Reviews (Section 76)
EXPANDED VINYL COATED KNITTED FABRICS RANGING IN WEIGHT
FROM 406 TO 1016 GRAMS PER SQUARE METRE (12 TO 30 OUNCES PER SQUARE
YARD), ORIGINATING IN OR EXPORTED FROM THE REPUBLIC OF KOREA
Review No.: RR-89-007
TABLE OF CONTENTS
Ottawa, Friday, May 11, 1990
Review No.: RR-89-007
IN THE MATTER OF a review under section 76 of the Special
Import Measures Act of the finding of likelihood of material
injury dated February 3, 1984, made by the Anti-dumping Tribunal
EXPANDED VINYL COATED KNITTED FABRICS RANGING IN WEIGHT FROM
406 TO 1016 GRAMS PER SQUARE METRE (12 TO 30 OUNCES PER SQUARE
YARD), ORIGINATING IN OR EXPORTED FROM THE REPUBLIC OF
The Canadian International Trade Tribunal, under the provisions
of section 76 of the Special Import Measures Act, has
conducted a review of the finding of likelihood of material injury
dated February 3, 1984, made by the Anti-dumping Tribunal
respecting expanded vinyl coated knitted fabrics from the Republic
of Korea in Inquiry No. ADT-14-83.
Pursuant to subsection 76(4) of the Special Import Measures
Act, the Canadian International Trade Tribunal hereby rescinds
the above-mentioned finding dated February 3, 1984.
Kathleen E. Macmillan
Kathleen E. Macmillan
Arthur B. Trudeau
Arthur B. Trudeau
Michèle C. Blouin
Michèle C. Blouin
Robert J. Martin
Robert J. Martin
Special Import Measures Act - Whether to rescind or
continue the Anti-dumping Tribunal's finding dated February 3,
1984, relating to the above-mentioned goods.
DECISION: The Canadian International Trade Tribunal
rescinds the above-mentioned finding dated February 3, 1984. Given
the state of the market for vinyl coated knitted fabrics, the
healthy financial status of Morbern and the low volume of imports,
the Tribunal concludes that the finding relating to the subject
goods should be rescinded.
Place of Hearing: Ottawa, Ontario
Date of Hearing: February 19, 1990
Date of Order & Reasons: May 11, 1990
Tribunal Members: Kathleen E. Macmillan, Presiding Member
Arthur B. Trudeau, Member
Michèle C. Blouin, Member
Director of Research: Marcel Brazeau
Research Officer: Audrey Chapman
Statistical Officer: Gilles Richard
Distribution Clerk: Molly C. Hay
Participants: G.P. MacPherson
for Morbern Inc.
Lucky America, Inc.
Sales and Marketing
Leonard J. Cardozo
Sales Manager - Ontario
Badrig B. Afeyan
Afeyan Industries Inc.
Address all communications to:
Canadian International Trade Tribunal
Journal Tower South
365 Laurier Avenue West
This is a review under section 76 of the Special Import
Measures Act (SIMA) by the Canadian International Trade
Tribunal (the Tribunal) of the Anti-dumping Tribunal's (ADT)
finding of likelihood of material injury dated February 3, 1984,
relating to expanded vinyl coated knitted fabrics. In that finding,
the ADT found that the dumping in Canada of expanded vinyl coated
knitted fabrics originating in or exported from the Republic of
Korea had not caused, was not causing, but was likely to cause
material injury to the production in Canada of like goods. In the
opinion of the ADT, the past and present injury suffered by Morbern
Inc. (Morbern) was not sufficient to warrant a finding of past and
present injury. However, with respect to future injury, the ADT
considered that the threat of the one importer from the Republic of
Korea entering another major area of the market in Canada and
introducing other product lines was real and imminent, and
therefore concluded that the continued dumping was likely to cause
Turning to this review, the evidence filed shows that imports of
expanded vinyl coated knitted fabrics from the Republic of Korea
declined substantially in 1989. In previous years, these imports
never accounted for more than 3 percent of the total market for the
subject goods and have always been in the lower priced segment of
the market. This low-priced market sector has been decreasing every
year since 1986. Morbern's share of this declining low-end market
increased markedly in 1988 and again in 1989.
The Republic of Korea has never been a factor in the higher
priced segment of the market for the subject goods where imports
emanate mostly from the United States.
