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JULY 6, 1995


Request No. TR-94-007

Tribunal Members: Arthur B. Trudeau, Presiding Member
Charles A. Gracey, Member
Lyle M. Russell, Member

Research Director: Réal Roy

Research Manager: Don Shires

Counsel for the Tribunal: John L. Syme

Registration and
Distribution Officer: Claudette Friesen

Address all communications to:

The Secretary
Canadian International Trade Tribunal
Standard Life Centre
333 Laurier Avenue West
15th Floor
Ottawa, Ontario
K1A 0G7


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. [1] 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.

Pursuant to the Minister’s reference, on February 8, 1995, the Tribunal received a request from Woods Canada Ltd. (Woods) of Toronto, Ontario, for the immediate and permanent removal of the customs duty on importations, from all MFN countries, of dyed nylon fabric of either plain weave or ripstop construction with a calendered finish, having a fabric weight of 68 g/m2 or more, but not exceeding 170 g/m2, and having a thread count of 67 dtex (the subject fabric), for use in the production of outer shells and carrying cases for sleeping bags. In a subsequent submission, Woods indicated that the warp yarn count is 67 dtex, while the weft yarn count is 133 dtex, and that the fabric construction is 42.0 threads/cm2 in the warp and 29.5 threads/cm2 in the weft.

On March 8, 1995, the Tribunal, being satisfied that the request was properly documented, issued a notice of commencement of investigation, which was widely distributed and published in Part I of the March 18, 1995, edition of the Canada Gazette.

As part of the investigation, the Tribunal’s research staff sent questionnaires to potential producers of identical or substitutable fabrics. Questionnaires were also sent to known and potential users of the subject fabric for use in the production of sleeping bags and to several potential importers of the subject fabric. A letter was sent to the Department of National Revenue (Revenue Canada) requesting information on the tariff classification of the subject fabric, and samples were provided for laboratory analysis. Letters were also sent to a number of other government departments requesting information and advice.

A staff investigation report, summarizing the information received from these departments, from Woods and from other firms that responded to the questionnaires, was provided to the parties that had filed notices of appearance for this investigation. These parties are Woods and the Canadian Textiles Institute (CTI).

The CTI filed a submission with the Tribunal, to which Woods provided a response. A public hearing was not held for this investigation.


Revenue Canada analyzed the subject fabric and confirmed that it is a 100 percent dyed nylon fabric, of plain weave or ripstop construction, woven from single yarns of non-textured nylon filaments, and that it is heat-calendered on one side. The fabric of ripstop construction has a checkerboard pattern. Revenue Canada reported that the decitex value for the yarns in the samples differed from the value provided in the request, which was 67 dtex in both the warp and the weft. Respecting the warp, Revenue Canada found that the yarns in the ripstop and plain weave samples are approximately 71 dtex and 69 dtex, respectively. The differences found for the weft yarns were greater, with the ripstop being approximately 139 dtex and the plain weave being approximately 141 dtex. Revenue Canada completed its analysis prior to Woods’ subsequent submission, as previously noted, which clarified that the weft yarns were 133 dtex in both samples.

The discrepancies in the decitex value for the yarns may have a logical explanation. For example, Revenue Canada found the subject fabric of ripstop construction to have a weight of 73 g/m2 and that of plain weave construction, 74 g/m2, while Woods described the subject fabric as having a weight of 68 g/m2 or more, but not exceeding 170 g/m2. Consequently, yarns within a range of decitex values could be used to produce a number of fabrics that all fall within the defined weight range.

The sole domestic producer of fabrics identical to or substitutable for the subject fabric submitted its own analysis of samples of the subject fabric and reported similar differences in product specifications from those provided by Woods.

The subject fabric is classified for customs purposes under tariff item No. 5407.42.00.20 of Schedule I to the Customs Tariff. [2] It is dutiable at 20.5 percent ad valorem under the MFN tariff and the GPT; at 20.2 percent ad valorem under the BPT; at 7.5 percent ad valorem under the U.S. tariff; and at 20.0 percent ad valorem under the Mexico tariff.

