TRICOTS LIESSE (1983) INC.
(SINGLE YARN OF ARTIFICIAL STAPLE FIBRES)
Request No. TR-2006-002
Monday, August 27, 2007
TABLE OF CONTENTS
Serge Fréchette, Presiding Member
James A. Ogilvy, Member
Meriel V. M. Bradford, 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
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 December 7, 2006, pursuant to the Minister’s reference,
the Tribunal received a request from Tricots Liesse (1983) Inc.
(Liesse), of Montréal, Quebec, for the removal, for an
indeterminate period of time, of the customs duty on importations
from all countries of single yarn of artificial staple fibres for
use in the manufacture of circular knitted fabrics.
3. On March 21, 2007, being satisfied that the request was
properly documented, the Tribunal issued a notice of commencement
which was distributed to known interested
parties. The yarn under investigation was described in the notice
as “single yarn solely of artificial staple fibres other than
acetate fibres, or mixed solely with 15 percent or less by weight
of any natural fibre, measuring less than 210 decitex, of
subheading No. 5510.11, and single yarn containing
50 percent or more by weight of artificial staple fibres other
than acetate fibres, mixed solely with cotton fibres, measuring
less than 210 decitex, of subheading No. 5510.30, for use
in the manufacture of circular knitted apparel fabrics”
(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. A request for information
was also sent to potential users and importers of the subject yarn.
A letter was sent to the Canada Border Services Agency (CBSA)
requesting a complete description of the physical characteristics
of the samples submitted by Liesse, an opinion on whether the
requested tariff relief would be administrable and suggested
wording to describe the subject yarn should tariff relief be
recommended. 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
5. A staff investigation report summarizing the information
received from the CBSA, Liesse, Atlantic Yarns Inc. and Atlantic
Fine Yarns Inc. (Atlantic), FilSpec Inc. (FilSpec), Manoir Inc.
(Manoir), Régitex Inc. (Régitex) and HMH General Trading Co. Inc.
(HMH) was provided to those that had become parties to the
proceedings by filing notices of appearance in the investigation.
Following distribution of the staff investigation report, Liesse
filed a submission with the Tribunal.
6. No public hearing was held for this
7. The request for tariff relief covers yarns imported from all
countries. Five of the six samples submitted with Liesse’s request
for tariff relief were composed of artificial staple fibres
viscose rayon or modal6
measuring 120, 197, 198 or 204 decitex. Of these samples, two
contained 10 percent by weight of fine animal hair or silk. As
of January 1, 2007, these yarns, classified for customs purposes
under classification No. 5510.11.00.11 (viscose rayon and viscose
rayon/silk), 5510.11.00.19 (modal rayon/fine animal hair) or
5510.11.00.29 (bamboo) of the schedule to the Customs
are dutiable at 8 percent ad valorem
under the Most-Favoured-Nation (MFN) Tariff and the General
Preferential Tariff (GPT), and at 2 percent under the Costa Rica
Tariff. They are duty free under the United States Tariff, the
Least Developed Country Tariff, the Mexico Tariff, the
Canada-Israel Free Trade Agreement Tariff and the Chile Tariff.
8. The sixth sample was composed of a blend of approximately 50
percent by weight of artificial staple fibres (modal rayon) and 50
percent by weight of cotton, measuring 117 decitex. As of
January 1, 2007, this yarn, classified for customs
purposes under classification No. 5510.30.00.00, is dutiable at 8
percent ad valorem under the MFN Tariff and the GPT, and at
2 percent ad valorem under the Costa Rica Tariff. It is duty
free under the United States Tariff, the Least Developed Country
Tariff, the Mexico Tariff, the Canada-Israel Free Trade Agreement
Tariff and the Chile Tariff.
9. Liesse has been producing knitted fabrics on circular
knitting machines, in Canada, since 1964. The company specializes
in the production of swimwear fabrics, but also produces fabrics
for other end uses. Liesse’s production consists mainly of
single-knit and double-knit fabrics, and its product range includes
plain, striped, jacquard and crocheted fabrics, as well as fabrics
with multi-level designs and surfaces.