The domestic producers have increased sales to the United States
substantially over the past few years. In the process, Morbern has
become more cost-effective and less vulnerable to material
Given the state of the market for vinyl coated knitted fabrics,
the healthy financial status of Morbern, the low volume of imports
and the nature of the industry, the Tribunal concludes that the
finding relating to the subject goods should be rescinded.
Pursuant to section 76 of SIMA, the Tribunal initiated a review
of the finding of the ADT dated February 3, 1984, respecting
expanded vinyl coated knitted fabrics from the Republic of Korea
and issued a Notice of Review dated November 8, 1989. This notice
was forwarded to all known interested parties and was published in
the Canada Gazette of November 18, 1989.
As part of its review, the Tribunal sent detailed questionnaires
to the Canadian manufacturers and selected importers of the subject
goods. From the replies to the questionnaires and other sources,
the Tribunal's research staff prepared public and protected
pre-hearing staff reports relating to the review. In addition, the
record of this review consists of all relevant documents, including
the original finding, the Notice of Review and public and
confidential sections of the replies to questionnaires. All public
exhibits were made available to interested parties and protected
exhibits, to independent counsel only.
Public and in camera sessions were held in Ottawa,
Ontario, on February 19, 1990.
The producer, Morbern, which was represented by counsel at the
hearing, submitted evidence and made argument in support of
continuing the finding. Canadian General-Tower Limited (C.G.T.)
submitted information, but did not participate in this review.
Lucky-Goldstar International Corp. (Lucky), an exporter from the
Republic of Korea, was represented by Mr. Y.S. Lee of Lucky
America, Inc. Mr. Lee submitted evidence and made argument in
support of the rescission of the finding.
Afeyan Industries Inc. (Afeyan), an importer of the subject
goods, was represented by Mr. B.B. Afeyan. Mr. Afeyan submitted
evidence and also made argument in support of the rescission of the
The product under consideration in this review was described in
the ADT's finding as:
expanded vinyl coated knitted fabrics ranging in weight from 406
to 1016 g per square metre (12 to 30 oz. per square yard),
originating in or exported from the Republic of Korea.
Expanded vinyl coated knitted fabrics may be produced by either
the calendering process or the casting process. Calendering is a
three-step operation requiring a substantial capital investment. In
the first stage of this process, a solid vinyl skin is formed by
pressing a vinyl compound between rollers. Next, a vinyl foam
compound is applied to a knitted fabric by the same process. The
foam coated fabric then enters an oven where the foam is expanded.
Finally, the vinyl skin and the foamed vinyl coated fabric are
laminated to produce an expanded vinyl coated knitted fabric.
The casting process is a one-step operation. Vinyl compounds are
continuously cast on casting paper in a skin oven to form a vinyl
skin. This is conveyed to a foam oven where vinyl foam compounds
are added. The material then converges with a knitted fabric in the
expansion oven where the foam is expanded and the major components
are laminated together.
There are many uses and applications for expanded vinyl coated
knitted fabrics, the most important of which is in office furniture
manufacturing. In addition, it has applications in the restaurant
trade, automotive seating, domestic furniture, marine seating,
luggage, handbags, footwear and a variety of smaller
The domestic industry consists of three producers: Morbern,
C.G.T. and Entreprises Beckwith-Bemis Inc. (Beckwith-Bemis).
Morbern was the largest domestic producer of the subject goods
at the time of the finding and still is the largest domestic
producer. It is a Canadian-controlled private corporation, founded
in 1965 as an expansion of Service Backing and Coating Corporation
Limited. The company operates two divisional plants which include
facilities at Cornwall and Montréal. The knitted material used by
Morbern is produced at its knitting plant in Montréal, Quebec. The
coating operation is completed at the plant in Cornwall, Ontario.
The production of expanded vinyl coated knitted fabrics represents
virtually all of the firm's output. Morbern's production process
has not changed since the original finding. It continues to use the
casting process of production.
