Air
&EPA
United States
Environmental Protection
Agency Research Triangle Park, NC 27711
Office of Air Quality
Planning and Standards
FINAL REPORT
EPA-452/R-01-015
September 2001 .
ECONOMIC IMPACT ANALYSIS OF
THE LEATHER TANNING AND
FINISHING OPERATIONS
NESHAP: FINAL RULE
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TABLE OF CONTEXTS
Section Pa<>e
Executix e Summary . .'....... ..".... i
1 Introduction \
2 industry Profile ;'..•}
2.1 Production Overview 2
2.2 Producers of Finished Leather Products 7
3 Economic Impacts '.. , ) ]
3.1 Summary of Compliance Costs . ... . .._ jj '
3.2 Market Impacts .,..,:.,.. ,.......,. . 12
3.3 Small Emits Screening Analysis • . / 13
3.4 Con\ersio.n from SIC to NAICS Industn, Classification -. 14
4 Summan :.,..,.. .^.,.....,.......; [5
.5 Reference^ , .;... ,. . . ... .-..-.- 16
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EXECUTIVE SUMMARY
The U.S. is a key player in the \vorld market for leather goods. We are a top producer in
all facets of leather production, including:
raising cattle, sheep, pigs, and other animals:
• tanning and finishing hides and skins: and
manufacture of finished leather goods. . .
The regulation developed by the EPA to reduce emissions of HAPs will impact 16
lacilities in the leather tanning and finishing industry and are owned by 14 parent companies.
The industry .includes approximately 300'establishments in all. therefore, the affected producers
represent a \er\ small fraction of the leather tanning production in the U.S. The regulation is
expected to cost a total of S'437.589 annually, \\hich is 0.0014 percent of industry revenues.
Because such a small fragment of the industn is impacted by the rule, changes in the cost of
production for these lacilities resulting from the rule will not influence market prices or
production. ;
We determined the percentage of revenues that will be consumed by compliance costs
and found that in nearly all cases, the impacts are very minimal (ranging from 0.00% to 0.09°'0
for nearly all facilities). We found that only one facility had a moderate impact of 1.52 percent.
however, with average industry profit margins of 3.6 percent, we conclude this impact will not be
significant to this facility. Overall, we conclude that this rule will have a minimal (and in most
cases negligible) impact on the industn-. as \\ell as the individual facilities and firms in the
industn-. . '
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ECONOMIC IMPACT ANALYSIS OF
THE LEATHER TANNING AND FINISHING
OPERATIONS NESHAP
1 INTRODUCTION
Under section 112(d) of the Clean Air Act as Amended in 1990. the U.S.
Environmental Protection Agency (referred to as EPA or the Agency) is developing National
Emissions Standards for Hazardous Air Pollutants (NESHAP) for the leather tanning and
finishing industry. As part of the Agency's evaluation of impacts associated \yith the rule. \ve
have prepared estimates of the total compliance costs and emission reductions that will result
from the rule. This report uses information about the affected leather tanners and the complia
costs to evaluate the economic impacts on the industry and on individual producers.
2 INDUSTRY PROFILE
Leather tanners produce materials for several consumer markets, including: automotive
seats: shoes, handbags, and gloves: sports equipment: furniture and home furnishings: and
clothes. According to J.L-ciihcr Fuels published by the New England Tanners Club, the hides and
skins used to create these goads come from all over.the world and from a variety of animals1.
Most production iii the U.S. comes from cattle', sheep, and pigs, but considerable quantities of
other types of hides and skins are also produced, including: horse, walrus, buffalo, deer. goat.
ostrich, crocodile, and other large and small animals. Table 2-1 -shows some of the products
made with these different types of hides and skins.