10. Liesse indicated that there is a growing demand for
specialty yarns and that this trend is being driven by its North
American customers who insist on uniqueness and novelty in fabric
11. Liesse stated that it produces thousands of fabric samples
each year. In light of customer preferences and high turnover of
styles, these fabrics increasingly call for high-priced specialty
yarns made with superior variants of rayon, such as modal and
lyocell, and high-value fibres, such as silk, linen, cashmere and
extra-long staple cotton. These yarns are produced mainly in
12. Liesse stated that, on average, it imports approximately $2
million of yarns covered by heading No. 55.10 annually from
Europe and Asia and that these imports consist of a few commodity
yarns (e.g. single-ply viscose rayon) purchased in significant
quantities and a wide variety of specialty yarns purchased in small
quantities. According to Liesse, commodity yarns are priced beyond
the reach of North American producers, whereas specialty yarns are
priced at levels that are not high enough to attract new
13. Liesse pointed out that, in the past, the United States was
the dominant supplier of Canadian imports of the subject yarn, but
that, because the U.S. spinning industry is in a state of decline,
the availability of imported specialty yarns from North American
Free Trade Agreement (NAFTA) production has dwindled.
Liesse also indicated that, for reasons of delivery and service, in
the past three years, it has purchased 5 to 10 percent of its spun
rayon yarn requirements falling under heading No. 55.10 from
FilSpec, a Canadian producer. In this regard, Liesse stated that,
in the usual case where it requires a specialty yarn in very small
quantities for sampling or for responding to a fabric order, the
amount does not warrant the set-up costs of initiating yarn
production in Canada. Liesse indicated that, in the few instances
where it requires spun rayon yarn in significant quantity, it is
generally not feasible for a domestic spinner to compete on price.
However, Liesse indicated that, should tariff relief be granted, it
does not expect to buy less rayon yarn from domestic
14. Liesse submitted that the U.S. market accounts for more than
two thirds of its fabric sales and that its U.S. customers, that
are faced with increased competition from swimwear imports from the
People’s Republic of China, demand unique fabric designs that are
increasingly produced with specialty yarns. Liesse also indicated
that, although it is exporting a high proportion of its total
fabric production to the United States, the duty that it pays
on the yarns is not recoverable by drawback.8
claimed that tariff relief on the subject yarn would improve
economic efficiencies in today’s competitive environment and that
the ensuing benefits would also extend to other circular knitters
who use such yarn.
15. In its reply submission, Liesse submitted that it has
restricted the scope of its request for tariff relief to heading
No. 55.10 in order to exclude a broad variety of spun yarns and
minimize the impact on domestic yarn spinners. Liesse submitted
that, on the basis of the information provided, implementation of
this small request would have no significant “cost” or negative
16. As to the availability of NAFTA yarn sources, Liesse
submitted that the most recent data on the value of U.S. shipments
confirms that the U.S. spinning industry is in a state of decline.
Also, the small value of exports of Canadian yarns classified in
subheading Nos. 5510.11 and 5510.30 indicates that the availability
of the subject yarn in Canada is limited.
17. Liesse submitted that FilSpec’s sales of allegedly identical
yarn to certain of its customers would not be affected by tariff
relief on the subject yarn, since the end-use provision of the
request is restricted to circular knitted fabrics. Liesse also
submitted that, if FilSpec produces a yarn that is indeed
substitutable for the subject yarn and the price comparison is
favourable, there is every reason to believe that it would switch
its purchases to FilSpec, regardless of a tariff.
18. Liesse submitted that, although Régitex indicated that it is
within its technical capability to produce finer yarns, the
Tribunal has consistently held that a capability to produce
identical or substitutable goods does not suffice to justify
retaining a textile tariff. In this connection, Liesse submitted
that it has never been contacted by Régitex with an offer of
identical or substitutable yarns.
19. Manoir, of Terrebonne, Quebec, a producer of circular knit
supported Liesse’s request for tariff
relief. It stated that the subject yarn is featured prominently in
its new product offering and that duties adversely affect the
marketability of fabrics made with such yarn.
20. Atlantic, of Mississauga, Ontario, was founded in 2000 to
produce ring-spun yarns in Pokemouche, New Brunswick. Atlantic
indicated that it has the capacity to produce 3,000 metric tonnes
of a variety of yarns per year and the technical capability to
produce yarns identical to the subject yarn.
