THE MINISTER OF FINANCE
REQUESTS FOR TARIFF RELIEF BY
CERTAIN MAN-MADE NONWOVEN AND
NEEDLED FELT FABRICS
APRIL 1, 1996
TABLE OF CONTENTS
Request Nos.: TR-95-007 and TR-95-008
Tribunal Members: Raynald Guay, Presiding Member
Robert C. Coates, Q.C., Member
Desmond Hallissey, Member
Research Director: Réal Roy
Research Manager: Audrey Chapman
Counsel for the Tribunal: Shelley Rowe
Distribution Officer: Claudette Friesen
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
Pursuant to the Minister’s reference, on May 15, 1995, the
Tribunal received two requests from Parapad Inc. (Parapad) of
Montréal, Quebec, for the permanent removal of the customs duty on
importations of certain man-made, nonwoven fabrics (Request No.
TR-95-007) and certain man-made, needled felt fabrics (Request No.
TR-95-008) for use in the production of high-quality shoulder pads,
which are used in the manufacture of men’s and women’s garments
(the subject fabrics).
On August 17, 1995, the Tribunal, being satisfied that the
requests were properly documented, issued notices of commencement
of investigation, which were distributed and published in the
August 26, 1995, edition of the Canada Gazette, Part I.
As part of the investigations, the Tribunal’s research staff
sent questionnaires to potential producers of fabrics identical to
or substitutable for the subject fabrics. Questionnaires were also
sent to known users of fabrics identical to or substitutable for
the subject fabrics. A letter was sent to the Department of
National Revenue (Revenue Canada) requesting information on the
tariff classification of the subject fabrics, and samples of the
subject fabrics 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, Parapad and other firms that
responded to the questionnaires, was provided to the parties that
had filed notices of appearance for these investigations. These
parties are: Parapad, the Canadian Textiles Institute (CTI), Texel
Inc. (Texel), Handler Canada Inc. (Handler), Matador Converters Co.
Ltd. (Matador) and Altrim Inc. (Altrim).
Matador, Altrim, Handler and the CTI filed submissions with the
Tribunal, to which Parapad provided a response.
The Tribunal reviewed all the information on file and determined
that it required certain additional information in order to make a
reasoned and fully researched recommendation to the Minister. On
January 19, 1996, the Tribunal sent out requests for additional
information to Parapad, Altrim and Matador. Responses to these
requests were then circulated to parties for their final
A public hearing was not held for these investigations.
Parapad requests tariff relief, in Request No. TR-95-007, on
certain nonwoven fabrics and, in Request No. TR-95-008, on certain
needled felt fabrics. Parapad uses both fabrics in the manufacture
of shoulder pads. The production process is performed at Parapad’s
own facilities. Parapad performs operations such as designing,
making patterns and samples, preparing, marking and cutting the
fabrics, and sewing and preparing the shoulder pads to a finished
state. The shoulder pads are then inspected and distributed.
Altrim, a producer of shoulder pads that supports the requests,
imports similar fabrics. However, certain characteristics, such as
fibre content and weight, differ.
The subject nonwoven fabrics are classified for customs purposes
under classification No. 5603.00.99.51 of Schedule I to the
Customs Tariff.  They are dutiable at 20.3 percent ad
valorem under the MFN tariff; at 7.4 percent ad valorem
under the U.S. tariff; and at 19.8 percent ad valorem under
the Mexico tariff.
As a result of its analysis of a sample of the subject nonwoven
fabrics, Revenue Canada suggested the following product
nonwovens of blended polyester and viscose rayon staple fibres,
weighing 87 g/m2 (weighing less than 100 g/m2) for use in the
manufacture of shoulder pads for apparel.
The apparent Canadian market for the subject nonwoven fabrics
and allegedly substitutable fabrics in 1995 was estimated to be
approximately 670,000 linear metres. This estimate  comprises the combined purchases
of imports reported by the two known users and Matador’s volume of
sales of the allegedly substitutable fabrics to other producers of
The subject needled felt fabrics are classified for customs
purposes under classification No. 5602.10.99.00. They are dutiable
at 20.5 percent ad valorem under the MFN tariff; at 7.5
percent ad valorem under the U.S. tariff; and at 20.0
percent ad valorem under the Mexico tariff.