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Table 2-1. Products of Leather Hides and Skins
TYPE OF HIDE
END USE APPLICATION
Cows and Steer
Calf
Sheep and Lamb
Goat and Kid
Pig
Deer
Horse
Reptile-
Shoe and boot uppers, soles, insoles: patent leather: garments: \u>rk-
gloves; belts: luggage: upholstery: transmission belts:.sporting:
goods
Shoe uppers: slippers: handbags and billfolds: hat s\veatband<:
bookbindings
Grain and suede garments: shoe linings: slippers: dress and \vork
gloves: hat sweatbands: bookbindings: novelties
Shoe uppeis. linings: dress gloves: garments: handbags
Shoe suede uppers: dress and work gloves: billfolds: fancy leather' ;
goods
Dress gloves: moccasins: garments
Shoe uppers: straps: sporting goods
Shoe uppers: handbags: fancy leather goods
Source: LiM/hcr Fuels: New England Tanners Club: 1994.
2.1 Production Overview
Leather Facts provides a basic description of the typical process for convening a am • -•=• ; :;
hide into a leather shoe upper. The leather tanning and finishing process can be Ji\ kled ir,:,•'*€•; •> *:»'• *-*_'-
operations and dr\ operations. A process How diagram is provided in Figure 2-', Ihcuw ; -,. ••
operations include all of the processes required for leather tanning. These process- :nci>.\ *.,-• ;
steps to purify and stabilizenhe collagen content of the hide. Collagen is the prut^r: re-p«*' - < k- » •*-•• •-•••-•• •
for strength and toughness. Dry operations consist mostly of processes that enhance the na;.^,- t -
characteristics of the leather, which encompass the leather finishing processes-. 1-or each UII^K.':. -••= '* ..., ••>,
however, the techniques and chemicals used at each step is uniquely, tailored to tlv* pvoduci - - - ; ;•
qualities they strive to achieve, and thus ma>' differ slightly from this description.- •*•- •
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Figure 2-1. Leather Tanning and Finishing Processes - Flow Diagram
Wet Operations
Dry Operations
Raw
Materials
Bating
•" Retanning
Drying
Soaking
Pickling
Coloring
Conditioning
Unhairing
Tanning
Fatliquoring
Staking/
Milling
Trimming/
Siding
Buffing
Splitting
Finishing
.Grading/
Measuring
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tt'c'l Operation.^
Before the tanning facility receives the hides, the raw material must undergo a curing
.process at the supplier's facility (typically a meat packer) to prevent any deterioration and decay of
the product. The hides are then shipped to the tannery by truck or freight cars, which can deliver
about 1000 hides at a time (weighing about 50.000 pounds). The first step in the tanning process is •
to prepare the hide for processing by sorting the hides by type, thickness, and other characteristics.
and storing them to prevent any deterioration of the hide. The next step is to soak a selection ol
hides in a solution of water, chemical wetting agents (similar to household detergents) and
disinfectants to restore the moisture that was lost during the curing process. The tanner then adds
chemicals to the soaking solution to.complete the next step, the unhairing process, which removes
the hair, epidermis, and certain soluble proteins.
Next, the hides go through a bating process to remove the residual unhairing chemicals and
non-leather making substances. In the first phase of the bating process, termed deliming. the hides
are placed in cylindrical drums-that have hollow axles and are rotated with water and chemicals to
remove any lime and alkaline chemicals present on the hides. In the second phase of this process. -
the "bate" is added, which attacks and destroys most of the remaining undesirable constituents of
the hide (i.e.. hair roots, pigment, grain of the hide). Then the hides are washed to prepare them.. ;. <
for the pickling process of the operation. Hides are pickled by adding common salt (or other -. '>
chemicals that act in the same manner) and acid to the same drum as is used for bating the-hide : ••] P
This step helps to preserve the hides until they are needed for the tanning process and als> • pix pjtres , ,
the hides to better accept the tanning materials. .
The tanning process is the conversion of the raw collagen fibers of the hide in to a stable : ! ••>
product which is no longer susceptible to putrefaction or rotting. In addition to stabilizing the • •
product, this step significantly improves many of the properties of the hide (i.e.. abrasion, resistance.
resistance to chemicals or heat, flexibility, ability to endure repeated cycles of \\etting and dr> ing i; ;.:
This process is completed by adding chemicals to the same drums used for the bating and piek!iiu>' '•""
processes. The most common tanning agent is chromium sulfate. which imparts a bkie-ureen ei-'iw;i ; ;
to the hides. Other chemicals are also added to achieve other desired characteristics in the leather.