21. Atlantic opposed Liesse’s request for tariff relief on the
basis of the breadth of coverage of subheading Nos. 5510.11 and
5510.30. However, Atlantic stated that it did not object to the
granting of relief for the specific yarns described in the request
and imported during the inquiry period. In this regard, it
submitted that Liesse imports not more than 200 metric tonnes of
the subject yarn per year and that a renewable “import licence”
could be issued to Liesse every year based on its utilization of
the “licence” for specific volumes of the subject yarn.
22. FilSpec, of Sherbrooke, Quebec, has been producing yarn of
artificial and synthetic staple fibres or natural fibres since
2004. The company employs 170 people.
23. FilSpec opposed Liesse’s request for tariff relief on the
grounds that it currently produces and sells yarns, including
specialty yarns, identical to the subject yarn and that these yarns
account for an important part of its activities. In this
connection, it stated that the production of yarn of artificial
staple fibres is simple and that the company produces yarn using
three different processes, i.e. open end, ring and air jet.
24. FilSpec claimed that tariff relief on the subject yarn would
seriously affect its viability because the company would be less
competitive with other low-cost producers of yarn. With respect to
Liesse’s allegations that the requirement for small quantities of
specialty yarn does not justify the set-up costs of initiating yarn
production in Canada, FilSpec stated that they are without
foundation. It indicated that more than 35 percent of its
production of specialty yarns is for quantities below 1,000 kg per
order. Since the demand for specialty yarns is on the rise and the
company has based its future on this growth, FilSpec stated that
tariff relief on the subject yarn would jeopardize its
25. FilSpec explained that its customers already import
high-volume yarns at very low prices and that the elimination of
duties on these yarns would only allow them to make additional
profits. In addition, tariff relief would encourage some of its
customers to import specialty yarns, thereby putting its sales of
these types of yarn at risk. FilSpec also stated that the product
description of the subject yarn is too broad and goes beyond the
characteristics of the yarns described in Liesse’s request. It
stated that tariff relief on single yarn of artificial staple
fibres, as described in the notice of commencement of
investigation, would jeopardize 80 percent of its volume of
26. Founded in 1998, Régitex, of Saint-Joseph, Quebec, develops
and produces custom-made ring-spun yarns using many natural and
27. Régitex opposed Liesse’s request for tariff relief on the
grounds that it currently produces and sells yarns covered by
subheading Nos. 5510.11 and 5510.30. Although it has not produced
yarns measuring less than 210 decitex under these subheadings,
Régitex stated that it is well within its technical capability to
produce finer yarns. In this regard, it indicated that it produces
and sells yarns measuring less than 210 decitex that are
classified in other subheadings.
28. Régitex stated that the risks associated with Liesse’s
request for tariff relief are far greater than the potential
savings of $160,000 in duties per year (based on Liesse’s annual
imports of $2 million). According to Régitex, there is a growing
demand for yarn made of artificial staple fibres, the elimination
of duties on the subject yarn would have a negative impact on its
potential sales, and the money invested in research and development
would be lost.
29. Régitex stated that Liesse’s request should not have been
considered by the Tribunal because, as reflected in the information
provided by Liesse, the company is buying the same yarn from a
domestic source. Moreover, as a result of the Tribunal’s last
inquiry into the availability of yarns produced by Canadian
manufacturers, tariff protection was retained on the subject yarn
because of reported domestic production.10
30. HMH is an importer and distributor of the subject yarn. It
imports the subject yarn from Austria and Portugal and supplies
Liesse. HMH supported Liesse’s request for tariff relief and stated
that the elimination of duties on the subject yarn would make its
customers more competitive in a global environment. As a result,
its sales of yarn would increase.
31. Under the World Trade Organization Agreement on Textiles
and Clothing, quantitative restraints on imports of textiles
and apparel were eliminated on January 1, 2005. Therefore, Canada
does not maintain any quantitative restrictions on the subject
32. The CBSA indicated that there would be no additional costs,
over and above those it already incurs, to administer the tariff
relief requested for the subject yarn.
33. 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.
