THE MINISTER OF FINANCE
REQUEST FOR TARIFF RELIEF BY
B.C. GARMENT FACTORY LTD.
AUGUST 20, 1996
TABLE OF CONTENTS
Request No.: TR-95-047
Tribunal Members: Arthur B. Trudeau, Presiding Member
Desmond Hallissey, Member
Lyle M. Russell, Member
Research Director: Réal Roy
Research Manager: André Renaud
Counsel for the Tribunal: David M. Attwater
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 Minister.
Pursuant to the Minister’s reference, on September 8, 1995, the
Tribunal received a request from B.C. Garment Factory Ltd. (B.C.
Garment) of Vancouver, British Columbia, for the immediate and
permanent removal of the customs duty on importations from all
countries of sewing thread of 100 percent polyester staple fibres,
measuring 196.7 decitex (60/2 ply cotton count), bleached or yarn
dyed, for use in the production of girls’ and women’s knitted
garments (the subject sewing thread).
On March 25, 1996, the Tribunal, being satisfied that the
request was properly documented, issued a notice of commencement of
investigation, which was distributed and published in the April 6,
1996, edition of the Canada Gazette, Part I. 
As part of the investigation, the Tribunal’s research staff sent
questionnaires to known and potential producers of identical or
substitutable sewing thread. Questionnaires were also sent to known
and potential users and importers of the subject sewing thread. A
letter was sent to the Department of National Revenue (Revenue
Canada) to request information on the tariff classification of the
subject sewing thread, and samples were provided for laboratory
analysis. Letters were also sent to a number of other government
departments to request information and advice.
A staff investigation report, summarizing the information
received from these departments, B.C. Garment and firms responding
to the Tribunal’s questionnaires, was provided to the parties that
had filed notices of appearance for this investigation. These
parties are: (1) B.C. Garment; (2) Fantastic-T Knitters Inc. of
Vancouver, a user of sewing thread similar to the subject sewing
thread; (3) the Canadian Textiles Institute (CTI)  of Ottawa, Ontario; (4) Allied
Threads Inc., a subsidiary of American & Efird Inc. (Allied) of
Montréal, Quebec, a producer of sewing thread identical to or
substitutable for the subject sewing thread; and (5) Fountain Set
Textiles (B.C.) Limited, a wholly owned subsidiary of Fountain Set
(Holdings) Limited, of Vancouver, an importer of the subject sewing
The CTI filed a submission with the Tribunal, to which B.C.
Garment filed a response. A public hearing was not held for this
The notice of commencement of investigation described the
subject sewing thread as follows:
bleached or dyed yarn consisting of a multiple (2 ply) yarn of
100 percent polyester staple fibres, having a final “Z” twist,
measuring 206 decitex or 103 decitex per single yarn, and dressed
with silicone, for use as sewing thread in the production of girls’
and women’s knitted garments.
Revenue Canada determined that the subject sewing thread is
classified for customs purposes under classification No.
5508.10.00.10 of Schedule I to the Customs Tariff.  Revenue Canada’s
laboratory analysis found that the results obtained analytically,
except for the yarn size, agreed with the information submitted by
B.C. Garment. The laboratory determined that the yarn size of the
submitted sample measured 206.0 decitex or 103.0 decitex per single
yarn (57 cotton count per single yarn), which was slightly higher
than B.C. Garment’s claimed value of 196.7 decitex (60/2 ply cotton
count). Revenue Canada also found that the subject sewing thread
and support together weighed 114 g and met all the requirements for
sewing thread as specified in Note 5 to Section XI of the
Customs Tariff. 
Furthermore, Revenue Canada described the sample of the subject
sewing thread as being wound onto a small white plastic cone and
packaged in a clear plastic bag. Each cone contains 5,000 metres of
either bleached or yarn dyed sewing thread.
The subject sewing thread is dutiable at 10 percent ad
valorem under the MFN tariff and the GPT; at 2 percent ad
valorem and 2.2¢/kg under the US tariff; and at 7 percent ad
valorem and 7.7¢/kg under the Mexico tariff.
Sewing thread similar to the subject sewing thread is made in
Canada from imported “raw” yarns. These “raw” yarns are allegedly
not produced in Canada. When imported, the “raw” yarns are not
dressed with silicone or other lubricant and, as such, would
normally be classified under tariff item No. 5509.22.10.
