PEERLESS CLOTHING INC.
(NONWOVENS OF POLYESTER AND VISCOSE RAYON STAPLE FIBRES)
Request No. TR-2007-001
November 6, 2007
TABLE OF CONTENTS
Meriel V. M. Bradford, Presiding Member
Pierre Gosselin, Member
James A. Ogilvy, Member
Lead Research Officer:
Counsel for the Tribunal:
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 April 23, 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 nonwovens of polyester and
rayon staple fibres, weighing between 50 g/m² and 90 g/m², for use
in the manufacture of shoulder pads used in the manufacture of
men’s and boys’ suit jackets and jackets (sportcoats) and
3. On May 7, 2007, Peerless amended its request to exclude
fabrics weighing 70 g/m² or less, which are already duty free under
tariff item No. 5603.92.91 of the schedule to the Customs
4. On July 30, 2007, the Tribunal, being satisfied that the
request was properly documented, issued a notice of commencement of
investigation into the matter. The nonwovens under investigation
were described in the notice of commencement as
“. . . nonwovens of polyester staple fibres mixed
solely with viscose rayon staple fibres, impregnated with a bonding
agent of acrylic polymer, weighing more than 70 g/m² but not
more than 150 g/m², for use in the manufacture of shoulder pads
used in the manufacture of suit jackets, jackets (sportcoats) and
blazers, of tariff item No. 5603.93.90 . . .” (the
5. As part of the investigation, the Tribunal’s research staff
sent questionnaires to potential producers of nonwovens identical
to or substitutable for the subject nonwovens. Staff sent a request
for information to potential users or importers of the subject
nonwovens, as well as a letter to the Canada Border Services Agency
(CBSA), requesting a complete description of the physical
characteristics of the sample submitted by Peerless, an opinion on
whether the requested tariff relief would be administrable and
suggested wording to describe the subject nonwovens, 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
6. The Tribunal provided a staff investigation report
summarizing the information received from the CBSA, Peerless,
Parapad Inc. (Parapad), Fybon Industries Ltd. (Fybon), Texel Inc.
(Texel) and Matador Converters Co., Ltd. (Matador) to those that
had become parties to the proceedings by filing notices of
appearance in the investigation. Following distribution of the
staff investigation report, Peerless filed a submission with the
7. No public hearing was held for this
8. The request for tariff relief covers nonwovens imported from
all countries. The sample submitted with Peerless’s request was a
nonwoven made from a blend of man-made synthetic staple fibres
(polyester) and man-made artificial staple fibres (viscose rayon).
The fabric consisted of 80 percent by weight of polyester and 20
percent by weight of viscose rayon. The fabric weighed 82
9. As of January 1, 2007, the subject nonwovens are classified
for customs purposes under classification No. 5603.93.90.20 and are
dutiable at 14 percent ad valorem under the
most-favoured-nation (MFN) Tariff and 4 percent 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.
10. Peerless, of Montréal, Quebec, 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 United States. Peerless has signed exclusive
licence agreements to market well-known brand names, such as Chaps
by Ralph Lauren and Ralph by Ralph Lauren.
11. Peerless claimed that there is no domestic production of
identical or substitutable nonwovens. It noted that the comparable
nonwovens in lighter weights are already duty free under tariff
item Nos. 5603.91.40 (not exceeding 25 g/m²) and 5603.92.91
(more than 25 g/m² but not more than 70 g/m²).
12. Peerless uses the subject nonwovens to manufacture both
shoulder pad tops and shoulder pad linings. Shoulder pad tops give
form and shape to shoulder pads that, in turn, provide stability
and durability to the shoulder area of jackets. Shoulder pad
linings, which form the bottom layer of shoulder pads, act as a
carrier for the inside or wadding part of shoulder pads.
13. Peerless manufactures jackets in a highly automated
environment that allows for the large-scale manufacture of men’s
and boys’ fine clothing. In some cases, pieces are glued together
rather than sewn, and the garments are exposed to high heat and
humidity during certain stages of production. Peerless stated that
the subject nonwovens are able to withstand the rigors of the
production process without any degradation in their ability to
stretch and maintain their shape. Further, it stated that the
viscose rayon in the subject nonwovens adds breathability and
14. Peerless indicated that the trend in the fashion market over
the past years has consistently been towards more comfortable and
lighter fabrics. According to Peerless, it is obliged to use
lightweight nonwovens, such as the subject nonwovens that it
imports from Germany, to make men’s fine tailored clothing that is
more comfortable and durable. Peerless contended that the market
drives its business decisions and that, if the market demands
garments with features made possible by the subject nonwovens, it
must produce such garments or face a decline in sales.
