REPORT TO THE MINISTER OF FINANCE
REQUEST FOR TARIFF RELIEF BY TANTALUM MINING CORPORATION OF CANADA
LIMITED REGARDING A FILTERING FABRIC
MARCH 21, 2001
TABLE OF CONTENTS
Request No.: TR-2000-003
Pierre Gosselin, Presiding Member
Counsel for the Tribunal:
Claudette D. Friesen
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 September 25, 2000, the
Tribunal received a request from Tantalum Mining Corporation of
Canada Limited (Tantalum) for the removal, for an indeterminate
period of time, of the customs duty on importations, from all
countries, of filtering fabric for use in the manufacture of cesium
formate. As part of its request, Tantalum asked that any tariff
relief granted be effective as of July 1, 1998.
On November 8, 2000, the Tribunal, being satisfied that the
request was properly documented, issued a notice of commencement of
which was distributed to known interested
parties. The notice described the fabric under investigation as
"filtering fabric, solely of non-textured polyester filaments, with
a loom width exceeding 3 metres, for use in the manufacture of
cesium formate (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/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 summarizing the information
received from these departments, Tantalum, questionnaire
respondents and other interested parties was provided to parties to
the proceedings. There were no submissions filed with the Tribunal
following distribution of the staff investigation report.
A public hearing was not held for this investigation.
The subject fabric is described as a filtering fabric. It is
3.21 metres wide and made of 4-thread broken twill-weave fabric. It
is woven in the warp direction from 3-ply yarns of non-textured,
man-made (polyester) synthetic filaments and textured, man-made
(polyester) synthetic filaments, and in the weft direction, from
0.5-millimetre diameter non-textured, man-made (polyester)
synthetic monofilaments. This width is required so that there is no
longitudinal seam on the belt filter cloth, which could allow
solids to leak during the filtration process and cause problems
during the subsequent processing of a filtrate solution. The fabric
itself is not processed, but is used as a filtration medium for the
separation of a cesium sulphate solution from solid impurities
during the manufacturing process for cesium formate. According to
Tantalum, the unique chemical and physical characteristics of
cesium formate make the substance attractive as a drilling fluid
for the oil and gas industry; however, cesium formate is
considerably more expensive than traditional drilling fluids.
Tantalum believes that cesium formate is not manufactured at any
other site in the world. Tantalum imports the subject fabric from
Germany (via the United States).
The CCRA indicated that the subject fabric is classified under
tariff item No. 5911.40.00 of the schedule to the Customs
and is presently dutiable at 16 percent
ad valorem under the most-favoured-nation tariff and at 10
percent ad valorem under the General Preferential Tariff,
and is duty-free under the Mexico tariff, the Chile tariff, the
U.S. tariff, the Least Developed Country Tariff and the
Canada-Israel Agreement tariff.
Tantalum is a wholly owned subsidiary of Cabot Corporation of
Boston, Massachusetts. Its mine site is located at Bernic Lake,
Manitoba. Tantalum's principal products are spodumene, which is
used as a source of lithium in the manufacture of glass, and
tantalum concentrate, which is used in the manufacture of tantalum
metal. A third mineral, pollucite, is mined and milled on site and
used to manufacture cesium formate.
Tantalum stated that no identical or substitutable fabrics are
available from domestic sources. It further stated that, while
there are two filter cloth suppliers in Canada, neither of these
companies is able to produce cloth of the required
Tantalum also stated that one of the main benefits of tariff
relief would be the continued optimum operation of the belt filter
- an essential piece of equipment in the manufacture of cesium
formate. According to Tantalum, high filtrate quality reduces
subsequent processing requirements and gives lower equipment
fouling, which reduces unit production costs. Tantalum stated that
unit cost is a critical factor in the success of introducing a new
product, such as cesium formate, into the marketplace and
establishing market share. Tantalum further stated that, when the
unit costs between cesium formate and traditional drilling fluids
are compared, cesium formate is at a considerable disadvantage,
notwithstanding the safety, environmental and technical advantages
offered by the product. Thus, Tantalum argued that customs duties
on the filter cloth, which are included in the unit cost of
production of cesium formate, are a negative factor affecting a
customer's decision to use cesium formate as a drilling fluid.
Users/Importers of the Subject Fabric
McCain Foods Ltd., of
Florenceville, New Brunswick, indicated that it did not import the
Domestic Producers of
Allegedly Identical or Substitutable Fabrics
was established in 1901 in Montréal, Quebec,
to supply woven paper machine cloth to local paper mills. It now
has 10 manufacturing plants in North America that make woven meshes
that are marketed worldwide.
AstenJohnson stated that it currently manufactures or could
easily produce the fabric required by Tantalum. The company also
stated that it currently weaves a product called ETX, in 12-metre
widths. This product is sold to the pulp and paper industry.