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After the tanning process is complete the hides are sent through a machine to wring the excess
moisture out of the hide. They are then sorted and trimmed to remove the perimeter areas of the
hide. Finally, they are sent to splitting and shaving which adjusts the thickness of the leather
required for the desired end use.
Once the tanning process is complete and the hides are prepared to the desired thickness.
they undergo the steps of retanning. coloring, and fatliquoring. The retanning and coloring are
performed to achieve specific end-use properties.-and the fatliquoring provides lubrication of the
fibers for flexibiliu and softness. .
Dry Operations:
After passing through the wet end processes, the leather tanning and finishing process moves
to the finishing room. In the finishing room, the hides undergo the drying, conditioning, staking.
buffing, and finishing processes. The objective of the dry operations is to produce a product that
has uniformity, resistance to scuffing and abrasion, appearance characteristics, and other desired
characteristics by a commercial product such as upholstery or footwear.
The leather is dried, conditioned, staked and mechanically dry-milled to further improve
flexibilin and softness. Then the leather is goes through a buffing process to smooth the,grain
surface b\ .mechanically, sanding. . - -
The next step in the operation is to finish the leather. In this step, film-forming materials are
.applied to the grain to provide abrasion and stain resistance and to enhance the color. This step
requires a lot of'Creativity, skill, and expertise by the finisher who uses chemical coating substances
to achieve the desired end-product. To complete this step, almost a limitless combination of leather
coatings or finishes are applied, depending on the type of leather being produced and the intended •
end use. Typically, three to five coats of finish are applied to the leather although the actual number
of coats can vary depending on desired characteristics. The different types of. finishes include stains
or dyes, pigments, binders, and top coats or sealer coats. Stains and dyes impart color below the
surface of the leather. Pigments impart color to the top surface leather by forming a film on the
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surface of the leather. Pigments are also used to hide imperfections. Binders form a film on the: - -
leather and create a smooth surface. They also bind stains and pigments to the leather and retard
bleedinu and fading of the color. Top coats seal and protect the finished leather surface from
abrasion and prevent the color of the leather from bleeding. They also give a smooth, slick feel to
the leather and depending on the formulation will give the leather a particular luster.
Hundreds of leather finishing formulations are available: each finish formulation has unique
chemical and physical characteristics and is applied as needed to meet end-use requirements. The
finishes used are primarily broken down into four major leather industry sectors, including: .
automotive upholstery leather, non-automotive upholstery leather, waterproof leather, and non- ••
waterproof leathers. Due to differences in the types of finishes required to achieve specific
characteristics in leather, the EPA has established four subcategories of operations for the
development of the regulation. The four subcategories represent the major leather industry sectors:
discussed above, and are described below:
L'pholsiL'rv Leather with Add-On Less Them -/e ft2: This category produces leather for ;
automotive seating. Finishes for automotive upholstery are typically water-based and ha\e-
lower HAP emissions. They are based on acrylic resins and polyurethane dispersions. The
polyurethane component provides toughness, while the acrylic resin lowers the formuLuion =
price. A small amount of organic solvents are used to act as a salting agent. Glvcol ethers
are also used as diluents and coalescing agents, improving the film-forming properties 01 the
finish.
l'plwki<.>r\ Lcu'hLT ir/7/7 Adti-On Greener Than or Equal to 4s fr: .This category produce*.
leather typically for use in furniture. The base coats for non-automotive upholster} HP' • ho?. •
are generally water-based. The top coats can be either water-based or solvent-based
depending on the end-use of the leather. Low cost types of leather furniture upholster} arc -.
intended to be functional at competitively prices and are typically finished with water-base,!!
top coats. In contrast, "high-end" furniture upholster}' leather is typical!} finished witr; '-.
lacquer-based top coats to obtain the desired appearance and feel.