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 nonwovens would allow it to stay competitive
and possibly increase its share of domestic and foreign markets.
Peerless stated 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
with respect to the imported inputs that it
uses in apparel exported to the United States.6
16. In its reply submission, Peerless stated that Fybon had
provided no evidence of production or planned production of an
identical nonwoven and noted that Fybon had indicated that it does
not sell identical or substitutable nonwovens to the apparel
industry for use in the manufacture of shoulder pads. Peerless
further noted that the sample provided by Fybon failed to meet the
definition of the subject nonwovens, i.e. it did not contain any
rayon and was not bonded with an acrylic polymer. Peerless also
stated that the evidence submitted by Fybon established that the
selling price of its nonwovens was significantly less than the cost
of the subject nonwovens imported by Peerless and Parapad. If the
Fybon nonwovens were substitutable, then, given their significant
cost advantage, Canadian manufacturers would purchase them.
17. Peerless submitted that, although Matador opposed the
request, it had provided no evidence of production or planned
production of identical or substitutable nonwovens.
18. Peerless submitted that Texel gave no evidence of current
production of identical or substitutable nonwovens, only that it
was capable of producing identical or substitutable fabrics
weighing more than 100 g/m². Peerless submitted that, if the
Tribunal were to conclude that Texel’s other products might be
adversely affected by tariff relief, the weight range in the
product description could be restricted to products weighing less
than 100 g/m².
19. Peerless requested that tariff relief be retroactive to
either January 1, 2005, the effective date of the broad tariff
relief implemented by the Government pursuant to Reference Nos.
and MN-2005-001, or, in the alternative, to
April 23, 2007, the date of filing of the request for tariff
20. Parapad, of Montréal, Quebec, a manufacturer of shoulder
pads and sleeve-heads, supported Peerless’s request for tariff
relief. According to Parapad, identical or substitutable nonwovens
are not manufactured domestically.
21. Parapad uses the subject nonwovens to manufacture the tops
and linings (bottoms) of shoulder pads. The subject nonwovens are
soft, dry and washable, and have good recovery characteristics,
i.e. they return to their original shape when folded or
22. Parapad submitted that the fashion trend is for
lighter-weight and more durable products and that, therefore,
manufacturers must be able to source raw materials from around the
globe to meet the requirements of their customers. Removal of the
customs duty would allow Parapad and its customers to remain
competitive. Parapad also submitted that the removal of the customs
duty would allow it to maintain its current employment levels and
to continue to export its product to the United States and
23. Fybon, of Toronto, Ontario, produces a variety of nonwovens,
including both carded and needlepunched products.
24. Fybon opposed Peerless’s request on the basis that identical
or substitutable products are available from several Canadian
manufacturers, including Fybon. According to Fybon, the subject
nonwovens can be used in many applications. Fybon submitted that it
had not sold identical or substitutable nonwovens for use in the
manufacture of shoulder pads in recent years because clothing
production had moved offshore. However, Fybon submitted that, in
the past, it had sold identical or substitutable products to
domestic producers for use in the manufacture of shoulder pads.
25. The CBSA analysed a sample of an allegedly identical or
substitutable product provided by Fybon. The sample consisted of
polyester staple fibres that had been impregnated with a polymer
binder other than acrylic and weighed 66 g/ m². Fybon indicated
that it did not currently have an identical fabric available.
26. Fybon submitted that, if the requested tariff relief were
granted, it would have a negative impact on its entire operation,
including sales, gross margin and employment.
27. Texel, of Saint-Elzéar-de-Beauce, Quebec, manufactures
needlepunched nonwovens in the range of 65 g/m² to more than 3,000
28. Texel did not oppose Peerless’s request for tariff relief
with respect to the subject nonwovens weighing less than 100 g/m².
