The shipment of leather has started to get boosts after Bangladesh fetched $100.40 million from exporting the semi-finished raw materials in July-March of 2023-24, according to the Export Promotion Bureau (EPB).
The exports were up 9.8 percent from the same period a year earlier thanks to China for importing semi-finished leather. China has started to import a significant quantity of semi-finished leather from Bangladesh to remain competitive in the US market by the way of keeping the production cost lower.
The dragging trade row between Washington and Beijing has brought about a positive impact on leather exports from Bangladesh.
Besides, the production cost in China has gone up in the last few years driven by a surge in labour wages, prompting manufacturers in the worlds second-biggest economy to source raw materials from the South Asian nation.
Chinese companies import semi-finished leather from Bangladesh and process them in China before manufacturing finished products in Vietnam and Cambodia for the US markets, traders said.
If Chinese firms export products from China, the US importers will have to pay an elevated level of tariffs, which are comparatively higher than Vietnam and Cambodia. Therefore, they are importing raw materials from Bangladesh.
Besides, Chinese companies use imported raw materials to meet the demand for their domestic leather goods market, which was valued at $22 billion in 2022.
Bangladesh has 161 tanneries that process rawhides into finished leather. However, 98 percent of them are not compliant as per global standards, forcing local suppliers to sell semi-finished leather.
Although the exports of semi-finished leather are gaining pace and generating foreign currencies for the country, Bangladesh is, in reality, losing out since it could have earned more had it been able to export finished leather and finished goods produced from the local leather directly.
For that to happen, local processors will have to secure certification from the Leather Working Group (LWG), a global multi-stakeholder community committed to building a sustainable future with responsible leather.
A top official of a leather product exporter says the Bangladeshi firms that process world-class finished leather don sell them in the local market since they don receive cash incentives from the government.
The government provides a 12 percent cash incentive on the shipment receipts of semi-finished leather. Of the semi-finished leather produced in Bangladesh, 70 percent is exported, mainly to China.