The subject fabric is heat-calendered on one side. Heat calendering is a manufacturing process that involves passing the fabric, under pressure, between heated rollers to provide a glossiness, hardness, lustre or sheen. The special finish afforded by heat calendering is usually not permanent, as it deteriorates through washing. Heat calendering may improve the resistance of the subject fabric to the migration of fibres used as insulation in sleeping bags.

Woods uses the subject fabric of plain weave construction to produce the outer shells and carrying cases for sleeping bags. Carrying cases are not produced using the subject fabric of ripstop construction. Woods uses another fabric to produce the carrying cases for sleeping bags that have a ripstop outer shell. Woods is not seeking tariff relief for that fabric.

The subject fabric is cut and sewn to a lining on three sides to produce an envelope. During this initial step, Woods installs the zipper on the edge of the envelope between the two fabrics. The envelope is then stuffed with insulation and, depending on the type of insulation, is quilted. The envelope is then sewn shut. Some manufacturers install the zipper after the envelope has been sewn shut.

Total Canadian imports of the subject fabric are estimated to be about 1.0 million linear metres in 1995, for a value for duty of approximately $1.2 million, an increase of 8 percent in volume and 17 percent in value over 1994. Historically, these imports have originated in Romania, the Czech Republic and Indonesia.

The apparent Canadian market for the subject fabric for use in the production of outer shells and carrying cases for sleeping bags in 1994 is estimated to be just over 1.6 million linear metres. This estimate comprises the combined purchases of imports reported by the two major sleeping bag manufacturers for use in their production, together with the sales of nylon fabrics to Canadian sleeping bag manufacturers reported by the domestic textile industry.


Woods’ request is for the immediate and permanent removal of the MFN customs duty on importations of the subject fabric. The estimated duty savings for Woods and other users of the subject fabric would be in excess of $200,000 annually.

Woods is a major Canadian producer of sleeping bags with 100 percent nylon outer shells. Woods stated that it could not maintain its market share if it used domestic nylon fabric rather than the subject fabric because it would have to raise its selling prices to reflect the higher domestic price for the plain weave and ripstop fabrics. Woods believes that the requested tariff relief will help it maintain its current pricing structure and compete better with the prices of sleeping bags that are imported from countries where labour costs are significantly lower than those in Canada.

In Woods’ view, its market penetration and that of Canadian Recreation Products Inc. (CRP) is indicative of the market acceptance of the subject fabric and other imported nylon fabrics used to produce their sleeping bags. Woods argued that the combined purchases of domestic nylon fabric for the designated end use have declined to minimal volumes. Woods argued that, in view of the price pressure from foreign competition in the sleeping bag market, users should not be obliged to purchase domestic fabric when the price discrepancy would render the user uncompetitive and any lost revenues to the domestic textile industry would be insignificant.

The CRP, a sleeping bag manufacturer located in Montréal, Quebec, supports Woods’ request for tariff relief. The CRP is the largest Canadian producer of sleeping bags. In 1994, approximately 85 percent of its total production of sleeping bags had nylon outer shells. The CRP submitted that fabrics substitutable for the subject fabric are available from both import and domestic sources, with imports being lower-priced than domestic fabrics. It identified Consoltex Inc. (Consoltex) as the only known domestic producer of substitutable fabrics. The CRP expressed satisfaction with the quality and service of the domestic producer, but stated that purchasing domestic nylon fabrics increases its costs and makes it more difficult to compete with low-priced imported sleeping bags. Consequently, the CRP imports virtually all of its plain weave nylon fabric. The CRP acknowledged that, if the tariff is removed, its competitive position vis-à-vis Woods or any other domestic competitor would be unaffected for both domestic and export markets. However, the CRP seeks to obtain the same tariff relief as that sought by Woods to assist it in competing with lower-priced imported sleeping bags.

The other domestic sleeping bag manufacturers filed neither questionnaire responses nor submissions, with the exception of Unitex Quilting & Fibres Inc., a small producer that reported buying only domestic nylon fabric for outer shells from Consoltex and indicated that it did not oppose Woods’ request for tariff relief.