AstenJohnson indicated that it could supply this fabric, in smaller
widths, to Tantalum as an identical or substitutable fabric. The
company further indicated that it would be contacting Tantalum
directly to pursue this opportunity.
Madison Filtration Inc., of Kirkland, Quebec, indicated that it
did not produce identical or substitutable fabrics in Canada.
Crosible Filtration Ltd., of Guelph, Ontario, indicated that it
did not produce identical or substitutable fabrics in Canada.
Albarrie Canada Limited, of Barrie, Ontario, indicated that it
did not oppose the request.
DFAIT informed the Tribunal that Canada does not maintain quota
restraints on the subject fabric classified under tariff item
5911.40.00 and that it is not subject to any quantitative import
The CCRA 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.
Tantalum claimed that no identical or substitutable fabrics are
available from domestic sources and that the two Canadian filter
cloth suppliers, known to it, were unable to produce cloth of the
required specifications. According to Tantalum, the continued
optimum operation of the belt filter, which uses the subject fabric
exclusively, reduces subsequent processing requirements and gives
lower equipment fouling, thereby reducing production costs.
Tantalum also stated that the duties payable on the subject fabric
affect the unit production costs of cesium formate, which, in turn,
affect a customer's decision to use cesium formate as opposed to
another drilling fluid.
AstenJohnson, the only domestic producer to oppose the request,
stated that it did or could produce an identical or substitutable
fabric. However, the Tribunal has stated in the past5
that it is
the responsibility of domestic producers to provide evidence, not
assertions or allegations, of their ability to produce identical or
substitutable fabrics. While the Tribunal recognizes that
AstenJohnson may be able to manufacture a fabric similar to the
subject fabric, this would involve decreasing, by a substantial
amount, the current width of the fabric that it currently produces
and sells to the pulp and paper industry. Furthermore, by
AstenJohnson's own admission, this business would be a very small
percentage of its current volume, and there would be no immediate
effect on its operations, should tariff relief be granted. Although
AstenJohnson has alleged that it intends to increase sales of
specialty fabrics outside the pulp and paper industry, including
the mining industry, the Tribunal has not been presented with any
evidence of current or potential sales to the mining industry, nor
does it have any evidence that AstenJohnson's products would be
acceptable to Tantalum.
Accordingly, the Tribunal is of the opinion that fabrics that
are identical to or substitutable for the subject fabric are not
produced in Canada and, therefore, concludes that there would be no
immediate cost to the domestic industry, if tariff relief were
granted. Regarding AstenJohnson's allegations that future losses,
with respect to potential new business, could occur should tariff
relief be granted, the Tribunal notes that these allegations have
not been substantiated or quantified. Accordingly, the Tribunal
cannot attribute any costs to the domestic industry, should tariff
relief be granted.
Tariff relief would provide a yearly benefit of more than
$20,000 to Tantalum. Any other potential users of the subject
fabric would also benefit accordingly. Furthermore, the filter for
which the subject fabric is used reduces Tantalum's subsequent
processing requirements and gives lower equipment fouling, which
reduces unit production costs.
In summary, the Tribunal finds that the granting of tariff
relief would provide net economic gains to Canada.
With respect to Tantalum's request for retroactive tariff
relief, the Tribunal has stated, in previous cases, that it will
not recommend such relief other than in exceptional circumstances.
Tantalum has provided no evidence to justify such a request.
Therefore, the Tribunal is not persuaded that the current
circumstances are so exceptional as to warrant a recommendation for
retroactive tariff relief.
The Tribunal hereby recommends to the Minister that tariff
relief be granted, for an indeterminate period of time, on
importations from all countries of filtering fabric, solely of
non-textured polyester filaments, with a loom width exceeding 3
metres, of subheading No. 5911.40, for use in the manufacture of
1 . R.S.C.
1985 (4th Supp.), c. 47.
2 . C.
3 . R.S.C.
1985 (3rd Supp.), c. 41.
4 . A
company named JWI Ltd. was also sent a questionnaire. However, the
Tribunal's staff was informed that this company and AstenJohnson
merged in September 1999.
5 . See,
for example, Camp Mate (10 June 1996), TR-95-051 (CITT);
Lady Americana Sleep Products (12 February 1997),
TR-95-064 and TR-95-065 (CITT); Cambridge Industries
(12 February 1999), TR-98-001 (CITT); Helly Hansen
Canada (19 March 1999), TR-97-015, TR-97-016 and TR-97-020
(CITT); Jones Apparel Group Canada (8 July 1999), TR-98-017
(CITT); Tribal Sportswear (24 August 1999), TR-98-019
(CITT); and Western Glove Works (February 4, 2000),
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Initial publication: March 21, 2001