PEERLESS CLOTHING INC.
(CERTAIN NONWOVEN FUSIBLE FABRICS)
Request No. TR-2003-003
Monday, August 30, 2004
TABLE OF CONTENTS
Zdenek Kvarda, Presiding Member
Patricia M. Close, Member
Ellen Fry, Member
Paul R. Berlinguette
Counsel for the Tribunal:
Gillian E. Burnett
Please address all communications to:
Canadian International Trade Tribunal
Standard Life Centre
333 Laurier Avenue West
Telephone: (613) 993-3595
Fax: (613) 990-2439
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.
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 February 18, 2004, 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 certain nonwoven fusible fabrics for use in
the manufacture of men's and boys' jackets (including suit
jackets), blazers and vests (waistcoats). Peerless also sought
immediate tariff relief.
3. On April 21, 2004, being satisfied that the request was
properly documented, the Tribunal issued a notice of commencement
which was distributed to known interested
parties. The fabrics under investigation were described in the
notice as "nonwovens of nylon staple fibres or nylon staple fibres
mixed with polyester staple fibres, partially coated with low-melt
adhesive, weighing more than 25 g/m2 but not more than
70 g/m2, for use in the manufacture of men's and boys'
jackets (including suit jackets), blazers and vests
(waistcoats)" (the subject fabrics).
4. As part of the investigation, the Tribunal's research staff
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 and importers of the subject
fabrics. A letter was sent to the Canada Border Services Agency
(CBSA), requesting a complete description of the physical
characteristics of the 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. Letters were also sent to the Department of
International Trade (DIT) and the Department of Industry requesting
information that could assist the Tribunal in its
5. 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 request.
6. Peerless imports the subject fabrics from Germany. Peerless
submitted three fabric samples with its request for tariff relief.
Two of the samples consisted of nylon and polyester staple fibres
and weighed 31 g/m2 and 49 g/m2. The
third sample consisted of nylon staple fibres and weighed 32
g/m2. All samples were partially coated on one side with
clear colourless flecks of low-melt plastic.
7. The subject fabrics are used to fuse lapels, hems, cuffs and
small parts in the manufacture of men's and boys' fine tailored
8. Peerless's production process entails the spreading, cutting,
sewing and pressing of different textile inputs for use in the
manufacture of men's and boys' jackets (including suit jackets),
blazers and vests (waistcoats). No operations are
9. As of January 1, 2004, the subject fabrics, classified for
customs purposes under classification No. 5603.92.90.20 of the
schedule to the Customs Tariff,4
are dutiable at 14
percent ad valorem under the Most-Favoured-Nation (MFN)
Tariff and at 10 percent ad valorem under 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.
Positions of the
10. Peerless has been manufacturing men's apparel since 1919.
The company is privately owned and employs in excess of 2,000
persons. Following the Canada-United States Free Trade
Agreement, Peerless established itself as an international
manufacturing and marketing company with a significant presence in
the U.S. market. In this respect, Peerless has signed exclusive
licence agreements to manufacture and market well-known brand
names, such as Chaps by Ralph Lauren, Ralph by Ralph Lauren and
DKNY (Donna Karan New York).
11. Peerless claimed that no Canadian textile manufacturer
produces and supplies fabrics that are identical to or
substitutable for the subject fabrics.
12. Peerless indicated that, previously, it was common to use
mainly polyester-based thermally or chemically bonded nonwoven
fabrics, which resulted in a firm yet resilient hand. Peerless
stated that, with the fashion market demanding softer and lighter
garments, the men's tailored clothing industry is obliged to move
to more sophisticated nonwoven fabrics consisting mainly of nylon
fibres, and to rely solely on the thermo-bonding technology using
polyamide. In this regard, Peerless indicated that nylon fibres are
softer and "loftier" than polyester fibres and that their generous
use gives a nonwoven fusible fabric a softer hand. Moreover, the
technology of binding the fibres together with a thermal process
rather than a chemical spray resin gives a nonwoven fabric a very
textile hand and no effect of a "papery" feel. This, according to
Peerless, gives the reinforced parts (e.g. lapels, flaps, hems and
cuffs) a rich full hand, without taking away the textile and
rich-hand feel of the outer fabric.
13. Peerless stated that competition in the men's apparel
industry is global in scale and is very fierce. Peerless indicated
that the removal of the customs duty on imports of the subject
fabrics would allow it to stay competitive in the market and
possibly increase its market share in domestic and foreign markets.
Peerless also stated that tariff relief would help maintain current
employment levels. It indicated that any cost savings would be
passed on to the consumer.
14. Peerless indicated that the market drives its business
decisions. Peerless stated that, if the market demands garments
that have the features that are created by the subject fabrics, it
must produce such garments or face a decline in sales. It stated
that it has certain cost and markup parameters that must be
obtained to allow it to remain at its ultimate price point.
Peerless also indicated that, if it were unable to satisfy the
market demand for such apparel, this demand would be supplied by
foreign imports of finished goods.