As a result of its analysis of samples of the subject needled
felt fabrics, Revenue Canada suggested the following product
needled felts containing 80 percent by weight of viscose rayon
staple fibres and 20 percent by weight of polyester staple fibres,
weighing 155 g/m2, for use in the manufacture of shoulder pads;
needled felts containing 88 percent by weight of viscose rayon
staple fibres and 12 percent by weight of polyester staple fibres,
weighing 183 g/m2, for use in the manufacture of shoulder pads.
The domestic textile industry submitted its own analysis of
samples of the subject fabrics. It reported similar findings to
those reported by Revenue Canada.
The apparent Canadian market for the subject needled felt
fabrics and allegedly substitutable fabrics in 1995 was estimated
to be approximately 675,000 linear metres. This estimate  comprises the combined
purchases of imports reported by the two known users and Matador’s
volume of sales of the allegedly substitutable fabrics to other
producers of shoulder pads.
The requests made by Parapad are for the permanent removal of
the customs duty under the MFN tariff. The estimated duty savings
for the identified users of the subject and similar fabrics would
be less than $60,000 per annum for the subject nonwoven and needled
Parapad was formed in 1948 as a manufacturer of shoulder
pads and canvas fronts. Parapad claims that it is the largest
manufacturer of shoulder pads in Canada. Parapad alleges that the
subject fabrics are not available from North American production.
As a result, Parapad argues that the landed costs of the subject
fabrics are unnecessarily high. Parapad submits that tariff relief
will enable it to remain competitive and profitable. In turn, it
will enable Parapad to expand its operation, expand its employment
and compete more favourably both domestically and in foreign
Parapad claims that there are no acceptable substitutes
available domestically. Shoulder pads made of other fabrics would
not be accepted by manufacturers of quality garments that require
quality shoulder pads. Parapad also claims that the price of
potential substitutable fabrics will further render shoulder pads
made of those fabrics unacceptable.
Parapad explains that proposed substitutable fabrics offered by
Matador are not acceptable because they are unproved and untested.
Parapad highlights that Matador’s allegedly substitutable nonwoven
fabric is over 50 percent heavier than the subject nonwoven fabrics
and lacks the viscose component.
Parapad continues to purchase certain nonwoven fabrics from
Matador; however, Parapad argues that the quality of nonwoven
fabric required for its quality shoulder pads is simply not
available domestically. Parapad claims to be very cognizant of the
differences between a higher-quality and a lower-quality shoulder
pad, as evidenced by the various types of shoulder pads that it
Regarding the needled felt fabrics, Parapad agues that there is
a substantial difference between the samples provided by Matador
and the subject needled felt fabrics. Parapad notes that Matador’s
allegedly substitutable needled felt fabrics currently do not come
in both heavier and lighter weights, as do the subject needled felt
fabrics. Further, the relative proportion of viscose to polyester
of the allegedly substitutable needled felt fabrics is reversed
when compared to the subject needled felt fabrics.
Altrim was incorporated in 1954 and serves various
women’s and men’s apparel manufacturers across Canada and the
United States. It produces shoulder pads, sleeve-heads, chest
pieces, waistbands, bindings and trims. Altrim supports the
requests made by Parapad because it states that it faces the same
problem, namely, that the subject fabrics or substitutable fabrics
are not available in Canada. Altrim argues that the duty-paid cost
makes the subject fabrics very expensive. Altrim submits that
European producers have captured an important share of the local
market for quality shoulder pads due to their lower cost advantage
and that the removal of the tariff will allow Canadian producers of
shoulder pads to have competitive access to all of the Canadian
market and many more export opportunities.