If 'aier-Rcsisuml Leather: Water-resistant leather is used in a variety of applications. huS ; .
most common in shoe uppers. While the waterproof properties of leather can be achieved
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throug-h \vet end processes, most, facilities achieve the waterproof properties of the leather
almost entire!}' through the finishing process. After wet end processes are complete, the
leather is spray dyed with a solution composed mostly of HAPs. The dyeing is often
followed by the application of a wax or oil. or a mixture of both. The wax and oil both
significantly enhance the waterproof properties that are obtained through the wet processes.
Xon n'ater-Resistant Leather: This category is also used in a variety of applications, but the
most common market again is shoe leather. Finishes for non-waterproof leather are similar
to thobe used in non-automotive leather upholstery. Most base coats are water-based, and
the top coats are'usually water-based but some are solvent-based.
The EPA has found that although the source category includes facilities that perform both
leather tanning and finishing operations, we believe emissions from the leather tanning (wet
operations) are negligible compared to emissions from leather finishing (dry operations). Thus, the
rule is applicable only to the leather finishine operations included in the subcatecories.stated above.
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The rule applies to the stains, pigments, binders, and sealers used in the finishing processes. The •
NESHAP will apply to all finishing application areas and equipment, including: spray booths.
brush applications, hand applications, roll coaters. manual swabbing, curtain coalers, and flow
coaters. It also applies to flash-off areas, drying ovens, infrared dryers, catalytic dryers, open-air
dn ing. cleaning, mixing, storage, and .waste handling. ' .
2.2 Pi oducers of Finished Leather Products
Leather fuels Siates "there is scarcely a country of any size which does not produce hides or
skins for conversion into leather."-' Thus, there is a-large international market for finished leather u.s
well as trading the raw hides and skins. Some of the top world producers of cattle that cin be used
for leather production include: Soviet Union. United States. Western Europe. Argentina. Eastern
Europe. Brazil- and Asia. For the U.S.. tanning activities are concentrated in the Northeast.
Midwest. Mid Atlantic States and California. Some tanneries are relatively small often specializing
in the manufacture of a particular kind of leather, and handing d.own the techniques from generation
to generation. Others employ several hundred people and produce a wide variety of leathers4.
According to the 1992 Census of Manufacturers, the top 20 companies in the industry accounted for
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74° o of the products produced in the industry, and the top 8 companies accounted for ON or Ni'1 t, oi
the industry products5. This indicates that the smaller companies probably specialize in niche •
markets and unique products, while the larger companies produce a large majoriu of the goods sold.
and can influence market price levels.
Because leather products are used in such a large variety of applications throughout the
world, the industry has a formidable market. As Table 2-2 shows, in 1993 leather tanning and
finishing was a S3.2 billion industry in the U.S.. employing 16.900 people in 330 establishments
and accounting for S7UO million in exports". In 1996. the industry value of shipments was S3.1.
billion and employed 14.800 people and accounting for S951 million in exports . During this time
period, employment dropped by 12% yet total shipments remained fairly stead\ around S3.0 billion.
The industry also moved from being a slight net exporter in 1993 to becoming a slight het importer
of products from 1994 to 1996.
Table 2-2. Leather Tanning and Finishing Industry Statistics:
Number of Employees
Value of Shipments (millions)
Imports
Exports
1993
16.900
S3. 198
S736
S764
1994
15.900
S3. 041
S960
S812
1995
15.300 •
S3. 11 9
SI. 08^
S87H
1 996
14.8'U) :
S3. 134- :
' S 1 . 1 :>•< • •
S';5 :
Sources lndustr> GUI look: L'.S, Department of Commerce. Bureau of Census: 1993
Annual Sur\c> of Manufacturers: L'.S. Department of Commerce. Bureau of Cen>i:-. t"u
According to data collected by EPA. there are 16 facilities that emit more than 1 u ions ,.v;,r- <
of a single HAP or 25 tons year of a combination of HAPs. and are thus determined to be-"nvii.>••••••••
sources" for the NESHAP. Table 2-3 displays the location and name of the facilities impacted K I •,.
this rule. . '
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Table 2-3. Facilities Affected by the Leather Tanning & Finishing NESHAP
Facility Name
Alliance Leather. Inc.
