October 2006 Fur Market Report

Fur Market Report: October 2006

By Parker Dozhier

When Mainland Communist China — the People’s Republic of China — assumed control of Hong Kong in 1999, the world watched with apprehension. The fur trade was no different. Hong Kong was the most free of all the free world markets. One obvious advantage of that free-market status was the absence of costly taxes and import duties. As a result, Hong Kong fur traders, dressers and garment makers captured the lion’s share of the wTR1006Cover.jpgorld’s fur trade.

The Hong Kong Fur Fair is the most widely attended of all fur fairs, surpassing both Milan and Frankfort in attendance and exhibitors. In a move to alleviate the widespread fears of the takeover, the rulers in the PRC pledged to Hong Kong’s trading partners a unique concept — One Nation, Two Systems. The PRC lived up to the pledge. The PRC quickly accepted two forms of government, two monetary systems, a different wage structure and a continuation of free-market ports.

It might be a One Nation, Two Systems bureaucracy, but one problem remains the same in Hong Kong and the PRC — corruption. From the highest levels of government to the lowliest bureaucratic officials, business transactions are, more often than not, conducted under the table.

A recent article in the Wall Street Journal reported that 30,205 government officials were prosecuted last year for corruption, down from more than 35,000 the previous year. I strongly suspect our legal fur trade has been caught up in this serious crack-down by the Chinese government.

The crackdown seems to be the root cause of our recent problems with otter imports into China. At the earlier established prices, I estimated that $5 million worth of otter pelts are languishing unsold at collection points. That was enough to catch the attention of the U.S. Department of Agriculture’s office in Shanghai.

Ralph Bean, at the USDA’s American Trade Office in Shanghai, is charged with promoting American agricultural products in China. Bean said that import regulations, such as CITES, are enforced in China on a haphazard basis. Adding the confusion is a massive problem with falsified documents.

Investigation reveals that U.S. otter pelts purchased in Canada by, or for, Chinese makers are shipped to Hong Kong — interesting because most of the dressing plants are now in north China, some 1,200 miles from Hong Kong. We can assume that once the otter pelts reach Hong Kong, they are shipped north for dressing.

In recent months, Hong Kong has been on Interpol’s radar. Illegal shipments of ivory, tiger and leopard pelts, numerous species of illegal otter skins, and an array of CITES Appendix I medicinal plants and animal parts have been confiscated while entering Hong Kong. Questionable documents accompanied the shipments.

The people involved in the illegal wildlife trade should pay the price. But those of us in the legal trade should not be penalized along with them. The “haphazard” enforcement caught more than the bad guys by surprise.

When otter pelts move into China through legal channels, they are subject to a 17 percent import duty, plus a 40 percent value-added tax.

Eventually, the problem with our otter moving into China will be sorted out. The demand for otter fur in China is too great to merely end abruptly. However, we can also anticipate adjustment in price.

On a different front, a movement is underway in the United States to eliminate CITES tagging of bobcats and otters. Both species are now tagged under the CITES Appendix II “look-alike” requirement.

Our bobcat are tagged because of the Mexico population. Mexican wildlife managers are attempting to establish population estimates necessary for delisting. Field studies are underway. The research is being funded, in part, by the International Association of Fish and Wildlife Agencies and the Texas Trappers and Fur Hunters Association.

Delisting is the first step and stands apart from eliminating tags. Even without delisting, the tags could be eliminated simply with documentation indicating the country of origin. How much time and money has been wasted by wildlife agencies and fur harvesters in the past 27 years complying with the tagging requirement?

Canada has never tagged bobcats, otters or lynx. In fact, to my knowledge, tagging of Appendix II CITES species has never been done in any other country.

Bid-Rigging Update
After pleading guilty to one felony count of conspiracy to rig bids on otters offered at a Fur Harvester’s Seattle auction, David Karash with Alaskan Brokerage is reportedly cooperating with investigators. The extent of his cooperation is unknown at this time. His sentencing has been postponed.

However, the felony charges against Karash have led to civil suits. The civil lawsuit filed by former fur ranchers Jan Wanachek and Clarence Jordan has been granted class-action status by a federal court in Seattle. Ranchers claim American Legend alerted its shippers of suspected bidding collusion in a marketing report. One of the defendants in the federal class-action suit is Global Mink Corporation. Lou Greenberg, of Global Mink, has also agreed to cooperate with federal investigators.

While the suit originally involved only two out-of-business ranchers, the class-action status granted by the court will include all ranchers with fur on the sales. Every shipper will be a plaintiff unless they petition the court to be removed.

American Legend’s chairman Stan Rees stated, “It is just bad business to sue your customers.”

That might be the case. But fur auction participants now know the FBI is looking over their shoulder.

Gassing Up
Petroleum analysts with Bloomberg Financial are speculating that gas prices have peaked.
Analysts are predicting gasoline at $2.15 to $2.30 a gallon by Thanksgiving — just in time for the beginning of the fur harvest.

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