Altrim submits that, if the Tribunal recommends tariff relief,
it is of the utmost importance that the description of the subject
fabrics include variations in fibre content and weight to allow for
typical differences between the various mills and their product
lines. It argues that the basic characteristics and function of its
imported nonwoven and needled felt fabrics are identical to those
of the subject fabrics. Altrim states that, as long as producers of
shoulder pads benefit from the tariff relief equally and have their
imported fabrics treated similarly, its competitive position will
remain unchanged vis-à-vis Parapad.
Altrim provided a number of technical reasons why the subject
fabrics meet its quality requirements. Altrim argues that, for both
the subject nonwoven and needled felt fabrics, features such as
thinness, softness, uniformity, resin bonding, lightweight and a
proven ability to withstand repeated dry cleaning and pressing are
very important. Altrim argues that, specifically, the resin bonding
helps create the “bounce-back-ability” that its customers demand.
Altrim submits that, increasingly, more garment manufacturers are
demanding these types of fabrics for their shoulder pads, because
of the added durability and superior look that they give a
Based on a simple examination of a small sample of the allegedly
substitutable needled felt fabric provided by Matador, Altrim
states that it does not have enough body, has poor abrasion
resistance and has too much stretch in both directions.
If tariff relief is granted on a broader range of fabrics that
includes those imported by Altrim, it anticipates that it will be
able to recapture market share from the imported European shoulder
pads. Altrim explains that this is a labour-intensive industry and
that the added business will have an immediate and significant
impact on employment. Further, it argues that Canadian producers of
nonwoven fabrics will benefit by selling more filling and lining
fabrics, as the majority of these types of fabrics are purchased
The CTI represents Canadian manufacturers of textiles. It
opposes the requests on the basis that substitutable fabrics are
produced in Canada.
Matador has been producing needled and nonwoven fabrics
since 1945. Matador submits that granting tariff relief will have a
serious negative impact on its sales, employment levels and
profitability. Matador claims that it currently sells similar
fabrics to a number of producers of shoulder pads, including
Parapad. Matador notes that other interested parties, such as
Altrim and Handler, have requested that the Tribunal expand the
description of the fabrics for which tariff relief should be
Matador claims that it is capable of and very interested in
producing fabrics substitutable for the subject fabrics. In this
respect, Matador provided samples of new fabrics to the Tribunal
that it has developed in order to meet the demands of producers of
shoulder pads like Parapad and Altrim. Matador alleges that the
fibre content of the samples provided closely parallels that of the
subject fabrics. For example, the samples have characteristics
similar to those of the subject fabrics in terms of hand, weight,
resilience and “bounce-back-ability.” The fibre, substrate and
production technology used to manufacture the allegedly
substitutable fabrics closely parallel those used to manufacture
the subject fabrics. Matador claims that its fabrics were developed
after an extensive worldwide search for the proper substrate and
after several in-house trial production runs. It also states that
it spent a considerable amount of effort to develop these allegedly
substitutable fabrics for both the subject nonwoven and needled
Matador submits that it has made significant investments in
plant and machinery over the last 10 years in order to remain
competitive in a global marketplace. In this respect, Matador
submits that it has the capability to produce fabrics substitutable
for the subject fabrics in lighter and/or heavier weights,
depending on the customers’ preferences. With the recent purchase
of new equipment, Matador argues that it can produce needled felt
fabrics weighing as little as 80 to 90 g/m².
Matador submits that, when its customers want to achieve a
certain “feel,” “loft,” “resiliency” and “bounce-back,” they
communicate their needs, provide samples and work together with
Matador in a joint effort to achieve a mutual goal. In dealing with
Parapad, however, Matador claims that Parapad’s needs were never
fully communicated. Product information seems to be closely
guarded. Matador claims that it has never seen a finished shoulder
pad made from the subject fabrics. In this respect, Matador argues
that Parapad was not forthcoming with a true desire to source the
subject fabrics domestically.
Matador strongly believes that there is significant potential
for its customers to avail themselves of the requested tariff
relief and begin importing a much broader range of nonwoven fabrics
that they would have otherwise sourced from Matador. Matador argues
that this would definitely have a serious negative impact on future
sales, employment levels and profitability.