C.G.T. is a privately owned, Canadian company. It is a leading
world producer of vinyl films and coated fabrics. C.G.T. is the
second largest Canadian producer of the subject goods which are
produced in its Toronto and Cambridge facilities. Its production of
expanded vinyl coated knitted fabrics has grown dramatically since
the time of the original finding. C.G.T.'s sales of the subject
goods are almost exclusively to the automotive sector of the
market, and it does not experience any competition from low-priced
imports in this market sector. C.G.T. uses both methods of
producing the subject goods, the calendering process and the
The third Canadian producer, Beckwith-Bemis, which was founded
in 1946, represents a very small proportion of domestic production
of the subject goods. The major portion of Beckwith-Bemis'
business, which is not part of the subject goods, is the production
of vinyl for the shoe industry.
On February 3, 1984, the ADT found that the dumping in Canada of
expanded vinyl coated knitted fabrics ranging in weight from 406 to
1016 g per square metre (12 to 30 oz. per square yard), originating
in or exported from the Republic of Korea had not caused, was not
causing, but was likely to cause material injury to the production
in Canada of like goods.
In its consideration of material injury, the ADT noted that
efficient production of these goods required large volumes and that
one plant of optimum size would satisfy the Canadian market. It
also noted that a large part of Morbern's output was exported to
provide the production volume necessary for maximum efficiency.
Nevertheless, Morbern's corporate strength required the maintenance
of a strong domestic base. Much of the evidence presented at the
hearing was concerned with the threats to the domestic base offered
by the dumped imports.
In the opinion of the ADT, the past and present injury suffered
by Morbern mainly took the form of price suppression. However,
Morbern's pricing was not affected over a large proportion of its
sales, because offers for the product originating in the Republic
of Korea had been confined to certain areas of the Canadian market,
and only in one product range. The loss of market share to dumped
imports in 1982 and 1983 contributed in some measure to the
domestic producer's reduced profitability during the period.
However, on the whole, the ADT concluded that the past and present
injury suffered was not sufficient to warrant a finding of past and
present material injury.
With respect to the likelihood of material injury, the ADT gave
considerable weight to the then recent appointment of a sales agent
in the Toronto area by the major importer of the product
originating in the Republic of Korea, Afeyan. Many of Morbern's
large accounts were in Ontario, and the ADT was persuaded that the
recent appointment of a sales agent demonstrated the likelihood
that the price suppression already suffered by Morbern would be
made worse. Furthermore, competition from the dumped product had
begun to affect Morbern's sales of other qualities of vinyl coated
fabric. The ADT considered that movement into another major market
area and new product lines by Afeyan would represent a significant
increase in the degree of injury suffered. The market share changes
in the aggregate were not considered to be material by the ADT.
However, they were of much greater significance when considered in
relation to one product line only, in the lower priced end of the
market and in one geographical area. The ADT considered that the
threat of such a development was real and imminent. In its opinion,
it was Afeyan's price advantage, permitted by the dumping, that
enabled it to weather the adverse economic conditions of 1982 more
successfully than could Morbern.
For these reasons, the ADT concluded that continued dumping of
expanded vinyl coated knitted fabrics from the Republic of Korea
was likely to cause material injury to the production in Canada of
Counsel for Morbern recognizes that imports of expanded vinyl
coated knitted fabrics from the Republic of Korea are not affecting
Morbern's production, sales or prices at this time. Morbern
believes that the finding in Inquiry No. ADT-14-83 continues to
have its intended effect of preventing material injury caused by
imports from the Republic of Korea. Morbern is said to have
demonstrated its ability to compete successfully with imports from
the Republic of Korea when goods are not priced below normal value
and has done well since the finding, and particularly with its
exports to the US market.
Morbern's continuing concern in respect of the Republic of Korea
is the likelihood that importers would switch to goods from the
Republic of Korea if the finding were rescinded. Counsel argued
that the ADT finding had halted the growth of imports from the
Republic of Korea which were affecting Morbern's market in 1983.
Although imports from the Republic of Korea have decreased over the
past two years, counsel stated that Morbern was encountering
competition on the basis of price from several countries, notably
East Germany, Hungary and Taiwan.
Counsel argued that there might be problems with available
import statistics in that goods might be transshipped through the
United States or that importers might be "classification shopping"
for the lowest tariff rate. Furthermore, the market data made
available showed a broader range of goods than that in which
Morbern faced competition from low-priced imports.
