PEERLESS CLOTHING INC.
(POLYESTER TUXEDO FACING)
Request No. TR-2007-003
Tuesday, February 5, 2008
TABLE OF CONTENTS
Tribunal Members: Serge Fréchette, Presiding Member
James A. Ogilvy, Member
Diane Vincent, Member
Research Director: Rose Ritcey
Research Officer: Jo-Anne Smith
Counsel for the Tribunal: Alain Xatruch
Registrar officer: Marija Renic
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 22, 2007, pursuant to the Minister’s reference, the
Tribunal received a request from Peerless Clothing Inc. (Peerless)
of Montréal, Quebec, for the removal, for an indeterminate period
of time, of the customs duty on importations from all countries of
woven fabrics, made of polyester, with or without backing, for use
as facing in the manufacture of men’s or boys’ tuxedos.
3. On November 15, 2007, being satisfied that the request was
properly documented, the Tribunal issued a notice of commencement
which was distributed to those who might
have an interest. The fabrics under investigation are woven
fabrics, with or without backing, solely of yarns of textured
polyester filaments, of a weight not exceeding 225 g/m2,
of tariff item No. 5407.52.90 of the schedule to the Customs
for use as facing or braids in the
manufacture of tuxedos (the subject fabrics).
4. 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 fabrics and a request
for information to potential users and importers of the subject
fabrics. It also requested the Canada Border Services Agency (CBSA)
to provide a complete description of the physical characteristics
of the fabric samples submitted by Peerless, an opinion on whether
the requested tariff relief would be administrable and suggested
wording to describe the subject fabrics 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. Letters were also sent to the Department of Foreign Affairs
and International Trade and the Department of Industry, requesting
information that could assist the Tribunal in its
6. A staff investigation report was not necessary for the
purposes of this investigation, since there was no opposition to
7. On December 17, 2007, the Tribunal indicated that it intended
to issue a report to the Minister concerning the request based on
the information on the record.
8. A public hearing was not held for this
9. Peerless imports the subject fabrics from Germany. It
submitted two fabric samples with its request for tariff relief.
The first sample was a black dyed fabric woven in both the warp and
the weft from yarns of textured synthetic (polyester) filaments.
The fabric weighed 134 g/m2. The second sample was made
from three layers laminated together and weighed 212
g/m2. The first layer was a black dyed fabric woven in
both the warp and the weft from yarns of textured synthetic
(polyester) filaments. The second layer consisted of a 0.3-mm-thick
sponge-like layer of cellular plastics (polyurethane) acting as an
adhesive to bond layers one and three together. The third layer was
a black dyed fabric knitted from yarns of polyester filaments.
10. As of January 1, 2008, the subject fabrics, classified for
customs purposes under tariff item No. 5407.52.90, are
dutiable at 14 percent ad valorem under the
Most-Favoured-Nation (MFN) Tariff and the Costa Rica Tariff, and
are duty free under the United States Tariff, the Least Developed
Country Tariff, the Mexico Tariff, the Canada-Israel Agreement
Tariff and the Chile Tariff.
Position of the
11. Peerless has been manufacturing men’s apparel in Canada
since 1919. The company is Canada’s largest manufacturer of men’s
fine tailored clothing, with a significant presence in the U.S.
market. Peerless has signed exclusive licence agreements to market
well-known brand names, such as Chaps by Ralph Lauren and Lauren by
12. Peerless claimed that no Canadian textile manufacturer
produces fabrics that are identical to or substitutable for the
13. Peerless uses the subject fabrics as facing for tuxedos.
Peerless indicated that facing is the differentiating factor
between regular men’s suits and tuxedos and that the subject
fabrics are necessary to give the look that meets the needs of
function and fashion.
14. Peerless stated that its business decisions are driven by
the market and that, if the market demands garments with the
features created by the subject fabrics, it must meet that demand
or face a decline in sales. Peerless contended that, if it were
unable to satisfy the market demand in North America for such
apparel, this demand would be met by foreign imports of finished
15. As for the anticipated benefits of tariff relief, Peerless
submitted that competition in the men’s apparel industry is global
in scale and very fierce and that removal of the customs duty on
imports of the subject fabrics would allow it to stay competitive
in the tuxedo market and possibly increase its share of domestic
and foreign markets. Peerless also submitted that tariff relief
would help it to maintain its current employment levels. It
indicated that any cost savings would be passed on to the consumer.
Finally, Peerless submitted that tariff relief would offset the
negative consequences of the elimination of duty drawback under the
North American Free Trade Agreement
with respect to the
imported inputs that it uses in apparel exported to the United
16. Peerless requested that tariff relief be retroactive to June
22, 2007, the date of filing of the request for tariff relief.
Position of the Textile
17. Domestic fabric producers did not oppose the request for
18. 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 on whether to
recommend tariff relief is based on the extent to which it
considers that such tariff relief would provide net economic gains
19. Peerless claimed that there is no domestic production of
fabrics identical to or substitutable for the subject fabrics. 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 commercial costs associated with the removal of the
customs duty on the importation of the subject fabrics. On the
basis of the information available to the Tribunal, tariff relief
would result in yearly benefits to users of the subject fabrics in
excess of $25,000. In summary, the Tribunal finds that the tariff
relief requested by Peerless would provide net economic gains for
20. As for Peerless’s request for retroactive tariff relief, the
Tribunal has stated in previous cases that it will not consider
recommending such relief other than in exceptional circumstances.
Peerless has provided no evidence to warrant such a recommendation.
However, it is the Tribunal’s view that the commencement of tariff
relief as soon as possible is warranted.
21. 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 woven fabrics, with or without backing, solely of yarns of
textured polyester filaments, of a weight not exceeding 225 g/m²,
of tariff item No. 5407.52.90, for use as facing or braids in the
manufacture of tuxedos.
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.3255.
. 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.
. North American Free Trade Agreement
Between the Government of Canada, the Government of the United
Mexican States and the Government of the United States of
America, 17 December 1992, 1994 Can. T.S. No. 2 (entered into
force 1 January 1994) [NAFTA].
. Non-NAFTA fabrics (i.e. fabrics not
originating in North America) that are incorporated into apparel
exported to the United States would generally qualify for duty
drawback, unless the apparel is exported under zero duty tariff