Texel, a producer of nonwoven fabrics and needled felt
fabrics, submits that, if tariff relief is granted, it must be
restricted to the subject fabrics as described in the requests.
Specifically, the polyester/viscose fibre content must be
Jasztex Fibers Inc. (Jasztex), a producer of nonwoven
fabrics of synthetic and natural fibres, has been producing
nonwoven fabrics for the past 11 years. Jasztex has four plants
located in the province of Quebec. Jasztex originally opposed the
requests for tariff relief; however, when it realized that tariff
relief would be limited to manufacturers of shoulder pads, it
withdrew its opposition.
The Department of Foreign Affairs and International Trade
informed the Tribunal that Canada does not maintain quota
restraints on either nonwoven fabrics classified under
classification No. 5603.00.99.51 or needled felt fabrics classified
under classification No. 5602.10.99.00. Therefore, these fabrics
are not subject to any quantitative import restrictions.
Furthermore, these fabrics are not included in the Import
Control List and, therefore, no import permit is required.
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.
Throughout these investigations, the arguments made by parties
were generally applicable to both the subject nonwoven and needled
felt fabrics. As a result, the Tribunal’s analysis and comments
apply to both subject fabrics, unless otherwise stated.
The 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
domestically produced textiles for imported textiles, the ability
of Canadian producers to serve the Canadian downstream industries
and domestic versus imported price competition.
According to Parapad and Altrim, there is no domestic production
of fabrics identical to or substitutable for the subject fabrics.
This position was contested by Matador, which argued that it is
capable of producing fabrics substitutable for the subject fabrics.
Texel and Jasztex, both domestic producers of nonwoven and needled
felt fabrics, submitted that they did not oppose the requests for
tariff relief if the Tribunal’s recommendation was limited to the
fabrics and end use described in the requests.
The question of “fabric substitutability” is of critical
importance, as Parapad’s main reason for seeking tariff relief is
that the shoulder pads produced from the subject fabrics are
“unique” and are positioned in the “high priced” market segment for
which there is no Canadian production.
Early in the investigations, Matador provided samples of its
allegedly substitutable fabrics to the Tribunal for examination.
The Tribunal sent these samples to Parapad. Parapad then produced
and provided the Tribunal with sample shoulder pads using both the
subject fabrics and the allegedly substitutable fabrics. Based on
characteristics such as “feel,” “bounce-back-ability” and
“appearance” identified by Parapad as the principle determinants of
substitutability, the Tribunal finds it difficult to detect
substantial differences between the subject fabrics and the
allegedly substitutable fabrics provided by Matador, even though
the allegedly substitutable fabrics do not have the same fibre
contents and weights as the subject fabrics. On more than one
occasion, Matador submitted that it can change the fibre content
and weight to suit the needs of its customers. Further, if the
Tribunal accepts the point made by Altrim that different weights
and fibre content should be considered in an expanded definition if
tariff relief is recommended, it also makes sense to consider
domestically produced fabrics which have different fibre contents
and weights, as they all compete in the same segments of the
The Tribunal puts great importance on the efforts and commitment
made by Matador to produce an acceptable substitutable fabric for
Parapad. It appears, from the evidence available, that Parapad did
not extend full cooperation to Matador, which may explain why, in
Parapad’s view, the samples supplied by Matador are still judged to
be unsatisfactory. The Tribunal recognizes that the circumstances
in these investigations are unique in that domestic producers do
not currently produce fabrics identical to or substitutable for the
subject fabrics. However, the Tribunal is persuaded that domestic
producers have the technical knowledge and production equipment and
facilities necessary to produce fabrics substitutable for the
The Tribunal does not accept the argument put forth by Parapad
that the domestic fabrics are unacceptable because they are
untested. The Tribunal strongly believes that if domestic users and
producers were to cooperate and work together, they could produce
acceptable fabrics. Evidence before the Tribunal indicates that
companies such as Matador and The Rumpel Felt Co. Ltd. (Rumpel
Felt) have shown their expertise in producing similar fabrics,
notwithstanding the lack of user/customer input.