However, Texel opposed Peerless’s request with respect to the
subject nonwovens weighing more than 100 g/m². Texel submitted that
providing such tariff relief would put at risk its current sales of
nonwovens for interlinings and shoulder pads.
29. Texel submitted that it is capable of supplying identical or
substitutable products weighing more than 100 g/m² using its
current manufacturing equipment, with a lead time of three months.
It currently supplies Peerless with a needlepunched polyester
nonwoven weighing 90 g/m² for use as interlinings in the
manufacture of men’s and boys’ suit jackets and jackets
(sportcoats) and blazers. This nonwoven is manufactured using a
thermal bonding process, which, Texel submitted, provides the same
rigidity as an acrylic binder.
30. Matador opposed Peerless’s request and submitted that it was
capable of producing a similar product. It did not provide a
31. Under the World Trade Organization Agreement on Textiles
and Clothing, quantitative restrictions 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,
above those that it already incurs, to administer the tariff relief
requested for the subject nonwovens.
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
notes that the single sample provided by Fybon failed to meet the
definition of the subject nonwovens, in that it was composed of
different fibres and had a different coating. Fybon failed to
provide any additional information to convince the Tribunal that it
had the capability to produce identical or substitutable nonwovens
and to sell them to apparel producers. In order to conclude that
Fybon had the capability to supply the market with identical or
substitutable nonwovens, the Tribunal would have required evidence,
such as documented information on production or orders on hand.
Finally, in view of the significant difference in the prices of the
subject nonwovens imported by Peerless and Parapad and the
relatively lower-priced nonwovens sold by Fybon, the Tribunal is
not persuaded that the tariff provides any effective protection for
Fybon’s production or that, conversely, its removal would cause
Fybon to lose sales.
35. Although Matador opposed Peerless’s request, it provided no
evidence to support its submission that it has the capability to
produce identical or substitutable nonwovens.
36. As for Texel, since it did not oppose Peerless’s request for
tariff relief with respect to the subject nonwovens weighing less
than 100 g/m², the Tribunal concludes that Texel does not produce
an identical or substitutable product in this weight range.
37. Other than the corresponding duty revenues forgone by the
Government, the Tribunal concludes that, on the basis of the
evidence, there are no direct commercial costs associated with the
removal of the tariff on the subject nonwovens weighing up to and
including 100 g/m².
38. In view of the evidence on the record, the Tribunal is not
convinced that removal of the tariff on the subject nonwovens
weighing more than 100 g/m² would maximize net economic gains for
Canada. The Tribunal notes Texel’s submission that such tariff
relief would put at risk its current sales of nonwovens for
interlinings and shoulder pads in this weight range. It also notes
that Peerless did not oppose restricting tariff relief to the
subject nonwovens weighing less than 100 g/m² if the Tribunal were
to conclude that Texel’s sales might be negatively affected.
Finally, the Tribunal notes that Peerless’s original request to the
Tribunal covered the subject nonwovens only up to 90
39. Given that the maximum weight indicated in the description
of the subject nonwovens was increased to 150 g/m² when the
investigation was initiated, it was this revised maximum that the
Tribunal considered. In the end, it accepts Texel’s view that
tariff relief on importations of the subject nonwovens weighing
more than 100 g/m² would put its sales at risk and, therefore,
concludes that 100 g/m² is an appropriate upper limit.
40. In summary, on the basis of the information provided to the
Tribunal, tariff relief would result in yearly benefits to users of
the subject nonwovens of more than $50,000. In addition, tariff
relief would provide benefits to users in the form of potentially
increased sales, including in export markets such as the United
States, where the recent appreciation of the Canadian dollar may
have put domestic apparel producers at a competitive
41. 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.
42. 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 nonwovens of polyester staple fibres mixed solely with viscose
rayon staple fibres, impregnated with a bonding agent of acrylic
polymer, weighing more than 70 g/m² but not more than 100 g/m², of
tariff item No. 5603.93.90, for use in the manufacture of shoulder
pads used in the manufacture of suit jackets, jackets (sportcoats)
. The terms of reference were last modified on October 27,
. R.S.C. 1985 (4th Supp.), c. 47.
. 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
. On the basis of production reported by
Matador and Texel, the Tribunal recommended the retention of duty
protection for tariff item No. 5603.93.90.
. Tribunal Exhibit TR-2007-001-01.