Counsel suggested that the significant drop in imports from the
Republic of Korea in 1989 might be linked to the revised normal
values that resulted from a review that was conducted by Revenue
Canada in late 1988. It was noted that Revenue Canada's previous
review was done in 1986 and that the long interval between reviews
might have resulted in significant increases in normal values,
thereby negatively impacting the volume of imports into Canada of
expanded vinyl coated knitted fabrics from the Republic of Korea in
Counsel referred to the evidence presented regarding the degree
of backward integration at Lucky, as well as the nature of the
products and the markets this integration covers. Counsel for
Morbern argued that, in coming years, pressure would increase on
producers to maximize the output of the subject goods and the goods
of which they are made, thereby increasing the incentive to dump
the subject goods in Canada. In addition, Morbern argued that the
Korean prices were so close to its own prices and the incentive to
resume dumping so strong that, in the absence of this finding, the
dumping would resume and, with it, the injury which the finding was
designed to prevent.
Finally, counsel argued that there were strong reasons why the
finding should be continued, not the least of which is the fact
that Morbern is currently pursuing a complaint with Revenue Canada
involving price-suppressing imports from several countries other
than the Republic of Korea.
Afeyan, the major importer of vinyl from the Republic of Korea
at the time of the finding, argued that the finding had had no
impact on the company's performance because Afeyan's import prices
from the Republic of Korea had always been higher than the normal
values determined by Revenue Canada.
Afeyan noted that its performance had been affected by the fact
that the overall market for expanded vinyl coated knitted fabrics
was shrinking because of substitution by other materials. Afeyan
stated that its imports, sales and inventories of the subject goods
were dropping year after year. If the Tribunal were to look at its
largest volume of imports in any given year since the finding, it
would find that it represents but a small portion of the total
market. Afeyan contended that the reason Morbern's sales were down
was because the market for the low-end product was shrinking and
that other products were being substituted for the vinyl in
question. For example, Mr. Afeyan noted that he had introduced a
new method of manufacturing chairs which uses unsupported vinyl
instead of vinyl coated knitted fabrics.
Mr. Lee of Lucky, the exporter, argued that it had not dumped
the subject goods in Canada since the finding, and that it had no
intention of dumping the subject goods in the future. Mr. Lee noted
that the volume of vinyl coated knitted fabrics that his company
exports to Canada was very small in relation to its total exports
and, therefore, the Canadian market is not of major concern to
Lucky at this time.
Total production of expanded vinyl coated knitted fabrics in
Canada has increased every year since the finding was issued. This
increase is attributable solely to increases in exports to the
United States by Morbern and C.G.T. Morbern's production of the
subject goods grew from 1983 to 1987 and then decreased in 1988 and
again in 1989.
Morbern's domestic sales of the subject goods have fallen since
1985. However, export sales had strong increases in 1986 and 1987.
Profitability was fairly steady from 1983 to 1988, but dropped
significantly in 1989.
Total apparent imports of the subject goods from all countries
increased from about 1.3 million square metres in 1983 to almost
2.7 million square metres in 1988. Imports from the Republic of
Korea fluctuated over the years covered by this review. Imports of
the subject goods from the Republic of Korea accounted for 28
percent of total imports in 1983. From 1984 to 1988, they
fluctuated between 183,000 and 328,000 square metres. In 1989, they
accounted for approximately 4 percent of total imports. All imports
from the Republic of Korea are in competition for the lower priced
end of the market.
The United States has traditionally been by far the most
important foreign source of supply of the subject goods. Imports
from the United States represented 91 percent of imports for the
first 10 months of 1989. However, a major proportion of these
imports is destined for the automotive industry and other higher
priced vinyl markets in which competition from low-priced imports
is not felt.
Imports from other sources, mostly low-priced, tend to fluctuate
rather widely from year to year.
The Canadian market of the subject goods, in volume terms, has
fluctuated somewhat over the years. The market share held by
domestic producers has declined by more than 10 percentage points
from 1984 to 1989. Imports from the Republic of Korea have
accounted for between one and three percentage points since 1984.
In 1989, they stood at less than half of one percentage point.
These have always been confined to the lower priced end of the
market. During the same period, imports from the United States have
accounted for between 8 and 30 percent of the market and are
heavily concentrated in the higher-priced end of the market.
An analysis of Morbern's sales in the high-priced and low-priced
market segments shows that Morbern's sales volume has decreased on
its high-priced vinyl sales. It also reveals that the apparent
market for the low-end market has plummeted by more that 30 percent
over the last five years. However, Morbern's share of this low-end
market sector has grown dramatically in 1989.
