THE MINISTER OF FINANCE
REQUEST FOR TARIFF RELIEF BY
HANDLER TEXTILE (CANADA) INC.
CERTAIN THERMALLY BONDED NONWOVENS
OCTOBER 23, 1996
TABLE OF CONTENTS
Request No.: TR-95-054
Tribunal Members: Raynald Guay, Presiding Member
Charles A. Gracey, Member
Desmond Hallissey, Member
Research Director: Réal Roy
Research Manager: Audrey Chapman
Counsel for the Tribunal: Joël J. Robichaud
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 October 8, 1995, the
Tribunal received a request from Handler Textile (Canada) Inc.
(Handler) of Montréal, Quebec, for the permanent removal of the
customs duty on importations, from all countries, of nonwovens,
solely of polyester staple fibres or mixtures of polyester staple
fibres and viscose rayon staple fibres, containing not less than 50
percent by weight of polyester, held together by thermal bonding,
partially coated on one side with small translucent dots of hot
melt adhesive, for use in the manufacture of fusible interlinings
and shoulder pads (the subject fabrics).
On January 18, 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 January
27, 1996, edition of the Canada Gazette, Part I. 
As part of the investigation, 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 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 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, Handler and other firms that
responded to the questionnaires, was provided to the parties that
had filed notices of appearance for this investigation. These
parties are: Handler; the Canadian Textiles Institute (CTI); Canada
Hair Cloth Co. Limited (CHC); Matador Converters Co. Ltd.
(Matador); Veratex Lining Ltd. (Veratex); Kufner Textiles Inc.;
Altrim Inc. (Altrim); Freudenberg Nonwovens Inc. (Freudenberg);
Peerless Clothing Inc. (Peerless); Parapad Inc.; and Interforme
Following the distribution of exhibits to parties, only the CTI
filed a submission with the Tribunal, to which Handler provided a
A public hearing was not held for this investigation.
The fabrics covered by the request made by Handler range from
nonwovens made of 50 percent polyester staple fibres blended with
viscose rayon staple fibres to nonwovens made of 100 percent
polyester staple fibres. In 1996, the subject fabrics are
classified under classification No. 5603.92.90.20. They are
dutiable at 18.8 percent ad valorem under the MFN tariff and
the GPT; at 4.9 percent ad valorem under the US tariff; and
at 17.3 percent ad valorem under the Mexico tariff. The
subject fabrics imported from the United States will enter duty
free in 1998. However, the MFN tariff will only be reduced to 14.0
percent by the year 2004.
The product description suggested by Revenue Canada was
incorporated in the description used in the notice of commencement
Nonwovens, solely of polyester staple fibres or mixtures of
polyester staple fibres and viscose rayon staple fibres, containing
not less than 50 percent by weight of polyester, held together by
thermal bonding, partially coated on one side with small
translucent dots of hot melt adhesive, for use in the manufacture
of fusible interlinings and shoulder pads.  In a submission filed by Freudenberg,
it is explained that the product description as stated by Handler
is somewhat confusing. Freudenberg suggests that the subject
fabrics are in fact the finished product, fusible interlinings,
which are ready for use in the construction and production of
collars, cuffs, garments and other apparel-related items. In this
respect, Freudenberg notes that the subject fabrics are not for use
in the manufacture of fusible interlinings, rather they are fusible
interlinings.  The
laboratory analysis of the samples provided by Handler was received
by the Tribunal on December 18, 1995, by Revenue Canada. Both
fabric samples are 100 percent polyester, thermally bonded
nonwovens. Handler claims that these are just samples of what it
imports and maintains that the request is to include all fusible
interlinings ranging from 50 percent by weight of polyester to 100
percent by weight of polyester.  CHC, a domestic producer, provided samples to the
Tribunal of identical or substitutable fabrics, and the Tribunal
sent these samples to Revenue Canada for analysis. Revenue Canada
provided the product description and laboratory analysis of these
samples to the Tribunal on May 17, 1996.
Handler converts large rolls of the subject fabrics into
fusible interlining parts for use by the apparel industry. It
imports 100 percent of the subject fabrics from Handler Textiles
U.S.A. in New Jersey. The variety of interlining fabrics available
is very extensive. During the Tribunal’s visit to Handler’s
production facility, Handler provided a sample book containing an
extensive selection of interlining fabrics with different weights,
fibre contents, constructions and types of adhesive applications,
both woven and nonwoven.
