REPORT TO THE MINISTER OF FINANCE
REQUESTS FOR TARIFF RELIEF BY SCAPA TAPES NORTH AMERICA LTD.
REGARDING CERTAIN WOVEN FABRICS OF 100 PERCENT COTTON
SEPTEMBER 13, 2001
TABLE OF CONTENTS
Request Nos. TR-2000-007 and TR-2000-008
Patricia M. Close, Presiding Member
Peter F. Thalheimer, Member
James A. Ogilvy, Member
Paul R. Berlinguette
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 in respect of those requests
to the Minister.
On March 12, 2001, pursuant to the Minister's reference, the
Tribunal received two separate requests from Scapa Tapes North
America Ltd. (Scapa), of Renfrew, Ontario, for the removal, for an
indeterminate period of time, of the customs duty on importations
from all countries of: (1) certain dyed woven fabrics of 100
percent cotton (TR-2000-007); and (2) certain bleached woven
fabrics of 100 percent cotton (TR-2000-008), for use in the
manufacture of pressure-sensitive adhesive tape. Scapa also sought
tariff relief retroactive to October 1, 2000.
On June 26, 2001, being satisfied that the requests were
properly documented and similar in nature, the Tribunal issued one
notice of commencement of investigation covering both
which was distributed to known interested
parties. The fabrics under investigation were described in the
notice as "woven fabrics, solely of cotton, bleached or dyed, plain
weave, ring-spun, weighing not more than 100 g/m², of
subheading No. 5208.21 or 5208.31, for use in the manufacture of
pressure-sensitive adhesive tape (the subject fabrics)".
As part of the investigation, the Tribunal informed key industry
associations of the requests and sent questionnaires to potential
producers of fabrics identical to or substitutable for the subject
fabrics. A request for information was also sent to potential
users/importers of the subject fabrics. A letter was sent to the
Canada Customs and Revenue Agency (CCRA) requesting a complete
description of the physical characteristics of the samples
submitted by Scapa, an opinion on whether the tariff relief would
be administrable, as well as suggested wording should tariff relief
be recommended. Letters were also sent to a number of other
government departments requesting information and advice.
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 fabrics did not
oppose the requests.
A public hearing was not held for this investigation.
Scapa imports most of the subject fabrics from India, Indonesia
and Thailand, for use in the production of pressure-sensitive
adhesive tape such as hockey tape, athletic and medical tapes, and
automotive wire harness tape. The manufacturing process begins with
the mixing of adhesives that are applied to a cloth
via a three-roll calender.4
product is then slit on conventional rewind slitting equipment into
narrow width rolls. Scapa runs a fully integrated operation and
also produces all of its adhesive requirements. For its U.S.
customers, Scapa has a warehousing and distribution centre located
in Syracuse, New York.
As of January 1, 2001, the subject fabrics, classified for
customs purposes under classification Nos. 5126.96.36.199
(bleached) and 5208.31.90.00 (dyed) of the schedule to the
are dutiable at 13.5 percent ad
valorem under the MFN tariff and are duty free under the U.S.
tariff, the Mexico tariff, the Canada-Israel Agreement tariff and
the Chile tariff. The MFN tariff, according to Uruguay Round
commitments, will be reduced to 13 percent ad valorem, 12.5
percent ad valorem and 12 percent ad valorem on
January 1, 2002, January 1, 2003, and January 1, 2004,
commenced operations in 1980. By 1990, Scapa
had expanded its production of athletic tape to include industrial,
medical, duct and pipeline tapes. In 1992, Scapa opened a
43,000-square-foot production facility in Watertown, New York, to
improve the distribution of its products into the expanding U.S.
market. In 2000, Scapa added automotive wire harness tape as well
as polyvinyl chloride tape to its product line. Its 140,000-
square-foot plant in Renfrew employs 190 people. This summer,
operations from the Watertown facility will be transferred to
Renfrew, resulting in the creation of about 40 local jobs and the
production of more product stock-keeping units in Renfrew.
Distribution of products for the U.S. market will take place in
Syracuse, New York.
While recognizing that DIFCO Performance Fabrics Inc. (DIFCO), a
Canadian textile producer, has a limited capability to produce a
substitutable greige fabric, Scapa claimed that DIFCO does not have
the ability to bleach or dye fabric, nor the production capacity to
produce identical or substitutable fabrics in the desired
quantities. Scapa also pointed out that the use of third-party
finishers, as well as the resulting additional handling and
transportation costs, makes the use of DIFCO fabric uncompetitive
in the athletic and medical tape marketplace. Scapa indicated that,
over the past two years, it has been able to purchase only
372,000 square metres of fabric from DIFCO, which represents
less than 3 percent of its annual requirements.