Jasztex, which originally opposed the requests for tariff
relief, but later withdrew its opposition, stated that the subject
fabrics are relatively generic and are similar to many needled felt
fabrics currently produced. Jasztex states that the main difference
is in the finishing, which requires careful preparation, but which,
in its opinion, could be performed by many domestic fabric
The Tribunal believes that the domestic manufacturers of
shoulder pads using the subject fabrics are relatively competitive
under the current tariff structure. Further, with the introduction
of the new fabrics produced by Matador and the capabilities of
producers such as Texel and Rumpel Felt, the Tribunal believes that
there is imminent potential for a domestic supply of substitutable
nonwoven and needled felt fabrics. The Tribunal is of the view that
Matador will be in a position to adjust the selling price of its
allegedly substitutable fabrics because, for example, Altrim
submitted that it would value the advantages of quick delivery time
and limited warehousing requirements of a local supplier at
approximately 7 to 10 percent. In addition, Altrim states that a
domestic producer can add a 15 to 20 percent premium on the
European price due to high shipping costs and still be competitive.
Further, with increased volumes of domestically purchased fabrics,
the potential for increased efficiencies and economies may lead to
lower prices of domestic fabrics in the longer term.
The estimated primary direct benefits of granting the tariff
relief, based on the historical level of imports of the subject
fabrics and the projections made by the users of the subject
fabrics, would be less than $60,000 per annum, if the subject
fabrics were dutiable under the MFN tariff and assuming no further
changes to the import volumes and prices as estimated for 1995.
Overall, the Tribunal is of the view that the costs which would
be incurred by the domestic textile industry, if tariff relief were
granted, would exceed the benefits to the producers of shoulder
pads as a result of granting the tariff relief on either or both of
the subject fabrics. These costs, as estimated by Matador, would
include reduced prices of current nonwoven fabrics sold to
manufacturers of shoulder pads in Canada and lost market
In summary, the Tribunal finds that the domestic textile
industry produces, or is capable of producing with the proper level
of cooperation with users, substitutable fabrics for the subject
fabrics and that the net economic costs of granting the tariff
relief, in the longer term, would be greater than the economic
benefits for the manufacturers of shoulder pads. The investment in
time and effort incurred by Matador in developing its substitutable
fabrics is tangible. In addition, the potential increase in future
sales by the domestic industry of these new nonwoven and needled
felt fabrics is encouraging. The Tribunal believes that these costs
and potential future sales outweigh the benefits that would accrue
to the manufacturers of shoulder pads if the tariff relief were
granted. Removing or reducing the tariff protection presently
available to domestic producers of competitive fabrics, in this
particular instance, could limit the ability of Canadian textile
producers to substantially expand their market in Canada.
In view of the above information and evidence before the
Tribunal in this matter, the Tribunal hereby recommends to the
Minister that tariff relief on importations of the subject fabrics
covered by Request Nos. TR-95-007 and TR-95-008 not be granted.
If, after proper consultation and cooperation with the domestic
industry, Parapad is unable to obtain an acceptable product from
domestic producers, it can file a new request for tariff relief
with the Tribunal.
Robert C. Coates, Q.C.
Robert C. Coates, Q.C.
1. R.S.C. 1985, c. 47
2. Vol. 129, No. 34 at
2931 and 2932.
3. R.S.C. 1985, c. 41
4. The market estimate
for the subject nonwoven fabrics and allegedly substitutable
fabrics includes a range of fabrics with varying fibre contents and
weights. For example, the fabrics imported by Altrim contain 100
percent by weight of polyester staple fibres, and the fabrics range
in weight from 60 to 100 g/m².
5. The market estimate
for the subject needled felt fabrics and allegedly substitutable
fabrics includes a range of fabrics with varying fibre contents and
weights. For example, the fabrics imported by Altrim contain 70
percent by weight of viscose rayon staple fibres and 30 percent by
weight of polyester staple fibres, with fabric weights ranging from
120 to 175 g/m².
[Table of Contents
Initial publication: August 28, 1996