Cudah> Tanning Compain
Elmo Leather of America
Gardenstate Tanning
Gardenstate Tanning
Gutman Leather Company. Inc.
Honveen Leather Compain
Irving Tanning Company
Lackawanna Leather Compain
Lackawanna Leather Company
Paul Flagg Leather Company
Prime Tanning Compatn - :,- '
S.B. Foot Tanning • •• .
Seton Company
Sal* Leathers. Inc.
Volunteer Leather Company
Location
Peabody. MA
Cudaln.Wl
Edison. NJ
Fleetwood, PA
Williamsport, MD
Chicago. JL -
Chicago. IL
Hartland. ME
Con over. NC
Omaha. NE
Shebo\gan. \YI
_ Rochester. NH
Red \Ving. MN
Norristoun. PA
Santa Cruz. CA
Milan. TN . '
hnhiMrr Growth:. , ......; .. ... •-..'. ... .. . . . •
As is meniioned at the beginning of this section, the leather tanning and finishing industry
supplies leather to a variet\ of industry sectors which include automotive upholstery, non-
automotive upholstery, men's and women's shoes, athletic shoes, leather gloves and mittens. "
luggage-, women's handbags and purses, small personal goods, and leather clothing. To determine
how these markets can influence the leather tanning and finishing industry. Table 2-4 shows the five
year forecast.of growth for the various leather industry sectors.^
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Table 2-4. Five Year Growth Projections for Leather Industry Markets
Leather Industry Market
Automotive Upholstery
Non-Automotive Upholstery (furniture)
Men's Shoes
Women's Shoes
Athletic Shoes
Gloves and Mittens
Luggage
Women's Handbags and Purses
Small Personal Goods
Leather Clothine
Five Year Growth Projection
(Annual Growth %)
4 to 5
4 to 5
2 •
little to no grovrth
1
• . -1.8
-2.7
-7.3
no change
-1.5
Source: I'.S. lndustr\ & Trade Outlook '98.: U.S. Department of Commerce
The overall forecast of growth for the leather tanning and finishing industry is 2 to 3 percent
annually over the next five years. The fastest growing and potentially the largest markets for leather
in the t'.S. are those for automotive upholstery and furniture upholstery. While shipments in tin- ; :
markets for leather gloves and mittens, luggage, women's handbags, and leather clothing arc
expected to decline in the next five years, shipments of leather to the automotive and nor- • ;
autoinoti\e upholstery sectors industry sectors are projected to grov\ annual!) u".ir •. u>. !i\ „• ]vu civ:, i ?
Shipments for men's shoes is expected to grow by two percent annually, and tin lettthci uthletM -.'. .'• •
shoes market is expected to gro\\- by one percent annually over the next five > ears. Tim.-., it ap-ix-ars- "
there will be a shift in current production of finished leather products from the markets \\ ith
declining gro\\lh to the markets with large expected growth.
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3 ECONOMIC IMPACTS
The NESHAP on the leather tanning and finishing industry requires affected facilities to use
different formulations of finishing products or requires them to modify finishing equipment to
reduce emissions to the MACT floor,. A memorandum to the project files titled. "MACT floor
Emission Limits for Leather Tanning and Finishing Operations" provides details on the
development of the regulator}' alternatives for this rule10. The costs to comply with the regulation
will vary across facilities depending upon the subcategory to which they are included, the current
finishing operations, and baseline emission control equipment. These regulatory costs will have
financial implications for the affected producers, and possibly broader implications as these effects
are transmitted through market relationships to other producers and consumers.
It should be noted that all calculated costs and economic impacts remain unchanged from
those included in the analysis presented at proposal of the rule. howe\er. since proposal EPA has
'converted to the North American Industry Classification System (NA1CS) instead-of the Standard
Industry Classification System (SIC) to classify industries during economic analysis. Section 3.4
provides greater detail with respect to the change in industry classification methods
3.1 Summary of Compliance Costs
In a memo to the project files titled. "Cost Impacts Associated with HAP Emission
Reductions for Leather Tanning and Finishing Operations." (September 2. 1999). the EPA has
determined that total compliance costs imposed,on the 16 affected facilities described earlier;.