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 maximize net economic gains for Canada and
would be administrable on a cost-effective basis.
34. With respect to the issue of substitutability, the Tribunal
accepts the evidence provided by FilSpec that it currently produces
and sells yarns identical to or substitutable for the subject yarn.
In this regard, the Tribunal notes that, over the past three years,
Liesse has purchased 5 to 10 percent of its spun rayon yarn
requirements under heading No. 55.10 from FilSpec.
35. Régitex also stated that it is well within its technical
capability to produce finer yarns, since it produces and sells
yarns measuring less than 210 decitex that are classified in other
subheadings. However, Régitex has not provided any evidence, in
this case, to support a conclusion of imminent production or the
potential to supply commercial quantities of yarn in the Canadian
marketplace that would be acceptable to Liesse and other potential
buyers. As stated by the Tribunal in previous cases, it is the
responsibility of the domestic producers to provide evidence, not
just assertions or allegations, of their ability to produce
identical or substitutable products. Moreover, the Tribunal has not
seen a clear marketing strategy from Régitex in respect of yarns
substitutable for the subject yarn. Therefore, the Tribunal
concludes that Régitex has not demonstrated, to the Tribunal’s
satisfaction, that it will be able, in the foreseeable future, to
supply Liesse and other potential buyers with yarns that are
identical or substitutable for the subject yarn.
36. Atlantic did not indicate that it produces identical or
substitutable yarns for the subject yarn, only that it has the
technical capability to produce such yarn. As in Régitex’s case and
for similar reasons, the Tribunal concludes that Atlantic has not
demonstrated that it will be able to meet the requirements of
Liesse and other potential buyers.
Foreign Price Comparison
37. Liesse stated that it imports high-volume commodity yarns at
prices that are not competitive with those of North American
producers. The Tribunal is of the view that, even in the absence of
tariff relief, Liesse would not shift more of its purchases to
FilSpec unless FilSpec were able to offer yarns at competitive
prices. In this regard, the evidence indicates that FilSpec is not
likely to lose sales if tariff relief is granted since, for the
inquiry period, the landed cost of the subject high-volume yarns,
which includes all duties, is significantly lower than Filspec’s
selling prices of similar yarns.11
On the other hand, to the
extent that FilSpec already sells identical or substitutable
speciality yarns at prices that would be competitive even without
the tariff, tariff relief would not likely erode that advantage or
negatively affect FilSpec’s ability to sell to domestic circular
knitters, including Liesse.
Net Economic Gains
38. The Tribunal’s decision to recommend the reduction or
removal of a tariff must be based on the extent to which it
considers that such relief would maximize net economic gains for
Canada. The Tribunal accepts Liesse’s position that, in light of
the importance to its operations of the increasingly competitive
U.S. market, it has been forced to seek lower-priced yarns and
unique yarns from foreign suppliers. In this context, the Tribunal
is of the view that Liesse faces a high degree of competition and
is vulnerable to market pressures.
39. FilSpec claimed that tariff relief on the subject yarn would
seriously affect its viability and come at the expense of jobs in
its company. Régitex stated that such relief would have a negative
impact on its potential sales and that the money invested in
research and development would be lost.
40. As noted above, FilSpec has sold certain quantities of yarn
to Liesse and the Tribunal believes that, even if tariff relief
were granted, its circumstances would not change in the immediate
future. If tariff relief were granted, the pricing of domestic and
imported yarns would remain such that Liesse would not shift more
of its purchases to FilSpec and, in the Tribunal’s view, it is
doubtful that FilSpec would experience a loss of employment or
gross margin, as it submitted. The Tribunal also notes that
FilSpec’s alleged identical or substitutable yarns do not represent
a significant portion of its total company sales of
Furthermore, based on the evidence, these
sales include sales of yarn to companies not involved in circular
In other words, such sales are not
affected by this request for tariff relief, since the end-use
provision of the request is restricted to circular knitted apparel
fabrics. Therefore, the Tribunal is of the view that any potential
risk to FilSpec is minimal.