Consoltex weaves nylon and nylon-blended greige fabrics for apparel, recreational and footwear products at its plant in Montmagny, Quebec. The greige fabrics are transferred to Consoltex’s plant in Alexandria, Ontario, for dyeing and finishing. Consoltex opposes the request for tariff relief. It contends that it produces and sells, to sleeping bag manufacturers, 100 percent nylon fabrics in a variety of plain weave and ripstop constructions weighing from 68 g/m2 to 170 g/m2, which have characteristics that are the same as, or similar to, those of the subject fabric imported by Woods from the Czech Republic. Consoltex identified seven 100 percent nylon fabrics that it produces and sells to sleeping bag manufacturers that, it contends, are substitutable for the subject fabric. Consoltex provided its 1994 sales volume and value for each of the seven fabrics to major customers, eight of which are Canadian producers of sleeping bags, including Woods and the CRP. Consoltex submitted that it would face downward price pressure from its Canadian customers if the request for tariff relief were granted. Consoltex provided an impact analysis based on reduced selling prices that, it contended, reflects the removal of the customs duty on imports. The analysis indicates that, at these lower prices, margins would decline to levels that would force Consoltex to cease production of five of the seven alleged substitutable fabrics and that Consoltex would suffer revenue losses on the sales of the remaining two fabrics. Based on its domestic sales volume in 1994, the resulting loss of sales volume would amount to over 650,000 linear metres. Consoltex submitted that the annual combined lost revenue and margin would be in excess of $1 million.

The CTI represents Canadian manufacturers of textiles. In a preliminary submission, it opposed the request for tariff relief on the basis that substitutable fabrics are produced in Canada for use in sleeping bags and other end uses. The CTI submitted that domestically produced woven nylon fabrics are currently sold to sleeping bag manufacturers in Canada and the United States and that this business would be adversely affected by duty-free entry of the subject fabric. In addition, production and sales of other woven nylon fabrics would be adversely affected. The CTI contended that Consoltex would suffer a loss of sales, price pressures, declines in production and employment, and an erosion of margins and profits. The CTI also submitted that the Czech Republic is the lowest-cost source for nylon fabrics in the world and that duty-free entry of the subject fabric would not meaningfully alter Woods’ competitive position. The CTI argued that the existing annual reductions in MFN tariff rates would reduce the impact of Czech price increases expected through the first quarter of 1996.

In its final submission, following receipt of the staff investigation report, the CTI advanced additional arguments to bolster its opposition to the request for tariff relief. In addition to enhancing the price advantage already enjoyed by Woods for the subject fabric, the CTI argued that tariff relief would create a tariff anomaly, as similar nylon fabrics for use in applications other than the designated end use would land in Canada at a price different from that of the subject fabric. As well, producers of other finished goods made from similar nylon fabrics would request tariff relief to eliminate the perceived inequity of removing the tariff only for the designated end use. Furthermore, the CTI submitted that the subject fabric would be imported duty-free for use in the production of finished goods other than sleeping bags. The CTI also contended that competitive pressure from sleeping bags originating in China would not be relieved by removing the tariff on the subject fabric, as the savings in duty would amount to only about 2 percent of the average wholesale selling price for each sleeping bag.

The CTI also submitted that the Tribunal’s research staff, in its investigation report, underestimated the economic impact of tariff relief on the domestic textile industry by assuming that production of all seven alleged substitutable fabrics would continue because each would be generating enough revenue to make a contribution to fixed costs. It was submitted that the more relevant indicator of the impact of tariff relief is the comparison of the small savings in duty (approximately 2 percent of the wholesale selling price) to the much greater cost to the industry of a 16 percent drop in the gross margin which would result from having to reduce selling prices on the substitutable fabrics.

DuPont Canada Inc. (DuPont) opposes the request for tariff relief on the grounds that it produces nylon filament yarns that are sold to Canadian weavers that produce fabrics identical to or substitutable for the subject fabric. For DuPont, any reduction or removal of tariffs on importations of the subject fabric would negatively affect the sales volume and profitability of DuPont’s customers and, consequently, DuPont’s sales to them. DuPont submitted that granting duty-free entry for one end use would incite requests from other end users and that the overall impact on DuPont would be an impairment of its ability to fully utilize its capacity to produce nylon filament yarns at its facility in Kingston, Ontario.