O\erall. fi\e- facilities will experience costs ranging from SO to S883.. while the remaining 11
.facilities experience estimated costs of S8.515.to SI0-5.590. The primary reason for a difference in
cost between these groups of facilities is that as a result of the regulation, some of the facilities \\i\l
be able to recapture some of the chemicals and product in the process to save on costs of
production.'The total annualized cost of the rule is S437.589. which represents only 0.0014% of
total industry revenues (based on 1996 value of shipments).
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3.2 Market Impacts
Typically, our economic analyses take several data elements to input to a model that
determines changes in market prices, output, and total social cost (via the change in producer and
consumer surplus). However, the impacts of this rule are not likely to produce any measurable
changes in an economic model of the Leather Tanning and Finishing industry for the following
reasons:
only 16 facilities out of the 330 establishments are affected.
total compliance cost represents a small percentage (0.0014%) of total market revenues.
the largest producers account for a.large percentage of market share (i.e.. percentage of total
production).
\Ve can conclude in genera] that because a model of the market is not likely to sho\\ am
ehanues resulting from the costs imposed by this regulation, the market as a whole will not show-. „•
adjustments in price and production and affected producers will not be able to recover any oi the :
compliance costs incurred by raising prices. Likewise, while production levels at some of the •
affected facilities may lower due to the increase in cost of production, other facilities will
compensate for this change such that overall industry production will not change.
Rather than perform a full market-analysis, the analysis takes a closer look at the firm-ie1. ei
impacts if we assume all costs will be absorbed by the owner of the leather tannery. We do this t><.\
determining the percentage of revenues that the compliance cost will consume. I:MIIL' duiv -•> • -i
collected from Dun and Bradstreet. we found that the 16 affected facilities are o\\ne'd h> 14 uimmue
parent firms'''. We were able to obtain revenue and employment data for 9 of thi. 14 fir:vi.-.- ! >-L • >.,.
affected facilities, the compliance costs as a percentage of firm revenues ranges from 0,00 to i o_'
percent. Typical profit margins in the industry average approximately 3-.6 percent'". Therefore, th^
impacts presented by this rule are likely to be minimal on all of the firms owning the affected -: -.
tanneries.
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3.3 Small Entity Screening Analysis
This regulatory action will potentially affect the economic welfare of the owners of leather
tanneries. The ownership of these facilities ultimately falls on private individuals who may be
owner'operators that directly conduct the business of the firms..or more commonly.'on investors or
stockholders that employ others to conduct the business of the firm on their behalf (i.e.. privately or
public corporations). The individuals that manage these facilities have the capacity to conduct
business transactions and make business decisions that affect the facility. The legal and financial
responsibility for compliance with the regulation ultimately rests with the facility managers:
however, the owners must bear the financial consequence of the decisions. Environmental
regulations like this rule potentially affect all businesses, large and small, but small businesses may
have special problems in complying with federal regulations.
The Regulatory Flexibility Act (RFA) of 1980 requires that special consideration be 'given to
small entities affected by federal regulation. The RFA was amended in.1996 by the Small Business
V •
Regulatory Enforcement Fairness Act (SBREFA) to strengthen the'RFA"s analytical and procedural
t
requirements. The RFA and SBREFA require the preparation of a regulatory flexibility analysis for
am rule that would have a significant impact on a substantial number of small entities, or a
disproportionate impact on small entities. . .
This section identifies the businesses that will be affected by this rule and provides a
preliminary screening-level analysis to assist in determining whether the rule is likely to impose a
significant or disprupor'ionate burden on small entities and whether a regulatory flexibility analysis
is required under the-Rl-A. The screening-level analysis employed here is a "sales test." which
computes the annualized compliance costs as a share of sales for each company.