41. The Tribunal is of the view that, should FilSpec be in a
position to offer products that are directly substitutable for the
subject yarn, at competitive prices and in commercially available
quantities, it will be in a good position to obtain a share of the
market. The same conclusion would apply to Régitex, should it
choose to pursue potential business opportunities with Liesse. With
respect to Atlantic, the Tribunal considers that there was
insufficient information submitted to assess whether tariff relief
would have a negative impact on any potential production of
identical or substitutable yarns.
42. Régitex submitted that, since the Tribunal recommended the
retention of duty protection for tariff item Nos. 5510.11.00 and
5510.30.00 following its inquiry on the production in Canada of
certain fibres, yarns and apparel fabrics, Liesse’s request should
not have been considered. In this regard, the Tribunal notes that
the standing reference on textiles is the appropriate mechanism for
a case-by-case examination of any specific requests for tariff
43. On the basis of the information provided to the Tribunal,
tariff relief would provide direct annual benefits in excess of
$125,000 to importers of the subject yarn. Potential gains were
based on the MFN and GPT rate of duty for 2007, i.e. 8 percent
ad valorem. In addition, the benefits provided to users in
the form of reduced costs could enable them to better position
themselves for sales of fabrics in their export markets,
particularly the United States. Based on the evidence that the
current tariff does not offer effective protection, the Tribunal
sees little cost to the domestic producers of yarn, if tariff
relief is granted. Given that there is some indication that the
domestic industry can provide certain specialty yarns at
competitive prices, tariff relief should not reduce the opportunity
for the domestic industry to pursue opportunities with the
producers of circular knitted apparel fabrics.
44. The Tribunal also notes that the CBSA indicated that there
would be no additional costs, over and above those it already
incurs, to administer the tariff relief requested for the subject
45. Therefore, although the Government would forgo the
corresponding duty revenues, which are estimated to be in excess of
$125,000 annually, the Tribunal considers that there would be few
direct commercial costs to domestic producers of yarn associated
with the removal of the customs duty on the importation of the
46. In summary, the Tribunal is of the view that potential
benefits to Liesse and other users of the subject yarn outweigh any
potential costs to domestic producers of yarns. The forgone
revenues to the Government would be small. Consequently, the
Tribunal finds that the tariff relief requested by Liesse would
provide net economic gains to Canada.
47. 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 single yarn
solely of artificial staple fibres other than acetate fibres, or
mixed solely with 15 percent or less by weight of any natural
fibre, measuring less than 210 decitex, of subheading No. 5510.11,
and single yarn containing 50 percent or more by weight of
artificial staple fibres other than acetate fibres, mixed solely
with cotton fibres, measuring less than 210 decitex, of subheading
No. 5510.30, for use in the manufacture of circular knitted apparel
James A. Ogilvy
James A. Ogilvy
Meriel V. M. Bradford
Meriel V. M. Bradford
.October 27, 2005.
. R.S.C. 1985 (4th Supp.), c. 47.
. C. Gaz. 2007.I.732.
.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.
. Liesse claimed that one of the samples is
made of bamboo fibres. The CBSA indicated that, microscopically,
the fibres look very similar to viscose rayon fibres.
. Fairchild’s Dictionary of Textiles,
1996, defines modal as a British generic fibre category for
manufactured fibres of cellulose having a high breaking strength
and high wet modulus (rayon fibre having greater resistance to
deformation when wet than does ordinary viscose rayon).
. S.C. 1997, c. 36.
. Non-NAFTA yarns that are
incorporated in fabrics exported to the United States would
generally qualify for duty drawback, unless the fabrics are
exported under zero duty tariff preference levels.
. In its response of April 13, 2007, Manoir
stated that it has redesigned its business model and closed its two
main manufacturing plants located in Saint-Laurent, Quebec. It now
operates on the basis of a partnership with selected knitting
and/or dyeing and finishing specialists in order to offer knitted
fabrics to North American apparel manufacturers.
. In Reference No. MN-2004-002, on the
basis of production reported by FilSpec, the Tribunal recommended
the retention of duty protection for tariff item Nos. 5510.11.00
. Tribunal Exhibit TR-2006-002-24
(protected), Administrative Record, Vol. 2.1 at 12, 13.
. Tribunal Exhibit TR-2006-002-17.01
(protected), Administrative Record, Vol. 4 at 5.
. Ibid. at 2.