15. Peerless indicated that, because of the North American
Free Trade Agreement,5
it no longer gets a drawback6
imported inputs that it uses for its apparel exported to the United
States under Canadian TPLs and that, therefore, duties on the
subject fabrics seriously affect its market position in the
United States. Therefore, tariff relief would assist it in
overcoming the elimination of duty drawback.
Coppley Apparel Group
16. Coppley Apparel Group, of Hamilton, Ontario, a manufacturer
of men's tailored suits, jackets and trousers that employs over 500
persons, supported Peerless's request for tariff relief. It stated
that the benefits anticipated from such relief would allow it to
stay competitive in the market, possibly increase its market share
in the highly competitive marketplace and help the company maintain
current employment levels.
Positions of the
Canada Hair Cloth Company
17. Canada Hair Cloth Company (CHC), of St. Catharines, Ontario,
has been manufacturing woven canvas and fusible fabrics for the
Canadian men's and boys' apparel industry for over 120 years. In
response to the Tribunal's domestic producer's questionnaire, CHC
supported Peerless's request for tariff relief, but indicated that
the weight range was too broad and, therefore, that the maximum
range should be established at "not more than 55 g/m2"
in lieu of 70 g/m2. However, on June 3, 2004, CHC
advised the Tribunal that it had changed its position and supported
Peerless's request for tariff relief as described in the notice of
commencement of investigation.
18. Texel Inc., of Saint-Elzéar de Beauce, Quebec, was founded
in 1967 and is one of Canada's largest manufacturers of needled
nonwoven fabrics destined for the apparel and footwear industries,
as well as other technical sectors. It indicated that it does not
produce fabrics identical to or substitutable for the subject
19. Parapad Inc., of Montréal, Quebec, was founded in 1948 and
is a major distributor of interlinings for men's and women's
clothing. It claims to be the largest manufacturer of shoulder pads
in Canada. Parapad Inc. supported Peerless's request for tariff
relief. It stated that identical or substitutable nonwovens are not
available from domestic sources and that tariff relief on the
subject fabrics would allow the Canadian men's apparel industry to
remain competitive in the market, as well as enable it to expand
production levels, which in turn would help Parapad Inc. maintain
production and employment levels.
Veratex Lining Ltd.
20. Veratex Lining Ltd., of Montréal, Quebec, is an importer and
distributor of nonwoven fusible fabrics to the Canadian men's and
women's apparel manufacturers. It supported Peerless's request for
tariff relief and stated that the scope of the request for tariff
relief should be expanded by including nonwoven fusible fabrics of
100 percent polyester staple fibres and adding ladies' wear in the
21. DIT informed the Tribunal that Canada does not maintain
quota restraints on the subject fabrics. The CBSA indicated that
there would be no additional costs, over and above those it
normally incurs, to administer the tariff relief should it be
22. 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
23. Peerless claimed that there is no domestic production of
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 users of the subject fabrics in excess of
$50,000. In addition, tariff relief would provide benefits to users
in the form of potentially increased sales and stable employment,
as well as reduced costs, which could translate into benefits to
the consumer in terms of lower prices. In summary, the Tribunal
finds that the tariff relief requested by Peerless would provide
net economic gains for Canada.
24. Peerless requested that tariff relief be effective
"immediately". The evidence presented to the Tribunal to justify
such a request is that the subject fabrics are used, at present, in
the manufacture of men's and boys' jackets (including suit
jackets), blazers and vests (waistcoats). It is the Tribunal's view
that the commencement of tariff relief is warranted as soon as
25. 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 nonwovens of
nylon staple fibres or nylon staple fibres mixed with polyester
staple fibres, partially coated with low-melt adhesive, weighing
more than 25 g/m2 but not more than 70 g/m2,
of subheading No. 5603.92, for use in the manufacture of men's and
boys' jackets (including suit jackets), blazers and vests
(waistcoats). The tariff relief should be granted as soon as
Patricia M. Close
Patricia M. Close
1 . The terms
of reference were last modified on January 13, 2004.
2 . R.S.C.
1985 (4th Supp.), c. 47.
3 . C.
4 . S.C.
1997, c. 36.
5 . 32
I.L.M. 289 (entered into force 1 January 1994) [NAFTA].
NAFTA provides preferential tariff treatment for certain
quantities of apparel despite their incorporation of non-North
American (i.e. non-originating) fabric. This preferential tariff
treatment takes the form of Canadian tariff preference levels
(TPLs). TPLs permit the import of a fixed quantity of certain goods
into Canada, the United States and Mexico at the NAFTA rate
of duty. Goods entering a NAFTA country in quantities above
the TPLs are subject to the higher MFN rate of duty. A new method
of determining duty drawback, called "the lesser-of concept", was
introduced in NAFTA. Under this new scheme, the duty
drawback, or refund, is equal to one of the following amounts,
whichever is less:
(a) the duties paid on the goods imported into Canada; or
(b) the duties paid on the finished goods when exported to the
7 . By
letter dated May 26, 2004, the Tribunal advised Veratex that it had
decided not to expand the scope of the investigation because this
would unduly delay the conclusion of the request filed by Peerless.
The Tribunal also indicated that Veratex could file a separate
request for tariff relief in accordance with the Textile