The Small Business-Administration defines a small entity in the leather and tanning industry
as one with total employment at the parent company of less than 500 employees. As is stated in the
previous section, we collected data from Dun and Bradstreet and determined that the 16 affected
facilities are ownexl by.. 14 ultimate parent firms. \Ve were able to obtain revenue and employment
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data for 9 of the 14 firms and that 3 of these firms are classified as small. Many of the affected •
facilities are small at the individual locations, but most are incorporated into larger firms.
The calculation of cost-to-sales ratios for the 9 firms shows that only one firm (owning one
facility and who is classified as small) shows an impact that is slightly greater than 1 percent of
revenues (1.52%). All other firms have impacts well below 1/1 Oth of one percent (impacts range
from 0.00% to 0.09% of firm revenues). As is stated earlier, profit margins in this industry are on
average above 3 percent. Therefore, because the'observed impacts are well below typical profit
margins in the industry, we conclude that there will not be a significant impact on a substantial
number of small entities, and that the impacts are not disproportionate between small and large
firms.
3.4 Conversion from SIC to NAICS Industry Classification
The purpose of this section is to inform the reader about what changes, if any. occur to the
results of the economic impact and small entity analyses prepared in July 2000 for the proposal ol •
the Leather Tanning and Finishing Operations NESHAP when the data for the analyses are based on
a new s\ stem of classify ing industries, the North American Industry Classification S> stem ••
'(NAICS). As of October 1. 2000. EPA converted to the NAICS system for data collection on •
reuulated industries. Prior to this date and in its analysis of the proposed rule. EPA used the ;
Standard Industry Classification (SIC) system. . •
The Bureau of Census provides'a comparison of the two industry classificatk.n >> Meev;>:S- :;:•
their \\ebsite of the Census of Manufacturers (\\AVW.census.'gov). According to the Buioau's daw/; ;
the SIC 3111 that was formerly used for Leather Tanning and-Finishing is now represented iv. ;
NAICS code 316110. Under the SIC code in 1997. there were 332 establishments and the \u!t?o of >
shipments (total revenues) for the industry were S3.34 billion. Small businesses \\ere defined as
firms with employment of 500 or less. Under NAICS 313110. the data matches exa.ih \\ ith i;•„• <
SIC code data. Therefore, there can be a direct comparison between the SIC and UK- NAICS ; •:: the
industry. Because the final rule will not change any of the costs or economic impacts, the
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conclusions' for the leather tanning and finishing industry contained in the Economic Impact
Analysis at proposal will still apply for the final rule. Also for this industry, the definition of a
small business is the same as that of the SIC code, therefore, there is no change in the results of the
small entity analysis if it. is completed using the NAICS-based size standards.
4 SUMMARY . .
The U.S. is a key player in the world market for leather goods. We are a top producer in all
facets of leather production, including:
• raising cattle, sheep, pigs, and other animals;
• tanning and finishing hides and skins: and
manufacture of finished leather goods.
The regulation developed by the EPA to reduce emissions of HAPs will impact 16 facilities
in the leather tanning and finishing industry and are owned by 14 parent companies. The industry.
includes approximately 300 establishments in all. therefore, the affected producers represent a very
small fraction of the -leather tanning production in the U.S. The regulation is expected to cost a total
of S437.589 annually, which is 0.0014 percent of industry revenues. Because such a small fragment
of the industry is impacted by the rule, changes in the cost of production for these facilities resulting
from the rule will not influence market prices or production.
We determined the percentage of revenues that will be .consumed by compliance cost's and
found that in nearh all cases, the impacts are very minimal (ranging from 0.00% to 0.09% for
nearly all facilities). \Ye.found that only one facility had a moderate impact of 1.52 percent.
however, with average industry profit margins of 3.6 percent, we conclude this impact will not be
significant to this facility. Overall, we conclude that this rule will have a minimal (and in most
cases negligible) impact on the industry, as well as the individual facilities and firms in the industrv.
