PEERLESS CLOTHING INC.
(WOVEN POLYESTER FABRIC)
Request No. TR-2007-006
Wednesday, August 13, 2008
TABLE OF CONTENTS
André F. Scott, Presiding Member
Serge Fréchette, Member
Pasquale Michaele Saroli, Member
Counsel for the Tribunal:
Manager, Registrar Office:
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 March 12, 2008, 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 fabric, made of polyester, for use as knee lining in the
manufacture of trousers.
3. On June 4, 2008, 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 fabric under investigation is a woven fabric,
plain weave, dyed, of untwisted textured polyester filament yarns
in the weft and untwisted non-textured polyester filament yarns in
the warp, of a weight not exceeding 55 g/m², of tariff item No.
5407.69.90 of the schedule to the Customs
as knee lining in the manufacture of trousers (the subject
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 fabric and a request
for information to potential users and importers of the subject
fabric. It also requested the Canada Border Services Agency (CBSA)
to provide a complete description of the physical characteristics
of the fabric sample submitted by Peerless, an opinion on whether
the requested tariff relief would be administrable and suggested
wording to describe the subject fabric 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 July 8, 2008, 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 fabric from Germany. It
submitted one fabric sample with its request for tariff relief. The
sample was a dyed fabric, plain woven, consisting of textured,
untwisted yarns of synthetic (polyester) filament in the weft and
non-textured, untwisted yarns of synthetic (polyester) filament in
the warp. The fabric weighed 50.3 g/m2.
10. As of January 1, 2008, the subject fabric is classified for
customs purposes under tariff item No. 5407.69.90 and is
dutiable at 14 percent ad valorem under the
Most-Favoured-Nation Tariff and the Costa Rica Tariff, and is 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. Its products include men’s tailored suits, sports jackets,
blazers, tuxedos, trousers, vests and walking shorts. Peerless has
signed exclusive licence agreements to market well-known brand
names, such as Chaps by Ralph Lauren and Lauren by Ralph
12. Peerless claimed that no Canadian textile manufacturer
produces fabrics that are identical to or substitutable for the
13. Peerless uses the subject fabric to line the knee portion of
suit pants and trousers. Peerless indicated that the knee lining is
used primarily to provide relief from any irritation or allergies
that can be caused by wool fabrics. Peerless also stated that the
textured polyester yarns in the weft of the subject fabric make it
superior as knee lining because of the smoothness and softness.
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 fabric, 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 goods.
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 fabric would allow it to stay competitive in
the market and possibly increase its share of domestic and foreign
markets. Peerless also submitted that tariff relief would help it
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
to the imported inputs that it uses in apparel exported to the
16. Peerless requested that tariff relief be retroactive to
March 12, 2008, the date of filing of the request for tariff
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 fabric. 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 fabric. On the basis
of the information available to the Tribunal, tariff relief would
result in yearly benefits to users of the subject fabric in excess
of $45,000. 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 fabric, plain weave, dyed, of untwisted textured polyester
filament yarns in the weft and untwisted non-textured polyester
filament yarns in the warp, of a weight not exceeding 55 g/m², of
tariff item No. 5407.69.90, for use as knee lining in the
manufacture of trousers.
André F. Scott
André F. Scott
Pasquale Michaele Saroli
Pasquale Michaele Saroli
. 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