industry and Commerce (AIC) or the General Administration of Quality Supervision, Inspection & Quarantine (AQSIQ).

The government implements a product quality supervision and inspection system with random checking as its main form of product surveillance. Unsafe or poor-quality products may result in product recalls and other penalties imposed by the Chinese authorities. Recalls and/or penalties may adversely affect brand image and business reputation. It is important to ensure that the relevant safety and compulsory requirements are met when selling on the Chinese market.

Understanding the basic market requirements is a prerequisite to offset the potential business risks.

Standard system in China and basic leather standards

The standard system in China is composed of four layers of standards, each of them specifying the general quality requirements for the relevant products that are manufactured, distributed, sold or imported to China. National standards (GB) are considered as general and basic requirements for product compliance. Requirements in QB standards should be more specific and stricter than GB standards.

In addition to the four layers, the standards are also classified as mandatory standards or recommended standards. Mandatory standards mainly concern human health, safety and hygiene, or a high-risk product category. All products sold or imported into China must comply with the requirements of the relevant mandatory standards. Standards without the letter T are mandatory and legally binding; for example, GB 20400 and GB 30585. The recommended standards carry the letter T in the standard code, such as GB/T or QB/T.

For leather, GB 20400-2006 is the basic mandatory requirement. The concerned parameters are Azo dyes and formaldehyde content. Chromium VI is not covered in the current version of GB 20400-2006, but it is required in GB 30585-2014, which is the safety technical specification for children's footwear where the limit is 10ppm. Thus, this parameter should be applied to children's leather footwear products.

Besides mandatory standards, the Product Quality Law of China requires all consumer products to have a suitable 'product standard'. For leather goods, some common product standards are listed in Table 3. If a specific product standard is chosen for the corresponding product, even if the standard code has a letter T and is considered to be a recommended standard, all the requirements of the standard must be met. Physical and chemical requirements can be listed in the product standards. For example, in QB/T 1333-2010 Handbags and knapsacks, the following parameters are covered: appearance quality, shaking impact test, stitching strength, colour fastness to rubbing, corrosion resistance of hardware fitting, and zipper durability. During spot-checks of leather bags for market supervision, the shaking impact test is often checked and shows failures most of the time.

Labelling and marking on leather goods

There are no harmonised leather product labelling standards in China. Different standards apply to different categories. Proper product labelling and hangtags are important during governmental spot-checks and care should be taken when determining the proper information.

For footwear products, QB/T 2673-2013 Footwear, specification of marking is currently the most widely used standard. According to QB/T 2673-2013, footwear sold in China must disclose trademark, product name, China shoe size, materials, place of production, company name and contact (including address, phone number or other contact information), the 'Three Guarantee Policy' (return, replacement and repair), product standard code, date of production, colour, article number and product quality grade.

The Three Guarantee Policy is a special requirement in China for footwear labelling. Under this policy, brands or retailers need to provide a guarantee to Chinese consumers that products with quality problems can be returned, replaced or repaired free of charge within a certain time period. The length of period varies in different regions. For example, the current required period in Shanghai is three months for leather footwear.

In addition to the above information, the Product Quality Law of China requires a "qualification certificate or mark" in the footwear marking.

The official Chinese language must be used on the actual hangtag. In addition to the information on the hangtag, each pair of shoes must have the trademark or company name, China shoe size and article number indicated on the shoe.

Labelling of other leather products, such as bags, is mainly based on requirements indicated in the corresponding product standard. For handbags, QB/T 1333­-2010 Handbag and knapsack requires the following marks: name of manufacturer (distributor), address of manufacturer, trademark, grade, qualification certificate (or inspection mark) and contact number. If necessary, product use (care and maintenance) instructions should be included. The hangtag should at least include the following contents: product name, product standard number, specification (model), article number, main material (shell, lining) and qualification (inspection) mark.

Environmental protection and sustainability

Besides the quality requirement on final products, environmental protection during the manufacturing stage also has been a hot topic in the China leather industry. The newly revised Environmental Protection Law of the People's Republic of China has been effective since 1 January 2015. It gives harsher punishments for environmental wrongdoing. For example, the law says that besides a financial penalty, the responsible persons would face up to 15 days detention if their enterprise dodges environmental impact assessments and refuses to suspend production after being issued a ban.

In addition to the New Environmental Protection Law of China, the 'Discharge Standard of Water Pollutants for Leather and Fur Making Industry' (GB30486-2013) is applicable for the leather industry in China. This mandatory discharge standard is specific and strict, and takes into consideration the actual situation of the domestic leather industry. The standard specifies the following 13 pollution factors: pH value, chromaticity, CODcr, BOD5, SS, ammonia nitrogen, total nitrogen, total phosphorus, animal and vegetable oil, sulphide, chloride ion, total chromium and chromium VI. The limit on unit product standard discharge volume is stipulated along with the respective requirements for direct discharge and indirect discharge for companies. Limits for wastewater pollutant special discharge are applicable in key regions.

Under growing environmental pressure, leather enterprises are increasingly adopting proactive measures to face the challenge. According to data from CLIA, in Haining City, which is one of the leather industry hubs in China, shows that during 2010 to 2013, the number of leather tanneries in Haining City has been reduced from 38 to 8. This 70% reduction can be attributed to environmental pressures. Although the number of enterprises is lower, the remaining big enterprises benefit from the economy of scale and the business has become more centralised. The production value of Haining tanneries increased from nearly $500 million in 2010 to $850 million in 2013.

Summary

The Chinese Government has declared the economy growth as 'The New Normal' status. The new normal means China will shift from high-speed to mid-to-high-speed growth, and change from the size and speed-oriented growth model to the one that values quality and the environment. In the foreseeable future, the emphasis on quality and green products will be expected in the China market supervision. Requests for higher product quality and better environmental performance will be the new normal trend for leather products in China.