KORHANI MANUFACTURE INC.
(TEXTURED POLYPROPYLENE MULTIFILAMENT YARN)
Request No. TR-2007-002
Monday, February 25, 2008
TABLE OF CONTENTS
Ellen Fry, Presiding Member
James A. Ogilvy, Member
Diane Vincent, Member
Senior Research Officer:
Counsel for the Tribunal:
Please address all communications to:
Canadian International Trade Tribunal
Standard Life Centre
333 Laurier Avenue West
THE MINISTER OF FINANCE
1. On July 14, 1994, the Canadian International Trade Tribunal
(the Tribunal) received terms of reference1
from the Minister of
Finance (the Minister) pursuant to section 19 of the Canadian
International Trade Tribunal Act.2
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 in respect of those requests
to the Minister.
2. On June 12, 2007, pursuant to the Minister’s reference, the
Tribunal received a request from Korhani Manufacture Inc.
(Korhani), of Sorel, Quebec, for the removal, for an indeterminate
period of time, of the customs duty on importations from all
countries of polypropylene multifilament yarn, for use in the
manufacture of area rugs.
3. On October 18, 2007, the Tribunal, being satisfied that the
request was properly documented, issued a notice of commencement of
into the matter, which was distributed to
those whom the Tribunal identified as potentially having an
interest. The yarn under investigation was described in the notice
as “. . . multifilament yarn, solely of
polypropylene, textured, fully drawn, with an ‘S’ twist exceeding
50 turns per metre, measuring per single yarn 1,680 decitex or more
but not exceeding 3,215 decitex, of tariff item No. 5402.34.00 of
the schedule to the Customs Tariff
, for use in the
manufacture of area rugs” (the subject yarn).
4. As part of the investigation, the Tribunal sent
questionnaires to potential domestic producers of yarns identical
to or substitutable for the subject yarn. It also sent a request
for information to potential users and importers of the subject
yarn. The Tribunal requested the Canada Border Services Agency
(CBSA) to provide a complete description of the physical
characteristics of the samples submitted by Korhani, an opinion on
whether the requested tariff relief would be administrable and
suggested wording to describe the subject yarn should tariff relief
be recommended. The CBSA indicated that there would be no
additional costs, over and above those that it normally incurs, to
administer the tariff relief should it be granted.
5. The Tribunal also wrote to the Department of Foreign Affairs
and International Trade and the Department of Industry, requesting
information that could assist the Tribunal in its
6. The Tribunal provided a staff investigation report
summarizing the information received from the CBSA, Korhani and
Seaway Yarns Ltd. (Seaway), a domestic yarn producer, to those that
had become parties to the proceedings by filing notices of
appearance in the investigation. Following distribution of the
staff investigation report, Korhani filed a submission with the
7. No public hearing was held for this
8. Korhani imports the subject yarn from Iran and Turkey. It
submitted three yarn samples with its request for tariff relief,
which were each textured, multifilament single yarns of fully drawn
filaments, solely of polypropylene, with an “S” twist that exceeded
50 turns per metre. The three samples measured 1,779 decitex,
2,759 decitex and 3,063 decitex.
9. As of January 1, 2008, the subject yarn is classified for
customs purposes under tariff item No. 5402.34.00 and is
dutiable at 8 percent ad valorem under the
Most-Favoured-Nation Tariff and at 8 percent ad valorem
under the General Preferential Tariff, and is duty-free under the
United States Tariff, the Least Developed Country Tariff, the
Mexico Tariff, the Canada-Israel Agreement Tariff, the Costa Rica
Tariff and the Chile Tariff.
Domestic User of
10. Korhani has been manufacturing area rugs in Sorel since
2001. Korhani’s core business is the production of area rugs, and
its facility has three looms with an annual capacity of 1.2 million
11. An important characteristic of the yarn that Korhani uses to
manufacture area rugs is that it is heat-set. In its original
request to the Tribunal, Korhani requested tariff relief for
heat-set yarn. However, the Tribunal excluded the term “heat-set”
from the definition of the subject yarn in the notice of
commencement of investigation because the CBSA indicated to the
Tribunal that it was not aware of any test that could determine if
yarn has been heat-set.
12. According to Korhani, there are no domestic producers of
identical or substitutable heat-set yarns. In the past, Korhani was
able to purchase such yarns from a domestic producer, Engineered
Fibres, but this company ceased operations more than four years
ago. Korhani contacted another domestic producer, Springs
Decorative Floor Canada, Inc. (Springs Canada), to determine if it
could manufacture heat-set yarns. Springs Canada cannot produce
such products. Korhani is not aware of any other domestic producer
of heat-set yarns.
13. Korhani submitted that U.S. suppliers are not
cost-competitive and, in most cases, are also direct competitors in
the manufacture of area rugs.
14. Korhani submitted that tariff relief would enable it to be
more competitive in the Canadian market against U.S. and offshore
products. Korhani also submitted that the reduced costs would
enable it to invest in more machinery and to hire more staff.
15. Korhani submitted that, although Seaway proposed changes to
the description of the subject yarn, it supports the description
found in the notice of commencement of investigation.
16. Seaway, of Cornwall, Ontario, was established in 1990 and
manufactures a wide range of high-tenacity filament yarns, aramid
yarns, spun yarns and monofilament yarns. Seaway is a “yarn
twister”. It buys yarns and builds them up or processes them in
some way to meet customer requirements.
17. According to Seaway, duty-free imports of twisted yarn
always have the potential to harm its business. However, in this
case, Seaway submitted that it did not object to tariff relief for
what it described as the “input (base or single)” yarn.
Nonetheless, Seaway requested three changes to the description of
the subject yarn.