Cansew and Allied both produce sewing thread of 100 percent
polyester staple fibres which, they claimed, are identical to or
substitutable for the subject sewing thread. Cansew’s sewing
thread, 80SP, purportedly measures 196.8 decitex, and Allied’s
sewing thread, Tex 21, measures 210.0 decitex. Revenue Canada
analyzed the submitted samples of sewing thread and found that
Cansew’s sewing thread measured 214.0 decitex (55 cotton count per
single yarn) and that Allied’s sewing thread measured 242.0 decitex
(49 cotton count per single yarn).
Cansew claimed also that its 70/2 and 65/2 sewing threads are
substitutable for the subject sewing thread. On the other hand,
while Coats stated that it did not manufacture a sewing thread
identical to or substitutable for the subject sewing thread, it
indicated that it had the capability to do so. Moreover, Coats
stated that its 42/2 sewing thread of 100 percent polyester staple
fibres is substitutable for the subject sewing thread. The table
below summarizes the measurements of the subject sewing thread and
the allegedly identical or substitutable sewing thread.
SUBJECT SEWING THREAD AND ALLEGEDLY IDENTICAL
OR SUBSTITUTABLE SEWING THREAD
(per single yarn)
Subject Sewing Thread
As per request
As per Revenue Canada
Allegedly Identical or Substitutable Sewing Thread
As per Submission
As per Revenue Canada
As per Submission
As per Revenue Canada
Not Allegedly Substitutable Sewing Thread
Allied, as the manufacturer of Tex 21, a sewing thread allegedly
identical to or substitutable for the subject sewing thread, did
not consider substitutability to be at issue with respect to Tex
27, despite the fact that it also produces a sewing thread of 100
percent polyester staple fibres sold under the brand name “Tex 27”
similar in size to the allegedly substitutable sewing thread
produced by Cansew and Coats.
On the basis of the confidential information presented, it is
estimated that the larger sewing thread, i.e. 270 to 296 decitex,
dominates the Canadian market for fine count sewing thread used to
sew apparel and that the sewing thread identical to or
substitutable for the subject sewing thread, i.e. 214 to 242
decitex, represents a very small portion of that market. B.C.
Garment uses the subject sewing thread to stitch knitted garments,
mainly for women and girls. Both Allied and Cansew, the Canadian
producers of sewing thread identical to or substitutable for the
subject sewing thread, indicated that, while the subject sewing
thread can be used to sew garment seams, because of its relative
fineness and low tensile strength, it is more often used as selvage
or serging thread. Moreover, they noted that the use of the
identical or substitutable sewing thread is not limited to sewing
girls’ and women’s knitted garments.
The Tribunal found that only two firms, namely, B.C. Garment and
Hang Tung Garment Factory (Canada) Limited (Hang Tung) of
Vancouver, had imported 57/2 to 60/2 (i.e. 206.0 to 196.7 decitex)
sewing thread of 100 percent polyester staple fibres in 1995 and
that only two Canadian firms, namely, Cansew and Allied, had
produced similar sizes (i.e. 214.0 to 242.0 decitex) of sewing
thread. The estimated value of the Canadian market for sewing
thread in these sizes cannot be made public owing to the relatively
small number of participants. However, it can be stated that the
Canadian producers account for the largest share of the market.
As noted in the staff investigation report, the Department of
Foreign Affairs and International Trade informed the Tribunal that
the Government of Canada does not maintain quota restraints on
sewing thread classified under classification No. 5508.10.00.10.
Hence, the subject sewing thread is not subject to any quantitative
import restriction. Furthermore, the subject sewing thread is not
included in the Import Control List; therefore, no import
permit is required.
The Tribunal also received advice from the Department of
Industry on potential Canadian producers of sewing thread and from
Revenue Canada indicating that there would not be any costs, over
and above those already incurred by it, to administer the tariff
relief, should it be granted. In that event, Revenue Canada
suggested using a new concessionary code with the following
specific description: “Sewing thread, of 100% polyester staple
fibres, 2 ply, bleached or dyed, measuring not less than 95 decitex
and not more than 110 decitex per single yarn.” This would permit
distinguishing the subject sewing thread from others that would be
classified under a tariff item without an end-use designation.
In its submission following receipt of the Tribunal’s staff
investigation report, the CTI commented on the staff investigation
report and other documentation pertaining to this
The CTI recalled the three reasons invoked by B.C. Garment in
making its request:
• the price of identical or substitutable sewing thread is
allegedly higher in Canada than the subject sewing thread imported
by B.C. Garment from the Orient;
• domestic sewing thread is allegedly unavailable
“off-the-shelf” in colours which match the garments produced by
B.C. Garment; and
• producers of sewing thread in the Orient will custom dye a
colour for a lower minimum quantity than that allegedly required by
For the following reasons, the CTI submitted that the Tribunal
should not recommend tariff relief.
