THE MINISTER OF FINANCE
REQUESTS FOR TARIFF RELIEF BY
LADY AMERICANA SLEEP PRODUCTS INC.
AND EL RAN FURNITURE LTD.
CERTAIN STITCH-BONDED WARP-KNIT FABRICS
FEBRUARY 12, 1997
TABLE OF CONTENTS
Request Nos.: TR-95-064 and TR-95-065
Tribunal Members: Arthur B. Trudeau, Presiding Member
Robert C. Coates, Q.C., Member
Lyle M. Russell, Member
Research Director: Réal Roy
Research Manager: Paul R. Berlinguette
Counsel for the Tribunal: Heather A. Grant
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, the Tribunal received, on
February 13, 1996, requests  from Lady Americana Sleep Products Inc. (Lady
Americana) of Dorval, Quebec, and el ran Furniture Ltd. (el ran
Furniture) of Pointe-Claire, Quebec (the requesters) for the
permanent removal of the customs duty on importations of
stitch-bonded warp-knit fabrics, printed, consisting of a blend of
viscose rayon and polyester staple fibres, stitch-bonded with nylon
filament yarns, weighing more than 100 g/m² but not more than 150
g/m², of tariff item No. 6002.43.90 of Schedule I to the Customs
Tariff,  for
use in the manufacture of mattresses, box springs and upholstered
furniture (the subject fabrics).
On September 25, 1996, the Tribunal, being satisfied that the
requests were properly documented, issued a notice of commencement
of investigation, which was widely distributed and published in the
October 5, 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 and an importer 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, the requesters and other
interested parties, was provided to those interested parties that
had filed notices of appearance in the investigation, thereby
becoming “parties” to the proceedings. These parties are: Lady
Americana; el ran Furniture; the Canadian Textiles Institute (CTI);
Montreal Fabrics Corp. Ltd. (Montreal Fabrics); and Simmons Canada
Following the distribution of exhibits to parties, only the
requesters filed a final submission with the Tribunal.
A public hearing was not held for this investigation.
The fabrics covered by the requests are stitch-bonded warp-knit
fabrics, printed on one side, consisting of a web of a blend of
viscose rayon and polyester staple fibres, which has been
stitch-bonded with nylon (polyamide) filament yarns. The viscose
rayon represents about 55 percent of the weight, the polyester
represents approximately 35 percent and the nylon accounts for
roughly 10 percent. The sample of the fabric submitted with Lady
Americana’s request weighed 134 g/m², while el ran Furniture’s
sample weighed 131 g/m². These fabrics are used as a cover
(ticking) for mattresses and box springs and as decking  for upholstered furniture.
All production of end products is performed in-house by the
requesters. The subject fabrics are cut to specific size
requirements. In the case of mattresses and box springs, the
material is sewn to a flange fabric which is fastened to the inner
springs together with other filling materials that may be used. The
unit is then closed by attaching the “topper” to the side wall.
With respect to upholstered furniture, the material is sewn to
In 1997, the subject fabrics are dutiable at 17.5 percent ad
valorem under the MFN tariff and the GPT; at 2.5 percent ad
valorem under the US tariff; and at 15.0 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 be reduced to 14.0 percent by the year 2004.
The requesters originally described the subject fabrics as
nonwoven stitch-bonded fabrics, imported under tariff item No.
5603.00.99. However, for tariff purposes, Revenue Canada indicated
that the subject fabrics are stitch-bonded warp-knit fabrics of
tariff item No. 6002.43.90. The requesters accepted Revenue
Canada’s classification of the subject fabrics for the purposes of
their requests. The product description and classification
suggested by Revenue Canada were incorporated in the Tribunal’s
notice of commencement of investigation.
Lady Americana manufactures mattresses and box springs which it
sells in Canada and the United States. Lady Americana imports the
subject fabrics from the United States and also purchases them from
Lenrod Industries Ltd., which imports the subject fabrics from
El ran Furniture manufactures upholstered furniture, mostly
chairs, love seats and sofas, which it sells in Canada and Europe.
It also purchases the subject fabrics from Lenrod Industries
The requesters claim that there are no domestic producers of
identical or substitutable fabrics which meet their needs. They
state that the removal of the customs duty on imports of the
subject fabrics would enable them to reduce their manufacturing
costs, which, in turn, would enable them to compete more
effectively with imports of the finished products. They also argue
that lower production costs would allow them to become more
profitable, expand operations, purchase new equipment and pass on
benefits to the consumer. The requesters are seeking tariff relief
retroactive to September 1994.