The Department of Foreign Affairs and International Trade informed the Tribunal of the current quota restraints on nylon and nylon-blended fabrics. Restraints apply to Taiwan, the Republic of Korea, Thailand and Poland, but not to Romania, the Czech Republic or Indonesia. The annual growth rate in the restraint level is 6 percent for each country, except for Taiwan whose rate is 3 percent. In 1994, the utilization rate for both Taiwan and the Republic of Korea was over 90 percent, while Thailand’s was 60 percent and Poland’s was 44 percent. Thailand and Poland have considerable potential for growth in their volume of exports to Canada in 1995. The Tribunal was also advised that ex-quota entry on the subject fabric will be considered where a recommendation has been made by the Tribunal to remove the tariff on the basis of non-availability.

Revenue Canada has indicated that there would be no additional costs, over and above those already incurred by it, to administer the tariff relief, should it be granted.


The primary direct benefits of granting the tariff relief, based on the historical level of imports of the subject fabric and the projections by Woods and the CRP, would amount to just over $200,000 per annum, if the subject fabric were dutiable under the MFN tariff and assuming no further import volume or price changes.

The Canadian market for sleeping bags is 0.9 to 1.0 million units annually, of which about 80 percent have nylon outer shells.

Consoltex is the principal domestic manufacturer of nylon fabrics. Consoltex produces a broad range of nylon fabrics that are sold in Canada by the Outerwear Division of its Performance Fabrics Sector. These fabrics are sold for a variety of end uses, including outer shells and linings for garments, such as ski suits, coordinated sportswear and a number of non-apparel applications, including tents, backpacks and computer cases. Consoltex provided a 10-year history of sales of its nylon fabrics to the sleeping bag industry, as well as sales to its major customers in Canada and the United States that produced sleeping bags during the period from 1990 to 1994. Its nylon fabrics compete with imported nylon fabrics used in the sleeping bag industry.

The Tribunal is satisfied that Consoltex produces fabrics that are substitutable for the subject fabric and that these are sold to Canadian producers of sleeping bags for use in the production of outer shells. Currently, Woods and the CRP are importing the bulk of their requirements from offshore suppliers. In recent years, their domestic purchases have declined and have been replaced by imports that, clearly, are very price-competitive, even with the existing tariff. The difference between the domestic and import prices is significant, and it is clear to the Tribunal that the tariff is a significant factor in Consoltex’s ability to maintain a positive gross margin on its sales of competing nylon fabrics. The evidence before the Tribunal indicates that removal of the tariff will lead to price concessions and, hence, to negative or severely reduced gross margins for the substitutable nylon fabrics that are currently sold to sleeping bag manufacturers. This could force Consoltex to stop producing several of these fabrics. Tariff removal would leave Consoltex with no possibility of recovering the business that it used to have with Woods and would threaten its current volume of sales to the CRP.

According to Woods, it faces increasing competition from imported sleeping bags, and unit price quotations to its major customers must be within approximately $0.30 of other quotations to be competitive. As the cost saving from tariff removal is estimated to be $0.60 per sleeping bag, granting the request for tariff relief would likely assist Woods in remaining competitive. However, no specific information was provided that would establish the extent to which Woods would lose sales, if any, in the absence of tariff relief.

The potential savings from tariff relief amount to a very small percentage of the average wholesale selling price of the end product. In sum, the Tribunal finds that, while tariff relief would somewhat alleviate the competitive pressures from imported sleeping bags, it would have a limited effect on Woods’ wholesale prices and concludes that little, if any, improvement to Woods’ competitive position vis-à-vis imports would be realized. Consequently, the Tribunal concludes that granting tariff relief would harm Consoltex considerably more than it would help domestic sleeping bag producers.


In view of the above information and evidence before the Tribunal in this matter, the Tribunal hereby recommends to the Minister that the request for tariff relief not be granted.

Arthur B. Trudeau
Presiding Member

Charles A. Gracey
Charles A. Gracey

Lyle M. Russell
Lyle M. Russell

1. R.S.C. 1985, c. 47 (4th Supp.).

2. R.S.C. 1985, c. 41 (3rd Supp.).

[Table of Contents]

Initial publication: August 28, 1996

Case Number(s)




Publication Date

Wednesday, August 28, 1996

Modification Date

Tuesday, January 20, 2004