The CTI pointed out that, even if B.C. Garment’s reasons were
well founded, these facts alone would not justify recommending
tariff relief. The CTI argued that the government’s reasons for
maintaining the scheduled tariff on any goods were not predicated
on Canadian products being superior or equal to all competing goods
from other countries.
Moreover, the CTI pointed to the domestic producers’ evidence
which contradicts B.C. Garment’s allegations on production, pricing
and service and, as B.C. Garment itself acknowledged, to the fact
that it had little experience of these matters through lack of
purchasing from domestic suppliers.
For the CTI, it is clear from the record that identical and
substitutable sewing thread is made and sold successfully in
Canada. One domestic supplier of sewing thread manufactures the
60/2 sewing thread to which B.C. Garment attaches special
importance. Although demand for this size of sewing thread is
relatively low in Canada, another important producer indicated that
it has immediate access to the required raw materials and is
equipped to produce 60/2 sewing thread, in volume, at any time.
The CTI further noted that, faced with competition from the
large US and offshore industries, the domestic producers of sewing
thread had earned and continued to serve a large share of the
Canadian market for sewing thread. That market share, added the
CTI, could not have been maintained if the derogatory opinions
expressed by B.C. Garment had reflected the general opinion in the
marketplace. The CTI concluded that the Canadian producers had
demonstrated market acceptance for their sewing thread, thus
negating the reasons for making the request.
Finally, the CTI questioned the alleged benefits on which the
request is based. In support, it pointed to the confidential record
which showed that, by B.C. Garment’s own calculations, the effect
of the tariff on the cost of the garments was minuscule. Therefore,
the CTI argued, the request must fail on the simple basis that any
influence that tariff removal could have on B.C. Garment’s
competitiveness is de minimis. On the other hand, the CTI
submitted that tariff removal would harm domestic producers of
sewing thread whose prices could be depressed by as much as 9
percent, with consequent important losses of margin which would
stop the production of certain products or product ranges.
Subsequent to B.C. Garment’s final response, the Tribunal
received a further submission from American & Efird Inc.
correcting what it considered to be an error in B.C. Garment’s
calculations of the amount of duty incurred, on a per garment
produced basis, on the subject sewing thread. This information was
taken into the record. However, because of the nature of the
information, it did not affect the Tribunal’s decision and, because
the Tribunal felt that the parties had not been prejudiced by
admitting the information, their views were not sought.
No other producer registered as an interested party made a
In response to the CTI’s submission, B.C. Garment made a number
of arguments opposing the views of the Canadian producers. Since
counsel for B.C. Garment had not completed a declaration and
undertaking with respect to confidential information, it could only
have access to the public information. B.C. Garment’s main
arguments can be summarized as follows.
With respect to Canadian production of identical or
substitutable sewing thread, B.C. Garment stated that Cansew,
Allied and Coats cannot provide it with the size of sewing thread
that it is currently using. It added that, according to the
Canadian manufacturers of sewing thread themselves, the market for
the subject sewing thread is virtually nil in Canada. From this,
B.C. Garment concluded that production of 60/2 sewing thread is
very limited and that it is only made if requested.
Moreover, B.C. Garment argued that there is no substitutable
sewing thread produced in Canada. While Cansew informed the
Tribunal that its 40/2 and 50/2 sewing threads are substitutable
for the subject sewing thread, arguing that they are equal to or
better than the subject sewing thread with a higher single end
tensile strength and similar performance and construction, B.C.
Garment pointed out that Cansew had also indicated that its sewing
thread is heavier than the subject sewing thread. For this reason,
B.C. Garment advanced that Cansew’s claim of substitutability
should be rejected, as the latter’s sewing thread would create
larger holes in the fabric during sewing. B.C. Garment argued that
it is not seeking a better sewing thread, but one that exactly
matches the subject sewing thread. Whether or not the subject
sewing thread is considered to be of North American standard, B.C.
Garment pointed out that it is using a large amount of it.
In comparing its average price for the subject sewing thread
with Allied’s published list prices, B.C. Garment estimated a cost
saving of at least 25 percent. With respect to terms of sale, B.C.
Garment indicated that, contrary to what is claimed by Canadian
producers on the record, it waits only two weeks for delivery of
custom-dyed colours, not six weeks as alleged.