Handler states that there are no domestic producers of identical
or substitutable fabrics which meet its needs in the manufacture of
fusing products. Handler argues that the subject fabrics are very
specific in nature because they are partially coated on one side
with small translucent dots of hot melt adhesive. Handler stresses
that it has not been able to obtain identical or substitutable
fabrics from domestic producers. Handler confirmed that all its
fabrics, including the 100 percent polyesters and the blends of
polyester staple fibres with viscose rayon staple fibres, are in
fact thermally bonded.
Early in the investigation, Handler submitted that it had
discussions with CHC and invited CHC to show its product line.
Handler described its needs and the current prices that it pays for
the subject fabrics. Handler submitted that, as of June 24, 1996,
CHC had not followed up with Handler. This lack of interest leads
Handler to believe that CHC is a small competitor and does not have
the capabilities to supply the nonwoven fusible interlinings that
Handler argues that the reduction in duty will help it compete
with importers of pre-made fusible interlining parts. It will also
help offset any rise in labour costs and overhead, while holding or
lowering prices. The textile industry is very tight and vulnerable,
and Handler argues that it is still recovering from the recession
and that economic uncertainty is prevalent in the textile industry.
Handler further argues that the benefit of tariff relief for two
years is not “feeble.” It states that this type of benefit results
in minimal cost to the government, while, at the same time, it
fuels the Canadian economy. In particular, it gives a much needed
boost to companies like Handler that supply the apparel industry.
Handler feels that this benefit is not superfluous because a number
of users will benefit for a two-year period without causing CHC to
Handler requested that, if tariff relief is granted, it should
be retroactive to the date on which the request was deemed properly
documented. Handler argues that, if it deserves the tariff relief,
it deserved it on the date on which it applied for it. Handler
highlights the fact that time lags between the date of a Tribunal
recommendation and the actual implementation of an order-in-council
can be very long. Handler questions why a company should fail to
obtain tariff relief for this extended period of time because of
circumstances beyond its control.
Peerless of Montréal is Canada’s largest manufacturer of
men’s fine tailored clothing. Peerless was established in 1919. It
is privately owned and employs in excess of 2,000 people. Peerless
is an international manufacturing and marketing company which
supplies a wide range of tailored suits to all major market
segments in the United States. Peerless’s product line includes
men’s tailored suits, sports jackets, blazers, tuxedos, trousers,
vests and walking shorts.
Peerless supports the request for tariff relief made by Handler
and also requests the immediate and permanent removal of the
customs duty on the subject fabrics.
Peerless submits that it uses the subject fabrics as a component
of its suits, sports coats, trousers and vests. Peerless argues
that the subject fabrics are critical to Peerless’s success and
that the engineering process which has contributed to Peerless’s
success requires the use of the subject fabrics. Peerless believes
that there are no acceptable domestic substitutable fabrics of the
quality supplied by its existing sources. Peerless claims that it
has been unable to find identical or substitutable fabrics over the
past two years.
Peerless submits that tariff relief would lower costs, which
would allow it to lower its wholesale price. Peerless states that,
with the elimination of the existing drawback regime under the
North American Free Trade Agreement  (NAFTA) of third party inputs on
exports to the United States, tariff relief would directly affect
its export sales to the United States.
Veratex of Montréal was established in 1981. It imports
the subject fabrics from the United States. Veratex cuts the
subject fabrics to shape for collars, cuffs, facings and fronts of
garments. It then fuses the cut interlining pieces to garment
parts. Veratex also sells piece goods to garment manufacturers
that, in turn, use these fabrics by cutting them to their own
requirements for their garment manufacturing process.
Veratex supports the request for tariff relief and claims that
identical or substitutable fabrics are not available from Canadian
production. Veratex imports thermally bonded nonwovens, partially
coated on one side with small translucent dots of hot melt
adhesive. The fabrics are composed of 100 percent polyester, 70
percent polyester and 30 percent nylon, 100 percent nylon, 85
percent nylon and 15 percent polyester, and 70 percent nylon and 30
percent polyester. These fabrics range in weight from 24 to 90
Veratex argues that tariff relief would enable it to lower its
price to Canadian garment manufacturers that, in turn, would become
more competitive in the global marketplace. It argues that tariff
relief would also enable Canadian garment manufacturers to be more
competitive vis-à-vis imported garments.
Altrim of Montréal was incorporated in 1954. It serves
women’s and men’s apparel manufacturers in Canada and the United
States. Altrim submits that it produces shoulder pads, sleeve
heads, chest pieces, waistbands, bindings and trims. It sells
fusible interlinings and also cuts and fuses these interlinings to
its customers’ fabrics according to their specifications. All
production processes are performed in Altrim’s plant in Montréal.
The fusible interlinings are cut and then passed through a fusing
press and fused onto the customers’ face fabrics.
