Italian cases reveal Asian production in 'Made in EU' luxury
Recent Italian judicial actions, including a 2024 case by the Milan Public Prosecutor's Office, reveal how major European luxury brands use Asian facilities for primary production despite "Made in Europe" labelling.
Judicial Scrutiny on Luxury Goods Origin
European luxury fashion brands face increasing scrutiny over the actual origin of their products, challenging the long-held narrative of exclusive European craftsmanship. This tension stems from international trade regulations that permit significant manufacturing to occur outside Europe while still qualifying for a "Made in Europe" label.
In 2024, the Milan Public Prosecutor's Office initiated proceedings that uncovered networks of illegal subcontractors in Italy's Lombardy and Tuscany regions. These facilities, often Chinese-owned, were found to be performing extensive assembly work for major luxury houses, including Dior and Armani.
Court documents detailed how bags produced for less than €100 were subsequently retailed for thousands of euros, exposing a significant gap between perceived origin and actual production for consumers and investors.
The 'Last Substantial Transformation' Framework
The current regulatory framework, specifically Article 60(2) of the European Union Customs Code, permits this division of labour. This non-preferential origin rule states that a product legally qualifies for a "Made in [Country]" label if its "last substantial transformation" takes place within that country's borders.
This provision allows brands to conduct primary manufacturing stages, such as complex component production, in Asia, while only completing minimal final operations, like attaching a zipper or sewing a logo, in Europe.
Compliance oversight for these rules is largely administrative, relying primarily on self-declarations from brands rather than physical audits of deeper supply chain tiers. This regulatory approach enables European luxury conglomerates to maintain their domestic heritage claims while optimising global supply chain costs.
Asia's Advanced Manufacturing Capabilities
The notion that non-European manufacturing solely provides cheap, low-skill assembly is increasingly outdated. Modern European luxury production frequently relies on advanced industrial and artisanal capabilities distributed across the Asian region. China, for instance, offers high-throughput technical infrastructure and specialised material processing.
Facilities in Southeast Asia, particularly Vietnam and Indonesia, contribute specialised craftsmanship, such as buffalo horn carving for jewellery and expertise in regional heritage textiles.
In South Asia, Indian ateliers, like Chanakya International in Mumbai, provide intricate hand-embroidered dresses and runway tapestries for prominent European couture houses including Dior, Fendi, Lanvin, and Valentino. These capabilities demonstrate Asia's integral role in the high-value segments of the global luxury supply chain.
Shifting Asian Consumer Preferences and Local Brands
Growing supply chain transparency is influencing consumer attitudes, particularly across East and Southeast Asia. A rising segment of discerning, tech-savvy consumers is moving beyond brand loyalty based solely on European origin. These consumers are increasingly rejecting the assumption that the West is the exclusive source of true luxury craftsmanship.
In China, the "Guochao" movement, or "national tide," has elevated domestic luxury labels. These local brands offer craftsmanship comparable to Western counterparts while reflecting local identity and cultural resonance.
This shift suggests a growing demand for authenticity and local relevance, potentially impacting the market share of traditional European luxury houses in key Asian hubs.
Implications for Asian Manufacturers and Investment
The increased scrutiny on origin labelling and the evolving consumer landscape present distinct implications for Asian manufacturers and investors. Asian production facilities, which contribute advanced technical and artisanal skills to the luxury sector, may see increased demand for transparency and direct branding opportunities.
For investors, this trend could signal a reallocation of capital towards Asian luxury brands that can authentically claim local craftsmanship and cater to the "Guochao" movement's growth.
Continued judicial actions in Europe, such as those seen in Italy in 2024, are likely to accelerate the need for clearer origin declarations, potentially driving further investment into establishing fully integrated, high-value manufacturing ecosystems within Asia to serve both global and local markets.
This analysis is journalism, not investment advice; consult a licensed professional before making financial decisions.
Pieces are credited to the desk that commissioned and edited them. Our editorial standards, and the desks behind them, are set out on the Editorial Standards and Team pages.
Further reading
- Briefings · Industry
How is Etihad Airways boosting Bangkok flight capacity for peak season?
The carrier has deployed Airbus A380 superjumbos on its daily route to the Thai capital, increasing passenger capacity by approximately 30% compared to its A350 fleet.
Continue reading → - Briefings · Industry
What new rare earth processing methods is the US funding?
Washington is investing in private firms to develop novel rare earth refining techniques, aiming for self-sufficiency as Beijing restricts refining technology and skilled personnel exports.
Continue reading → - Briefings · Markets
What will ECB's €50 billion EUREP facility mean for global euro liquidity?
The Eurosystem repo facility for central banks, updated this year, provides standing access and significant same-day liquidity to non-euro area central banks to manage euro funding needs.
Continue reading →