B.C. Garment also drew attention to its gradual loss of customs
duty drawback under the North American Free Trade Agreement
 and questioned how
it might remain viable in the long run if it has to pay an
additional cost that would make it less competitive. On the other
hand, if purchased from Canadian suppliers, B.C. Garment’s raw
material costs, it argued, would “sky rocket.”
On the question of net economic gains for Canada, B.C. Garment
argued that tariff relief would not cause harm to Canadian
production. In its estimation, while there is at least a 25 percent
difference in the cost of sewing thread between the price that it
pays and the price offered by Canadian producers, there
nevertheless seems to be no great rush by domestic garment
manufacturers to source in the Orient. B.C. Garment concluded that
domestic users were willing to pay more because they obtained a
better product from Canadian manufacturers, i.e. greater tensile
strength. For this reason, B.C. Garment argued that, contrary to
what domestic producers have advanced, the price of domestic sewing
thread would not be affected by 10 percent if tariff relief were
granted. Furthermore, since the general marketplace prefers to use
the 40/2 sewing thread in Canada, contrary to what is submitted by
the CTI, the effect of removing or reducing the duty on the 60/2
sewing thread would have no impact on the Canadian industry. On the
other hand, B.C. Garment argued that, while the dollar savings
resulting from tariff relief may not be large, every penny counts
in the apparel industry, and it could lose a contract for the
pennies not saved.
In preparation of its staff investigation report, the Tribunal’s
research staff canvassed a number of users. Only four firms
provided information, but, except for Hang Tung, none used the 60/2
sewing thread in its production.
Hang Tung made a submission in support of B.C. Garment’s
request, on June 24, 1996, following the publication and
distribution of the staff investigation report. This additional
information was distributed to interested parties. Hang Tung’s
reasons for supporting the request were almost identical to B.C.
Garment’s reasons for making the request.
Besides B.C. Garment, no user registered as an interested party
responded to the CTI’s submission.
Similarly, the Tribunal’s research staff canvassed a number of
importers, in addition to the users/importers or
manufacturers/importers already contacted in the course of the
investigation. Four firms provided information, but none imported
the subject sewing thread.
No importer registered as an interested party responded to the
The Tribunal has considered all the facts made available by the
investigation and the position of parties in the light of its terms
The Tribunal’s mandate is to determine if there would be net
economic benefit in granting tariff relief. In so doing, the
Tribunal must determine if textile inputs, identical to or
substitutable for those imported and for which tariff relief is
requested, are produced in Canada.
On the basis of the record, the Tribunal is satisfied that
sewing thread identical to or substitutable for the subject sewing
thread is produced in Canada by Cansew in small quantities.
According to Revenue Canada’s laboratory analysis, the subject
sewing thread measures 206 decitex and Cansew’s 80SP sewing thread
measures 214 decitex. The record also shows that the demand in
Canada for sewing thread in the 60/2 (approximately 200 decitex)
size range is relatively small, the demand being rather
concentrated in the larger 40/2 (approximately 300 decitex) size
range when used to sew apparel.
B.C. Garment, while acknowledging the existence of Canadian
production, nevertheless requested tariff relief, noting that an
acceptable Canadian sewing thread would need to be less expensive
and have smaller minimum dye lot orders and shorter delivery times.
Subsequently, in response to the CTI’s submission, B.C. Garment
referred to its need for a Canadian sewing thread exactly matching
the 60/2 subject sewing thread.
Nevertheless, on this question of size, the investigation showed
that B.C. Garment initially compared the value for duty of a
5,000-metre cone of the subject sewing thread (206 decitex)
purchased in large quantities, whether bleached or yarn dyed, with
a recent purchase, at list price, of a small quantity of a
6,000-metre cone of Cansew’s premium quality larger sewing thread
(296 decitex) identified as 65/2. Notwithstanding this difference
in size, B.C. Garment’s initial concern was not one of matching
sizes, but one of the perceived difference in price and ready
availability of Canadian sewing thread in the required colours.
Thus, by purchasing Cansew’s 65/2 sewing thread, by using this
sewing thread in its production and by comparing its price with the
price of the subject sewing thread as if comparing equals, B.C.
Garment failed to demonstrate convincingly its alleged need for the
smaller sewing thread. Notwithstanding this failure, the record
unquestionably showed Canadian production of sewing thread
identical to or substitutable for the subject sewing thread.
