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Terms of Payment

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Terms of Payment - Guidelines

adopted by COTANCE, Paris, 13 June 2008

Introduction – Why this document ?

Credit for business has become increasingly difficult and costly, notably in traditional sectors composed by SME’s such as the leather industry, in particular since Basel II. Although European tanners and dressers are always ready to support the success of their customers in any possible way, including the facilitation of a reasonable period for receiving their dues, many of them have suffered or witnessed difficulties in their balance sheets due to excesses by some clients.

It is important to recall that tanners in Europe are constrained to pay their supplies of hides and skins within 14 days, and if one considers that processing of this raw materials takes on average some 5 weeks, one understands that the financial efforts tanners engage can be considerable.

European tanners and dressers, notably those small and medium sized enterprises that make up its industrial fabric, are not always in a position to pre-finance the leather value chain. In order to avoid adverse effects to tanner’s treasury and thus to secure their financial standing in the interest of their customers, limits to the credit given to customers need to be set.

Good governance in the leather industry calls for rules and understandings that discipline the sector in the interest of all stakeholders.

Guidelines

European tanners and dressers, meeting at the COTANCE Council on 13 June 2008 with a view to promote transparency and in order to guarantee sound trade relations between suppliers and clients, have adopted the following Guidelines related to terms of payment :

Unless otherwise stipulated in a contract, partnership agreement or other agreement signed between a European tanner/dresser and its client, the following Guidelines related to terms of payment are applicable:

1. Invoicing of samples

Leather samples produced for and supplied to a client are not free. The price of those samples may not be higher than their actual production cost plus 20% minimum of development costs. Sending back the samples does not cancel the debt.

2. Delay of payment

Invoices laid out by European tanners and dressers following a firm order, the supply of samples or any request for the supply of other goods or services subject to a general tariff, are due within a delay of 30 days starting from the time of receipt.

A rebate of the price invoiced may be afforded if payment occurs with 10 days. The eventual rebate is to be agreed at the conclusion of the contract if it is to be claimed.

3. Exchange rate

For any contract established in foreign currencies, at the time of the invoice, the European tanners/dressers automatically apply a correcting increase that will level out the difference.

Those Guidelines adopted by bodies representing the European leather industry strengthen the good practices and collective discipline of the European tanning sector as regards provisions of payment. COTANCE reserves the right to modify or complete those Guidelines as it sees fit.