18. First, Seaway requested that the term “textured” be removed
from the description of the subject yarn and replaced with the name
of the specific type of texturing process used to produce the
subject yarn. Seaway uses a process known as air jet texturing
(AJT) to produce textured yarns. In this process, flat yarns,
single or multiple, are passed through an air jet that textures
them, giving them bulk. In comparison, according to Seaway, carpet
yarns are typically textured in a one-step operation when the yarn
is extruded using a bulked continuous filament (BCF) process.
19. Second, Seaway requested that the term “heat-set” be
included in the description of the subject yarn.
20. Finally, Seaway submitted that listing the single yarn size
in the description of the subject yarn was insufficient and that
this would allow the importation of all yarns greater than 3,360
decitex. Accordingly, Seaway requested that the
“. . . resultant count, both maximum and minimum, be
included . . . .”
21. Seaway contended that it could make a yarn virtually
identical to the subject yarn and submitted three samples of yarn
that it currently manufactures. According to the CBSA, two of the
samples were of nylon, while the third sample was of polypropylene
with a decitex per single yarn of 388.
22. Seaway did not make a submission to the Tribunal following
distribution of the staff investigation report.
23. 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 economic factors, including, where
appropriate, the availability of substitutable inputs from domestic
sources and a domestic versus foreign price comparison. The
Tribunal’s decision on whether to recommend tariff relief is based
on the extent to which it considers that such tariff relief would
maximize net economic gains for Canada and would be administrable
on a cost-effective basis.
24. The Tribunal notes that
none of the three samples submitted by Seaway met the description
of the subject yarn, with two of the samples being of a different
fibre. Seaway provided no other evidence to support its submission
that it could produce a virtually identical yarn. In fact, Seaway
acknowledges that the AJT process that it uses is a secondary
operation that cannot produce exactly the same effect as BCF yarn.
Further, the Tribunal notes Seaway’s submission that it does not
oppose Korhani’s request as it applies to “input (base or single)”
25. In view of the above, the Tribunal concludes that Seaway
does not produce a yarn identical to or substitutable for the
26. With respect to the changes to the description of the
subject yarn requested by Seaway, as noted above, the Tribunal
excluded the term “heat-set” from the definition of the subject
yarn because the CBSA indicated that it was not aware of any test
that could determine if yarn has been heat-set.
27. Likewise, when the Tribunal requested the CBSA’s view on the
feasibility of Seaway’s request to include the name of the specific
texturing process in the description of the subject yarn, the CBSA
indicated that it would be difficult to conduct tests to
differentiate among texturing processes.
28. However, the Tribunal does accept Seaway’s request to
restrict the subject yarn to multifilament single yarn. It agrees
with Seaway that the current description of the subject yarn would
allow for the duty-free entry of multi-ply yarns with a total
decitex exceeding the maximum of 3,215 decitex, as long as the
decitex per single yarn met the definition. For example, a two-ply
yarn that measured 1,700 decitex per single yarn would qualify for
tariff relief even though the yarn measured 3,400 decitex
29. The Tribunal notes
that, on the first page of its original submission, Korhani
requested tariff relief on “. . . 100 percent
heat-set polypropylene yarn . . .” for use in the
manufacture of area rugs. It went on to describe the three products
“. . . being placed under this
review . . .” as “multifilament single yarn”, making
reference to the results of the National Classification Rulings,
which it obtained from the CBSA prior to submitting its request to
the Tribunal. Nevertheless, Korhani concluded its letter by
requesting tariff relief for the broader description of
classification No. 5402.34.00.10. When the CBSA proposed a
description for the subject yarn to the Tribunal, based on its
analysis of the samples submitted by Korhani, it did not explicitly
describe the yarn as being single yarn; rather, it included a
decitex measure “per single yarn” in the description. When
consulted by Tribunal staff prior to the commencement of the
investigation, Korhani agreed that the description proposed by the
CBSA would appear in the notice of commencement as the subject yarn
and that its tariff relief request was to be applied to this yarn.
In the Tribunal’s view, this description was not limited to
multifilament single yarn but also applied to multifilament yarn of
more than one ply.
30. The Tribunal considers that the current description of the
subject yarn could unnecessarily broaden the scope of the tariff
relief and that describing the subject yarn as “multifilament
single yarn” is more consistent with the products described and
submitted for review by Korhani, which are single yarns.
31. On the basis of the information provided to the Tribunal,
tariff relief would result in yearly benefits to users of the
subject yarn of more than $25,000 in terms of lower duty costs. In
addition, tariff relief would provide potential benefits to users
by making it possible for Korhani’s prices to be more competitive
in the Canadian market against U.S. and offshore products. Other
than the revenues forgone by the Government, the evidence does not
indicate that there would be any costs to administer the tariff
relief. Therefore, the Tribunal finds that the tariff relief
requested by Korhani would provide net economic gains for
32. In light of the foregoing, the Tribunal hereby recommends to
the Minister that tariff relief be granted as soon as possible, for
an indeterminate period of time, on importations from all countries
of multifilament single yarn, solely of polypropylene, textured,
fully drawn, with an “S” twist exceeding 50 turns per metre,
measuring 1,680 decitex or more but not exceeding 3,215 decitex, of
tariff item No. 5402.34.00, for use in the manufacture of area
James A. Ogilvy
James A. Ogilvy
. The terms of reference were last modified on October 27,
. R.S.C. 1985 (4th Supp.), c. 47.
. C. Gaz. 2007.I.3024.
. S.C. 1997, c. 36.
.Pursuant to rule 25 of the Canadian
International Trade Tribunal Rules, S.O.R./91-499, the Tribunal
has the authority to proceed by way of written submissions.