In their final submission of December 20, 1996, the requesters
submitted that the evidence on the record clearly demonstrates that
there are no domestic producers of identical or substitutable
fabrics which meet their needs. In this connection, the requesters
pointed out that Doubletex has stated that it does not produce
identical fabrics. Furthermore, the needlefelt fabrics produced by
Doubletex are not substitutable for the subject fabrics, and none
of the domestic users has indicated that it uses Doubletex’s
fabrics for the same end use as that of the requesters. As well,
Doubletex did not provide any production and sales information with
respect to its allegedly substitutable fabrics to the Tribunal nor
did it submit any samples of these fabrics.
The requesters further submitted that tariff relief would
improve the competitive position of Canadian users vis-à-vis their
US competitors. The requesters opposed the proposal put forward by
Doubletex and the CTI, i.e. that the Tribunal limit its
recommendation in respect of tariff relief to imports from the
United States, because this would inhibit Canadian users from
obtaining the subject fabrics from more competitive sources. In
measuring the impact of tariff relief, the requesters submitted
that the effect of a significant reduction in the cost burden for
Canadian users would have a corresponding positive impact on the
Canadian economy. Finally, the requesters noted that tariff relief
was granted on printed, warp-knit fabrics, solely of polyesters, of
tariff item No. 6002.43.90, for use as ticking in the manufacture
of mattresses and mattress supports.  The only difference between those fabrics and
the subject fabrics, it is argued, is the fibre content.
Serta Mattress Company (Serta), Division of Star Bedding
Products (1986) Ltd., located in Concord, Ontario, is a
manufacturer of mattresses and box springs with facilities in the
United States and Canada, as well as in Puerto Rico, Spain, Mexico,
Trinidad, Australia, Japan, the Republic of Korea, Taiwan, Israel,
New Zealand, Saudi Arabia, the Dominican Republic, Malaysia, the
Philippines, Iceland and Colombia. Serta imports the subject
fabrics from a number of suppliers in the United States. Serta
supported Lady Americana’s request for tariff relief and stated
that paying duty on the subject fabrics, which is a significant
part of the company’s raw material component, puts it at a
Simmons, of Mississauga, Ontario, is a Canadian owned and
operated company that manufactures bedding and furniture for the
retail and institutional markets. Simmons also supported Lady
Americana’s request and stated that there are no domestic producers
of fabrics identical to or substitutable for the subject fabrics
used as ticking. Simmons argued that ticking is very much a
“fashion” item and that each manufacturer seeks ticking which will
be unique to its products. It stated that the removal of the duty
on imported ticking, regardless of source, would cause no harm to
any fabric manufacturers, as none produces the ticking required by
Canadian bedding manufacturers.
The Sleep Factory, of Mississauga, submitted that
identical or substitutable fabrics for use in the production of
mattresses and box springs are not available in Canada. The company
stated that tariff relief would enable it to reduce its
manufacturing costs, which, in turn, would create a greater demand
for its products and that additional sales would enable it to
generate more profits and expand operations.
Direct Upholstery Ltd., located in Weston, Ontario, has
been manufacturing sofas, chairs, love seats, ottomans, sectional
furniture and sofa beds since 1971. The company stated that
identical or substitutable fabrics are not available in Canada. It
supported both requests, as tariff relief would increase sales,
expand the market for upholstered furniture and provide a level
playing field vis-à-vis competition from foreign sources.
Furnitrad Inc., located in Saint-Hyacinthe, Quebec,
manufactures upholstered furniture. Because the company sells more
than half of its products in the United States and, since January
1, 1996, can no longer avail itself of the duty drawback program
for its US sales, it supports all efforts to reduce or remove
tariffs on the subject fabrics.
The CTI represents Canadian manufacturers of textiles. In
a letter dated November 1, 1996, the CTI opposed the requests for
tariff relief on the basis that Doubletex is capable of producing
fabrics that compete with the subject fabrics. Notwithstanding this
broad opposition, the CTI would not oppose the requests if tariff
relief were granted on imports from the United States only.
Doubletex, of Montréal, Quebec, wrote to the Tribunal
stating that it is Canada’s largest non-integrated weaver of
fabrics and that an important part of its business is selling woven
and nonwoven fabrics to the home furnishings industry, including
manufacturers of mattresses, box springs and upholstered furniture.
Doubletex stated that it does not produce identical fabrics.