Altrim also supports the request for tariff relief. It states
that there are no Canadian producers of identical or substitutable
fabrics. Currently, Altrim imports the subject fabrics from the
United States and Germany. It describes fusible interlinings as
being manufactured by passing nonwovens or other fabrics through a
powder coating system that is subsequently heated to allow the
powder to adhere to the base fabric. The nonwovens imported by
Altrim are both thermally and chemically bonded.
Altrim submits that tariff relief would benefit Canadian apparel
manufacturers by making their garments more competitive in Canada
and in export markets. As a supplier to apparel manufacturers,
Altrim argues that its business success depends on the success of
the apparel manufacturers.
Freudenberg of Montréal distributes both “sew-in” and
“fusible” interlinings, commonly referred to as “Sew-ins,”
“Fusibles,” “Interfacings” and “Fusings.” Freudenberg supports the
request for tariff relief made by Handler.
Freudenberg’s North American headquarters office is located in
Chelmsford, Massachusetts. The subject fabrics are manufactured in
various plants throughout the United States. Freudenberg did
produce identical or substitutable fabrics in Cornwall, Ontario, up
until about five years ago; however, it now imports the subject
fabrics from the United States. Freudenberg submits that it
pioneered the use of nonwovens for the apparel industry. Since the
cancellation of Freudenberg’s manufacture of these nonwovens in
Canada, Freudenberg believes that there are no current Canadian
manufacturers of identical or substitutable fabrics.
Freudenberg imports nonwovens with various fibre contents,
including 100 percent polyester, 100 percent polyamides, blends of
polyester and polyamides and blends of polyester and rayon. These
fabrics are thermally bonded and binder-bonded. A high proportion
of its fabrics are thermally bonded.
The CTI represents Canadian manufacturers of textiles. It
opposes the request for tariff relief on the basis that identical
or substitutable fabrics are produced in Canada. In its submission
following receipt of the Tribunal’s staff investigation report, the
CTI commented that, if the subject fabrics originate preponderantly
in the United States, Handler and other users of the subject
fabrics have a “feeble” claim for any tariff relief. The CTI notes
that the tariff on imports from the United States will be reduced
by half next year and will be zero in 1998. Thus, any benefit
resulting from tariff relief will disappear in 1998.
The CTI highlights the fact that granting tariff relief would
create a tariff anomaly under which producers of identical or
substitutable fabrics in Canada would be paying the regular MFN or
US duty on the inputs while facing duty-free competition on its
further manufactured output.
The CTI further submits that the MFN duty should not be removed
under any circumstances, as no case has been made for tariff relief
in respect of non-NAFTA goods.
CHC of St. Catharines, Ontario, has been manufacturing
shape-retaining textiles for 112 years. It makes interlinings for
the apparel industry. These include a complete range of woven
interlinings, weft insertion interlinings and nonwoven
interlinings, both thermally bonded and saturate nonwovens. These
interlinings are all made in Canada and sold in Canada, the United
States and internationally.
CHC claims that it currently produces fabrics which are
identical to or substitutable for the subject fabrics. For example,
it makes interlinings with fibre contents ranging from 100 percent
polyester to 50 percent polyester/50 percent viscose to 50 percent
polyester/50 percent nylon, in weights ranging from 0.94 to 1.60
oz./sq. yd. CHC considers its fabrics to be identical to and
substitutable for the subject fabrics because they are used for the
same applications, are made using the same manufacturing processes,
have the same weights, fibre contents and other characteristics and
perform in the same way in the end uses in which they compete.
CHC currently imports the base fabric from the United States. A
polyamide paste is then applied to the fabric in numerous dot
configurations to convert the fabric into a fusible interlining. It
also applies a dry polyamide dot and a sintered application using
either polyamide, polyester or polyethylene types of coating. The
fabric is then inspected and checked for quality control.
Canada Pad of Montréal and Canatex/National Pad of Downsview,
Ontario, are the sales/marketing arms for CHC.
CHC argues that the subject fabrics compete directly with its
domestically produced nonwoven interlinings, as well as with weft
insertion linings. It claims that the interlining market is
dynamic, with thermally bonded nonwovens being equally
substitutable for other traditional nonwoven fusibles and weft
CHC points out that Handler sources the subject fabrics from the
United States and that, under NAFTA, these fabrics will enter duty
free within two years, but that tariff relief, if granted, would
open up duty-free entry to all sources. CHC argues that this open
access is more likely to have a negative impact on prices than a
positive one. If duty-free MFN import sources are available, the
traditional US sources of supply will be disrupted in favour of
lower-cost sources, and this will have a negative impact on the
whole market for interlinings, including CHC, other competitors and
Handler. CHC submits that the duty-free competition of imports from
MFN sources could be very disruptive and harmful to Canadian
producers of identical or substitutable fabrics.
