REPORT TO THE MINISTER OF FINANCE
REQUEST FOR TARIFF RELIEF BY MAJESTIC INDUSTRIES (CANADA) LTD.
REGARDING WOVEN TERRY CLOTH OF 100 PERCENT COTTON
JANUARY 12, 2001
TABLE OF CONTENTS
Request No. TR-2000-002
Zdenek Kvarda, Presiding Member
Richard Lafontaine, Member
James A. Ogilvy, Member
Counsel for the Tribunal:
Address all communications to:
Canadian International Trade Tribunal
Standard Life Centre
333 Laurier Avenue West
On July 14, 1994, the Canadian International Trade Tribunal (the
Tribunal) received terms of reference from the Minister of Finance
(the Minister) pursuant to section 19 of the Canadian
International Trade Tribunal Act.
The Minister directed the
Tribunal to investigate requests from domestic producers for tariff
relief on imported textile inputs for use in their manufacturing
operations and to make recommendations with respect to those
requests to the Minister.
Pursuant to the Minister's reference, on July 18, 2000, the
Tribunal received a request from Majestic Industries (Canada) Ltd.
(Majestic) for the removal, for an indeterminate period of time, of
the customs duty on importations from all countries of certain
woven terry cloth of 100 percent cotton, for use in the manufacture
of bathrobes and men's shave wraps. As part of its request,
Majestic asked for immediate tariff relief.
On October 2, 2000, the Tribunal, being satisfied that the
request was properly documented, issued a notice of commencement of
investigation that was distributed and published in the October 14,
2000, edition of the Canada Gazette.2
The notice described the
fabric for which tariff relief was sought as "terry fabric, solely
of cotton, warp pile, bleached or dyed, of a weight of 350 g/m² or
more but not exceeding 450 g/m², of tariff item No.
5802.19.90, for use in the manufacture of bathrobes and men's shave
wraps" (the subject fabric).
As part of the investigation, the Tribunal's research staff sent
questionnaires to potential domestic producers of fabrics identical
to or substitutable for the subject fabric. Questionnaires were
also sent to potential users and importers of the subject fabric. A
letter and a sample of the subject fabric were sent to the Canada
Customs and Revenue Agency (CCRA) requesting its advice as to the
tariff classification of the subject fabric and an analysis of its
technical characteristics. In addition, the Department of Foreign
Affairs and International Trade (DFAIT) was asked to provide
current information on any quantitative import restrictions on the
subject fabric, and the Department of Industry was informed of the
request and asked to provide any relevant comments. The Department
of Finance was also informed of the request.
A staff investigation report was not necessary for the purposes
of this investigation, since potential producers of fabrics
identical to or substitutable for the subject fabric did not oppose
A public hearing was not held for this investigation.
The subject fabric is described as a 100 percent cotton woven
terry velour. It is currently imported from Brazil and Turkey.
The CCRA indicated that the subject fabric is classified under
tariff item No. 5802.19.90 of the schedule to the Customs
and is presently dutiable at 14 percent
ad valorem under the MFN tariff and at 5 percent ad
valorem under the Mexico tariff and the Chile tariff and is
duty free under the U.S. tariff and the Canada-Israel Agreement
Majestic is a privately
owned and operated company, located in Montréal, Quebec, that has
been in operation for 80 years. Majestic is a leading manufacturer
of men's bathrobes and loungewear and supplies major retailers,
independent stores and institutions in Canada and the United
Majestic argued that no identical or substitutable fabrics are
available from domestic sources. It stated that one domestic
supplier, FCC Canada Inc., of Toronto, Ontario, is not able to
provide towelling fabric by the yard. Further, over the last two
years, Majestic has been unable to supply its needs domestically
and has had to seek alternative sources of supply overseas. It
further stated that tariff relief would put the company in a better
position to compete against the direct importation of finished
garments and would maintain and foster growth for the domestic
production of bathrobes. It estimated that it could create 20
to 30 full-time positions within a year of tariff relief
Majestic also stated that similar types of fabrics, namely,
jacquard and yarn-dyed woven terry fabrics, have been the subject
of favourable recommendations by the Tribunal.4
Majestic pointed out that tariff relief would provide it with a
competitive advantage and would enable it to compete against
foreign manufacturers that operate in an economic climate
characterized by much lower labour and overhead costs. It further
submitted that tariff relief would allow it to increase its
domestic production, provide more jobs and contribute to its
financial health and stability.
Domestic Users and
Importers of the Subject Fabric
Cantex Distribution Inc.
Cantex, of Niagara Falls, Ontario, submitted that it supported
the request without any limitation with respect to end use or
dyeing. Cantex indicated that, since it manufactures bibs, wraps,
towels and face cloths, it did not want any limitations in the
Lubertex, of Montréal, Quebec, indicated that terry cloth was
not an area in which it had an interest and, therefore, did not
complete the questionnaire. However, it did indicate that it
supported any duty reductions, since it would allow Canadian
manufacturers to become more competitive in a difficult market.