Average unit selling prices for Canadian producers increased
marginally over the period covered by this review. The average
selling prices of imports from the Republic of Korea tended to be
lower than the Canadian producers' selling prices.
Overall, Morbern's profit picture is a healthy one. This is
mainly attributable to the success Morbern has had in exporting
increasing volumes of the subject goods to the United States.
The Tribunal's task in this review was to determine whether the
industry was vulnerable to material injury caused by the potential
resumption of dumping from the Republic of Korea, and to assess the
propensity of the exporter in that country to dump in Canada in the
The evidence shows that, since 1983, imports from the Republic
of Korea have not increased their market penetration,
notwithstanding the fact that they have been largely undumped and
priced below those of Morbern. During this period, Morbern's total
domestic sales of the subject goods have continued to decline, but
not in the low end of the market where the competition is with the
Republic of Korea and other low-priced imports. Overall, Morbern's
total sales have increased owing to strong growth in sales to the
The evidence also indicates that the lion's share of imports of
the subject goods originates in the United States and that these
are mostly of a higher quality, grade and price than the goods from
the Republic of Korea. The majority of the imports from the United
States are destined for the automotive and other higher priced
markets, areas occupied almost entirely by Morbern and C.G.T., the
other major Canadian producer. There is no evidence that imports
from the Republic of Korea have ever been sold in this market.
Market data obtained demonstrate clearly that demand for
low-priced expanded vinyl coated knitted fabrics is on a steep
downward trend. This seems to stem primarily from substitution of
other materials by users such as furniture and luggage
manufacturers. Despite this market decline, the record shows that
Morbern has not been affected by imports from the Republic of Korea
in its ability to increase market share in the low-priced end of
the market nor in its ability to maintain and increase prices.
Morbern is a profitable company. Over the past several years,
its export performance has contributed significantly to growth in
production and resulted in lower costs per unit of output.
All in all, the Tribunal is persuaded by the evidence, as it
relates to production, market share, prices and profits, that
Morbern is not in a vulnerable position vis-à-vis imports from the
Republic of Korea. Indeed, these imports have lost ground in the
marketplace, notwithstanding their low prices.
In regard to propensity to dump, the evidence presented
regarding capacity and vertical integration at Lucky, by far the
major exporter from the Republic of Korea, leads the Tribunal to
believe that the nature of the integration will render the company
more efficient and cost-effective, not more susceptible to dump the
subject goods in the Canadian market. There would appear to be
little incentive to dump, as the import prices from the Republic of
Korea are already lower than Morbern's prices. Moreover, the market
for these goods is small and declining.
Furthermore, the Tribunal saw no evidence of imports from the
Republic of Korea moving into the higher priced segment of the
market, despite allegations to this effect.
In argument, counsel for Morbern made a number of comments
regarding problems with data on imports and the possibility of
transshipment through the United States and "classification
shopping" by importers to obtain better rates of duty. The Tribunal
is of the view that transshipment is unlikely to apply to goods
from the Republic of Korea since the GPT status would be lost if
such goods entered from the United States. Moreover, the Tribunal
was unable to find any evidence of possible misclassification that
would have the effect of altering the market data on the
Counsel for Morbern has put forth the argument that imports from
the Republic of Korea may have decreased in 1989 because of new
normal values established by Revenue Canada which may have been
substantial enough to discourage imports. The Tribunal is satisfied
that this was not the case. The revisions to normal values made in
late 1988 were marginal.
The original finding was made on the basis of likelihood of
material injury. The market penetration anticipated at the time did
not materialize in spite of the low prices. The low-priced segment
of the market is declining and there is no evidence that imports
from the Republic of Korea have or will penetrate the high-priced
end of the market. The domestic industry is not vulnerable
vis-à-vis imports from the Republic of Korea nor is there, in the
view of the Tribunal, a propensity to dump by exporters in the
Republic of Korea.
For the foregoing reasons, the Tribunal is of the view that the
finding of the ADT dated February 3, 1984, concerning expanded
vinyl coated knitted fabrics originating in or exported from the
Republic of Korea should be rescinded forthwith.
[Table of Contents
Initial publication: August 22, 1997