Scapa stated that it requested a quote on 3.9 million square
metres of bleached fabric and 3.9 million square metres of
dyed fabric from DIFCO, but that DIFCO declined because it was
unable to meet Scapa's specifications. Scapa also stated that DIFCO
management has recently indicated that it is essentially not
interested in producing such fabrics.
Moreover, Scapa indicated that it requires fabric made from
ring-spun yarn in order to provide the following three essential
characteristics in the end product: (1) linear tensile
; (2) the ability to tear across the final
product; and (3) the desired thickness.
Scapa submitted that the tariff imposed on imports of non-NAFTA
cloth into Canada threatens the future of cloth-based tapes as
North American competitors introduce customers to lower-cost
alternatives. Scapa indicated that consolidation within the retail,
distribution and industrial markets for tape has created
large-scale customers, i.e. automotive customers, 3M Canada,
Wal-Mart Canada Inc., Price Costco Canada Inc. and Canadian Tire
Corporation Limited, that expect or demand year-over-year
reductions in price and increases in service levels. Scapa pointed
out that the present tariff on imported fabric continues to inflate
the price at which cloth tape products can be marketed and that
demand for these products is price sensitive.
Scapa stated that tariff relief would restore the cost
competitiveness of cloth-based tapes and permit aggressive pricing
in the market. According to Scapa, this, in turn, is expected to
yield a 15 percent or greater increase in demand for these products
within a year. Scapa indicated that production and domestic
employment from the new business are expected to increase in
similar proportion and that further investment in productive
capacity would become necessary to match the demand.
Lowry Sales BC
Lowry Sales BC Ltd. (Lowry), of Richmond, British Columbia, a
wholesale-distributor of adhesive products since 1969, supported
Scapa's requests. Lowry stated that tariff relief on the subject
fabrics would translate into cost savings and enable it to maintain
its present market share.
Domestic fabric producers did not participate in the
The Department of Foreign Affairs and International Trade
(DFAIT) informed the Tribunal that Canada maintains quota
restraints on woven fabrics, solely of cotton, bleached or dyed
(subcategory 32.2), imported from China, Hong Kong and Chinese
Taipei. Accordingly, this coverage includes the subject fabrics
classified in subheading Nos. 5208.21 and 5208.31. Bilateral
agreements, which provide for these restrictions, between the
Government of Canada and the Government of Hong Kong and the Taiwan
Textile Federation, have been in place since 1979. A bilateral
agreement between the Government of Canada and the People's
Republic of China has been in place since 1987.
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 customs duties 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 indicated that there would be no additional costs over
and above those incurred by it to administer the tariff relief,
should it be granted.
The Canadian Textiles Institute filed a notice of appearance
with the Tribunal, but did not make any representations regarding
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, 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 for Canada.
Scapa claimed that there are no domestic textile producers
capable of producing, in the desired quantities, fabrics identical
to or substitutable for the subject fabrics. Domestic fabric
producers did not contest this claim. 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
Scapa in excess of $500,000. In addition, tariff relief would
provide benefits to users in the form of cost reductions, which
could translate into the hiring of new employees, the purchase of
new equipment and the provision of further spin-off benefits for
local support industries. In summary, the Tribunal finds that the
tariff relief requested by Scapa would provide net economic gains
As for Scapa'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
Scapa has provided no evidence to warrant
such a recommendation.
In light of the foregoing, the Tribunal hereby recommends to the
Minister that tariff relief be granted, for an indeterminate period
of time, on importations from all countries of woven fabrics,
solely of cotton, bleached or dyed, plain weave, ring-spun,
weighing not more than 100 g/m², of subheading No. 5208.21 or
5208.31, for use in the manufacture of pressure-sensitive adhesive
Patricia M. Close
Patricia M. Close
Peter F. Thalheimer
Peter F. Thalheimer
James A. Ogilvy
James A. Ogilvy
1 . R.S.C.
1985 (4th Supp.), c. 47.
2 . C.
Substrate: a material to which dyes and chemicals may be
Calender: a machine in which heavy rollers rotate in contact under
mechanical or hydraulic pressure.
5 . R.S.C.
1985 (3d Supp.), c. 41.
Formerly Renfrew Tapes Limited.
Tensile strength refers to the strength shown by a specimen
subjected to tension as distinct from torsion, compression or
See, for example, Re Request for Tariff Relief by Ballin (9
March 2001), TR-2000-004 at 6; Re Request for Tariff Relief by
Tantalum Mining Corporation of Canada (21 March 2001),
TR-2000-003 at 4; and Re Request for Tariff Relief by Majestic
Industries (Canada) (12 January 2001), TR-2000-002 at 4.
[Table of Contents
Initial publication: September 13, 2001