Caulfeild Apparel Group
Caulfeild, of Downsview, Ontario, submitted that, to its
knowledge, there are no commercial mills in Canada capable of
producing the type of fabric used to produce bathrobes to the
quality standards that would be required to become commercially
"cuttable". It further stated that it has closed its large terry
bathrobe manufacturing operation. Although it continues to
manufacture some terry robes in Canada, those quantities are
minimal and it now imports virtually all its terry cloth needs.
Accordingly, Caulfeild stated that, although it was not interested
in supporting the request because it would have an impact on its
own importations of finished products, it recognized that the
subject fabric is not available in Canada and denying the request
would be a disservice to Canadian manufacturers, particularly those
that are export capable.
Tex-Pro Western Limited
Tex-Pro, of Vancouver, British Columbia, submitted that it
supported the request, since it produces similar items and was
formerly supplied by the same domestic supplier as Majestic. Since
that source of supply has now ceased, the only alternatives are
offshore. Tex-Pro further stated that, without a domestic source of
velour terry fabric, it would have to compete at a disadvantage
with importers of finished robes. It also submitted that, with
tariff relief, it would be able to continue to manufacture robes in
W. Laframboise Ltée
Laframboise, of Ville d'Anjou, Quebec, indicated that it did not
import the subject fabric.
DFAIT informed the Tribunal that Canada currently maintains
quota restraints on cotton terry fabric, finished, imported from
the People's Republic of China, Hong Kong and Chinese Taipei. These
restraints include cotton fabric of tariff item No. 5802.19.90.
DFAIT also informed the Tribunal that the bilateral agreement,
which provides for this restriction between the Government of
Canada and the Government of the People's Republic of China, has
been in place since 1987. The bilateral agreements between the
Government of Canada and the Government of Hong Kong and with the
Taiwan Textile Federation have been in place since 1979. According
to DFAIT, the quota limit on this particular woven fabric was
implemented to protect Canadian manufacturers from large volumes
and low prices of exports from these countries.
DFAIT also indicated that it would consider requests for
ex-quota entry on textile inputs where a recommendation has been
made by the Tribunal to remove the customs tariff on the basis of
non-availability. Ex-quota treatment will only be granted in cases
where it can be demonstrated that there is an extra charge for
using products under quota or where goods are not otherwise
available in Canada.
The CCRA has indicated that there would be no additional costs,
over and above those already incurred by it, to administer the
tariff relief requested for the subject fabric.
The Minister's terms of reference direct the Tribunal to assess
the economic impact on domestic textile and downstream producers of
reducing or removing a tariff and, in so doing, to take into
account all relevant factors, including the substitutability of an
imported fabric for a domestic fabric and the ability of domestic
producers to serve the Canadian downstream industries.
Consequently, the Tribunal's decision to recommend tariff relief is
based on the extent to which it considers that such tariff relief
would provide net economic gains for Canada.
Majestic claimed that there is no domestic production of fabrics
identical to or substitutable for the subject fabric and,
consequently, over the last two years, it has been obliged to seek
alternative sources of supply overseas. This claim was not
contested by any domestic fabric producers. Therefore, other than
the corresponding duty revenues forgone by the government, the
Tribunal does not believe that there will be any direct costs
associated with the removal of the customs duty on the importation
of the subject fabric. Furthermore, tariff relief has already been
provided for two similar types of fabrics, namely, jacquard and
yarn-dyed woven terry fabrics.
On the basis of the information available to the Tribunal,
tariff relief would result in yearly benefits to Majestic in excess
of $100,000. Furthermore, the Tribunal is of the opinion that
tariff relief would provide Majestic with a competitive advantage
that would enable it to compete against foreign manufacturers that
operate in an economic climate characterized by much lower
In summary, the Tribunal finds that tariff relief would provide
net economic gains to Canada.
With respect to Majestic's request that tariff relief be
effective "immediately", the Tribunal interprets this request to
mean that Majestic would like tariff relief to be effective as of
the date of the request. The Tribunal has stated, in previous
cases, that it will not consider recommending such relief other
than in exceptional circumstances. Majestic has provided no
evidence to justify such a request. The Tribunal, therefore, is not
persuaded that the current circumstances are so exceptional as to
warrant a recommendation for retroactive tariff relief.
Finally, the Tribunal has reviewed Cantex's request to expand
the end-use provision to cover all other end uses (e.g. bibs, face
cloths). As it has stated in the past,5
the Tribunal will only
consider such requests when received prior to the initiation of the
investigation. Consequently, the Tribunal has decided not to expand
the scope of the investigation beyond the goods described in the
notice of commencement of investigation. Should Cantex wish to
obtain tariff relief for all other end uses, a new request must be
filed according to the Tribunal's Textile Reference
The Tribunal hereby recommends to the Minister that tariff
relief be granted, for an indeterminate period of time, on
importations from all countries of terry fabric, solely of cotton,
warp pile, bleached or dyed, of a weight of 350 g/m2 or
more but not exceeding 450 g/m2, of subheading No.
5802.19, for use in the manufacture of bathrobes and men's shave
James A. Ogilvy
James A. Ogilvy
1 . R.S.C.
1985 (4th Supp.), c. 47.
2 . C.
3 . R.S.C.
1985 (3d Supp.), c. 41.
4 . See
Request Nos. TR-95-053 and TR-95-059.
5 . See
Request No. TR-98-007.
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Initial publication: January 12, 2001