Matador of Montréal is a manufacturer of nonwovens of 100
percent polyester staple fibres and/or blends of polyester and
viscose fibres. Matador withdrew its opposition to the request for
tariff relief early in the investigation. However, it submits that,
should the Tribunal broaden the definition to include fabrics of a
weight greater than 70 g/m2, Matador would then oppose
the request for tariff relief.
Consoltex Inc. of Montréal wrote to the Tribunal stating
that it did not have an interest in this investigation.
Jasztex Fibers Inc. of Saint-Léonard, Quebec,
manufactures nonwoven, thermally bonded and chemically bonded
polyester wadding, weighing more than 65 g/m2, for use
in the needlepunching industry. It submits that it does not produce
fabrics with hot melt adhesive for use in the manufacture of
fusible interlinings and shoulder pads. Therefore, it states that,
within the confines of the adhesive process and the specific end
use requirement, it does not oppose the request for tariff relief
as submitted by Handler.
Western Fibres Limited of Vancouver, British Columbia,
submitted that it does not oppose the request for tariff relief as
submitted by Handler. It produces a wide variety of thermally
bonded low-, mid-and high-loft fabrics, but none of them with small
translucent dots of hot melt adhesive on one side. It stressed
that, if tariff relief is recommended, the Tribunal should make
sure that the product description includes only the subject
Union Felt Products Inc. of Downsview indicated that it
does not oppose the request for tariff relief as submitted by
The Department of Foreign Affairs and International Trade
informed the Tribunal that Canada does not maintain quota
restraints on nonwoven fabrics classified under classification No.
5603.92.90.20. Therefore, the subject fabrics are not subject to
any quantitative import restrictions. Furthermore, the subject
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.
The terms of reference direct the Tribunal to assess the
economic impact on domestic textile and downstream producers of
reducing or removing the tariff and, in so doing, to take into
account all relevant factors, including the substitutability of
domestically produced textile inputs for imported textile inputs,
the ability of Canadian producers to serve the Canadian downstream
industries and a domestic versus imported price comparison.
The question of “fabric substitutability” is important in this
case, as Handler’s main reason for requesting tariff relief is that
it claims that identical or substitutable fabrics are not available
from Canadian production. One of the first factors examined by the
Tribunal when assessing the substitutability of domestic fabrics
and imported fabrics is the technical description of the fabrics.
The laboratory analysis undertaken by Revenue Canada concluded that
two of the four samples submitted by CHC had the same general
construction and fibre content as the two samples submitted by
Handler. Specifically, all four fabrics are nonwoven, made of 100
percent polyester staple fibres held together by thermal bonding.
These samples have been partially coated on one side with small
translucent dots of hot melt adhesive. The only technical feature
which varies from sample to sample is the weight. The two samples
submitted by Handler weigh 28 and 35 g/m2, while the
samples submitted by CHC weigh 43 and 50 g/m2.
CHC submitted that, currently, it produces nonwoven fusible
interlinings ranging in weight from 0.94 to 1.60 oz./sq. yd. (31 to
54 g/m2). In support of this statement, the Tribunal
received a sample book from CHC displaying the broad range of
nonwoven fusible interlinings that it produces.
The weights of the subject fabrics have not been raised as an
issue by Handler. Handler noted that the two samples submitted to
the Tribunal for analysis are only examples of a broader range of
the subject fabrics that it imports (i.e. it imports the subject
fabrics made of blends of polyester and viscose which are
classified under tariff item No. 5603.92.90, which includes fabrics
weighing more than 25 g/m2 but not more than 70
g/m2). However, Handler did submit that, on average, the
weight of the subject fabrics ranges around 30 g/m2,
which is on the lighter end of the range defined by the tariff item
for the subject fabrics. Other users submitted to the Tribunal that
the nonwoven fusible interlinings that they import vary in weight.
For example, Peerless submitted that the nonwoven fusible
interlinings that it uses in the construction of its men’s suits
are also on the lighter end of the weight range defined by tariff
item No. 5603.92.90. Veratex submits that it imports nonwoven
fusible interlinings ranging in weight from 24 to 90
g/m2. Altrim imports nonwoven fusible interlinings under
the tariff item for fabrics weighing less than 25 g/m2
and under the tariff item for fabrics weighing more than 25
g/m2 but not more than 70 g/m2. In general,
this shows that the majority of the subject fabrics imported by
Handler and other interested users appear to be lighter than the
fabrics currently supplied by CHC.
