Kelim, Chapter Twenty-Six, Mishnah Nine
1) If a hide had contracted midras uncleanness and its owner then intended it to be used for straps or sandals, it becomes clean as soon as he put the knife to it, the words of Rabbi Judah.
a) But the sages say: it does not become clean until he has reduced its size to less than five handbreadths.
2) Rabbi Elazar bar Zadok says: even if one made a napkin from a hide it remains unclean,
a) But if [he made one from] a covering it becomes clean.
Section one: The hide mentioned here is one that has already been designated for a use and then contracted midras uncleanness. The owner then decided to cut the hide up and use the leather for straps or sandals. Leather cut into straps for such use is pure (until it is attached to another vessel). According to Rabbi Judah, as soon as he begins to cut the leather up, it loses its status as a hide and it becomes pure.
The other sages argue that it is not pure until it is reduced to a size of less than five handbreadths. A piece of hide less than five handbreadths in size is not considered usable (we will learn this in 27:2) and is pure. But simply beginning to cut the hide is not a sufficient act to free it from its impurity.
Section two: According to Rabbi Elazar bar Zadok, if one makes a small napkin out of a large hide used as a rug, the hide is still impure because a napkin is considered just a small rug. Merely reducing the size of a hide is not the type of physical change required to rid it of its impurity, because the leather is still being used in the same manner.
However, if he changes a covering into a napkin he has changed the nature of the hide’s usage. In this case, even though he changed it into another item that is susceptible to impurity (a napkin is susceptible), it loses its old impurity. While the new item will be susceptible, the impurity that was within the hide is gone.