With respect to price, the record also showed that there is a
very small difference in price between the published list price of
Allied’s Tex 21 sewing thread (242 decitex), which it produces in
considerable quantities, and the confidential price of the subject
sewing thread, despite the fact that the Tex 21 sewing thread is
slightly larger than the subject sewing thread. While B.C. Garment
estimated this difference at 25 percent, the Tribunal notes also
that list prices are subject to negotiation and, from the available
information, it is impossible to state how different the negotiated
domestic price for Cansew’s 80SP or Allied’s Tex 21 sewing thread
would be from the import price of the subject sewing thread. B.C.
Garment should have obtained and submitted a quotation to the
Tribunal from the domestic suppliers for large quantity purchases,
but it did not. Furthermore, such requests should have included
Coats, which has indicated its capability of producing sewing
thread in the 60/2 size range and its actual production of 42/2
(280 decitex) sewing thread.
The record also showed that B.C. Garment’s claim that Canadian
producers require minimum orders of 500 cones for custom dyeing to
order, whereas producers in the Orient require minimum orders of
only 50 cones, is largely exaggerated. The minimum requirements of
two Canadian producers, Cansew and Allied, range from 90 to 132
cones for custom dyeing, while Coats custom dyes upon request
beginning at 50 cones. Moreover, the three Canadian producers have
the required technology and skills to dye to match required colours
and are already providing this service to the Canadian market at no
On the question of shorter delivery times, Cansew’s and Allied’s
delivery times range from within hours for in-stock products, as
they each have warehouses in Vancouver, to two or three days
depending on whether the goods are in Vancouver or Montréal. Coats
also provides same day delivery for in-stock colours. As for
delivery of non-standard colours, the three Canadian producers
offer equal or shorter delivery times than experienced by B.C.
Garment for shipment from the Orient.
Finally, with respect to B.C. Garment’s need to increase its
competitiveness in the US market as a reason for requesting tariff
relief, the record showed that tariff relief represented less than
1 percent of B.C. Garment’s wholesale price, F.O.B. Vancouver.
Furthermore, tariff relief in total, for both B.C. Garment and Hang
Tung, while confidential, is less than $25,000 on sales of several
With respect to the costs of granting tariff relief, taking into
consideration the downward pressure that it would create for price
reductions on the sale of identical or substitutable sewing thread
(214 to 242 decitex), estimated at more than $50,000, and taking
into consideration the concomitant effect on the gross margins of
the Canadian producers, thus placing in jeopardy domestic
production of such sewing thread, the Tribunal estimates that these
costs would far outweigh the benefits of duty savings to B.C.
Garment and Hang Tung.
In sum, the Tribunal considers that sewing thread that is
identical to or substitutable for the subject sewing thread is
available from Canadian producers. B.C. Garment has failed to prove
that the price of the subject sewing thread is not comparable to
the price of identical or substitutable sewing thread produced in
Canada. Moreover, the Canadian sewing thread has found market
acceptance in terms of price, availability of colours and delivery
times. Finally, the Tribunal finds that granting tariff relief
would not result in a net economic benefit for Canada.
In light of the foregoing, the Tribunal hereby recommends to the
Minister that tariff relief not be granted.
Arthur B. Trudeau
Arthur B. Trudeau
Lyle M. Russell
Lyle M. Russell
1. On March 20 and
July 24, 1996, the Minister of Finance revised the terms of
2. R.S.C. 1985, c. 47
3. Vol. 130, No. 14 at
4. The CTI represented
Canadian textile producers and, in particular, Cansew Inc.,
formerly Canadian Sewing Supply Ltd. (Cansew) of Montréal, Quebec,
and Coats Bell, Division of Coats Canada Inc. (Coats) of Arthur,
Ontario, both firms also being parties that had filed notices of
appearance for this investigation. Cansew and Coats manufacture
allegedly identical or substitutable sewing thread.
5. R.S.C. 1985, c. 41
6. Note 5 reads as
follows: For the purpose of heading Nos. 52.04, 54.01 and 55.08 the
expression “sewing thread” means multiple (folded) or cabled yarn:
(a) Put up on supports (for example, reels, tubes) of a weight
(including support) not exceeding 1,000 g; (b) Dressed for use as
sewing thread; and (c) With a final “Z” twist. [Emphasis added]
7. Done at Ottawa,
Ontario, December 11 and 17, 1992, at Mexico, D.F., on December 14
and 17, 1992, and at Washington, D.C., on December 8 and 17, 1992
(in force for Canada on January 1, 1994).
[Table of Contents
Initial publication: October 15, 1996