Although Handler and other users have not argued strongly that
the weight of the subject fabrics that they import is of critical
importance, the Tribunal believes that the lighter-weight fabrics
being imported do give a certain texture, feel and drapability to a
finished garment that could not be duplicated when a heavier-weight
fabric is used. The evidence on file shows that, currently, CHC
makes thermally bonded, nonwoven fusible interlinings with small
translucent dots of hot melt adhesive in two weights, 43 and 50
Another factor that the Tribunal considers when assessing the
substitutability of domestic and imported fabrics is market
acceptance. The evidence in this case shows that CHC does sell its
identical or substitutable fabrics to customers that are well known
and established in the interlining business as either users or
distributors. These sales are made at an average price which falls
in the range of the average landed price of imports, albeit at the
The Tribunal finds that the domestic textile industry produces,
or is capable of producing, substitutable fabrics. However, the
evidence available to the Tribunal shows that Handler and other
users identified in this report prefer to source from imports for
reasons that are not linked to prices. In this regard, the Tribunal
is puzzled at CHC’s lack of follow-up after contacting Handler in
The question now facing the Tribunal becomes one of economic
benefit. Based on the evidence, the Tribunal only considered the
feasibility of granting relief with respect to the US tariff, as no
evidence was provided to justify recommending relief with respect
to the MFN tariff. In this respect, the estimated primary direct
benefits of granting the tariff relief, based on the level and
source of imports of the subject fabrics and the projections made
by Handler and other identified users of the subject fabrics, would
be approximately $170,000 in 1996 and $250,000 in 1997.  However, as noted in the
staff investigation report and emphasized by the CTI and CHC, the
tariff on imports from the United States will be reduced by half
next year and will be zero in 1998. Thus, any benefit resulting
from tariff relief will disappear in 1998.
The Tribunal recognizes and accepts that CHC may incur certain
costs if tariff relief is granted. However, as Handler and other
users identified in this investigation are not customers of CHC and
CHC submitted that it has been preparing to compete with duty-free
imports from the United States as a result of NAFTA, the Tribunal
believes that the net benefits associated with granting tariff
relief outweigh any potential costs that may be incurred by
The Tribunal is of the view that accelerating the tariff
reduction schedule for the United States to zero would provide the
tariff relief requested and an advanced benefit to users of the
subject fabrics without substantially increasing costs to CHC.
With regard to the issue of end use, the Tribunal accepts the
various arguments put forth by Handler and other parties that the
end use for shoulder pads should be deleted from the description of
the subject fabrics. It appears that very little, if any, of the
subject fabrics is used in the production of shoulder pads. Altrim,
a major manufacturer of shoulder pads, submitted that pre-coated
fusible fabrics are used “only rarely” in shoulder pads.
With respect to Handler’s request for retroactive tariff relief,
the Tribunal does not believe that there are extraordinary
competitive circumstances that warrant such a recommendation.
In view of the above information and evidence before the
Tribunal in this matter, the Tribunal hereby recommends to the
Minister that the tariff on the following importations from the
United States be reduced to zero:
Nonwoven fusible interlinings, solely of polyester staple fibres
or mixtures of polyester staple fibres and viscose rayon staple
fibres, containing not less than 50 percent by weight of polyester,
held together by thermal bonding, partially coated on one side with
small translucent dots of hot melt adhesive, of subheading No.
5603.92, weighing more than 25 g/m2 but not more than 70
g/m2, for use in the manufacture of apparel.
The Tribunal also recommends to the Minister that tariff relief
on the above imports from all other countries not be granted.
Charles A. Gracey
Charles A. Gracey
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. 4 at
4. On April 11, 1996,
Handler wrote to the Tribunal asking that the end use for shoulder
pads be excluded. This request was supported by other parties,
specifically, CHC and Altrim.
5. Various other users
of the subject fabrics commented that the subject fabrics are
actually fusible interlinings. It was suggested that the end - use
description refer to “fusible interlining parts for the apparel or
garment industry” rather than “for use in the manufacture of
6. Neither Handler nor
Revenue Canada made particular reference to a weight range for the
subject fabrics. In this respect, Revenue Canada’s laboratory
analysis shows that the two fabrics submitted by Handler fall
within the weight description of subheading No. 5603.92 (i.e.
weighing more than 25 g/m 2 but not more than 70 g/m 2 ).
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).
8. Assuming that
tariff relief would be in effect from September 1, 1996, to
December 31, 1997, the total benefit of granting relief is
estimated to be approximately $420,000 ($170,000 in 1996 and
$250,000 in 1997).
[Table of Contents
Initial publication: October 28, 1996