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5 REFERENCES
New England Tanners Club: "Leather Facts: A Picturesque Account of One of Nature's
Miracles." 1994. . '
Alpha Gamma Technologies. Inc.: "Industry Description for Leather Tanning and
Finishing Operations." Memo to Leather Tanning and Finishing Operations NESHAP
Project File: April 8. 1997.
3. Reference 1.
4. Reference 1. .
5. U.S. Department of Commerce: Bureau of Census. Census of Manufacturers:
"Concentration Ratios in Manufacturing:" Publication 3 MC92-S-2.
6. Reference 1. , •
7. U.S. Department of Commerce: Bureau of Census: 1996 Annual Survey of
Manufacturers. Statistics for Industry Groups and Industries. 1996.
8. Reference 2. <
9. L;.S. Department of Commerce. International Trade Administration. U'.S. Industry Trade
& Outlook'98.. McGraw-Hill. New York. New York. 1998.
10. Alpha Gamma Technologies. Inc.: "MACT Floor Emission Limits for Leather Tanning
and Finishing Operations." Memo to Leather Tanning and Finishing Operations NESHAP
Project File: December 9 .1999. .
1 1. Alpha Gamma Technologies. Inc.: "Cost Impacts Associated with HAP Emission
.Reductions for Leather Tanning and Finishing Operations." Memo to Leather Tanning
and Finishing Operations NESHAP Project File: September 2. 1999.
12. Dun and Bradstreet financial data obtained through confidential access of EPA IDEAs
database. Data contained in the Office of Air Quality Planning and Standards: Planning.
Resources <& Regional Management Staff: Clean Air Act Confidential Business
Information Files.
13. U.S. Department of Commerce: Bureau of Census: Quarterly Financial Reports for
Manufacturing. Mining, and Trade Corporations: Quarter for 1998.: website address
<\\ww.census.gov prod;99pubs'qfr-9Sq4.pdf>.
16
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1. REPORT NO.
EPA-452/R-01-015
TECHNICAL REPORT DATA
(Please read Instructions on reverse before completing)
2.
4. TITLE AND SUBTITLE
Economic Impact Analysis of the Leather Tanning and Finishing
Operations NESHAP: Final Rule
7. AUTHOR(S)
Lisa Conner; EPA, OAQPS
9. PERFORMING ORGANIZATION NAME AND ADDRESS
U.S. Environmental Protection Agency
Office of Air Quality Planning and Standards
Air Quality Planning and Strategies Division (MD-15)
Research Triangle Park, NC 27711
12. SPONSORING AGENCY NAME AND ADDRESS
John Seitz, Director
Office of Air Quality Planning and Standards
Office of Air and Radiation
U.S. Environmental Protection Agency
Research Triangle Park, NC 27711
3. RECIPIENT'S ACCESSION NO.
5. REPORT DATE
September 2001
6. PERFORMING ORGANIZATION CODE
8. PERFORMING ORGANIZATION REPORT NO.
10. PROGRAM ELEMENT NO.
11. CONTRACT/GRANT NO.
13. TYPE OF REPORT AND PERIOD COVERED
14. SPONSORING AGENCY CODE
EPA/200/04
15. SUPPLEMENTARY NOTES
16. ABSTRACT
This report presents a technical analysis of the economic impacts associated with the promulgated
NESHAP for Leather Tanning and Finishing Operations. The analysis evaluates adjustments in the leather
market (through price and production changes), social cost, and the resulting affects on employment,
international trade, and small businesses.
17.
KEY WORDS AND DOCUMENT ANALYSIS
a. DESCRIPTORS
Economic Impact Analysis (EIA)
Regulatory Flexibility Analysis (RFA)
18. DISTRIBUTION STATEMENT
Release Unlimited
b. IDENTIFIERS/OPEN ENDED TERMS
Air Pollution control
economic analysis
small business analysis
19. SECURITY CLASS (Report)
Unclassified
20. SECURITY CLASS (Page)
Unclassified
c. COSATI Field/Group
21. NO. OF PAGES
22. PRICE
EPA Form 2220-1 (Rev. 4-77) PREVIOUS EDITION IS OBSOLETE
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