However, the company submitted that it sells polyester/cotton,
polyester/rayon and polyester/nylon woven fabrics to the mattress
and upholstered furniture industries. Doubletex argued that the
home furnishings market, unlike the fashion apparel market, does
not define itself on the basis of fabrication and that it is a
market segment that substitutes fabrics and blends depending on
price and availability. Doubletex pointed out that the consumer
does not make buying decisions based on the precise fabric; people
judge the product based on comfort, colour, cost and related
features. Given the fact that the requesters import the subject
fabrics from the United States, Doubletex would not oppose the
requests if the Tribunal were to recommend that the tariff relief
be granted on imports from the United States only. However, it
opposes the reduction or removal of the MFN tariff.
Rentex Inc. and Matador Converters Co. Ltd., of
Montréal, and Texel Inc., of Saint-Elzéar, Quebec, wrote to
the Tribunal indicating that they did not oppose the requests for
Montreal Fabrics is an importer/distributor of fabrics
for the bedding and furniture trade. In a letter dated October 23,
1996, the company stated that, should the Tribunal recommend tariff
relief on the subject fabrics, the removal of duties on imports of
polyester/cotton fabrics (classification No. 5513.41.00.30) and
printed cotton fabrics (classification No. 5188.8.131.52) for use
in the production of mattresses should also be considered. Montreal
Fabrics stated that these fabrics are substitutable for and in the
same price range as the subject fabrics.
The Department of Foreign Affairs and International Trade
informed the Tribunal that Canada does not maintain quantitative
import restrictions on fabrics classified under tariff item No.
Revenue Canada has indicated that there would be no
additional costs, over and above those already incurred by it, to
administer the tariff relief requested, should it be granted.
The Minister’s terms of reference direct the Tribunal to assess
the economic impact on domestic textile and downstream producers of
reducing or removing a tariff and, in doing so, to take into
account all relevant factors, including the substitutability of
imported textile inputs with domestic textile inputs and the
ability of domestic producers to serve the Canadian downstream
Although Doubletex does not produce stitch-bonded warp-knit
fabrics, it submitted that it sells substitutable woven fabrics to
the mattress and upholstered furniture industries. In this regard,
Doubletex provided some pricing information on its
polyester/cotton, polyester/rayon and polyester/nylon woven
fabrics. The Tribunal notes that the landed cost of the subject
fabrics imported by Lady Americana and Serta for use in the
production of mattresses and box springs is generally below the
selling price of the allegedly substitutable domestic fabrics when
the width of the fabrics is taken into account. The landed cost of
the subject fabrics (width of 61 in.) used by el ran Furniture in
the production of upholstered furniture is also lower than the
selling price of the allegedly substitutable fabrics (width of 60
in.) offered by Doubletex. However, Doubletex did not provide any
production and sales information with respect to its allegedly
substitutable fabrics nor did Doubletex submit any samples of these
fabrics. This leads the Tribunal to conclude that Doubletex has not
demonstrated an ability to serve the needs of the mattress and
upholstered furniture industries with fabrics that are
substitutable for the subject fabrics.
The Tribunal notes that Doubletex does not oppose the requests
if tariff relief is granted solely on imports of the subject
fabrics from the United States. However, the Tribunal finds no
compelling reason to limit its recommendation in this way. The
Tribunal considers that the removal of the MFN tariff allows the
users to purchase the subject fabrics from the most competitive
Furthermore, the requesters submitted that tariff relief would
enable them to reduce their costs, which, in turn, would help them
to compete more effectively with imports of the finished products.
In this regard, the Tribunal notes that there are no duties on
imports of upholstered furniture from the United States and that
duties payable on imports of mattresses and mattress supports will
be removed completely on January 1, 1998. Consequently, the
Tribunal is of the opinion that tariff relief on the subject
fabrics will aid Canadian manufacturers of upholstered furniture,
mattresses and box springs in competing with imports of finished
products from the United States, where manufacturers have access to
lower input costs.
In the circumstances, the Tribunal concludes that, while there
would be tariff revenues foregone by the government, there would be
no commercial costs of granting tariff relief on the subject
fabrics. Based on 1995 volumes and values of imports and 1997 MFN
and US tariff rates, it is estimated that potential benefits for
users of the subject fabrics in 1997 would be approximately
$120,000. In addition, tariff relief would provide future benefits
to the requesters in terms of their competitive position in the
market. Accordingly, the Tribunal concludes that the net economic
benefits of granting tariff relief will be positive.
With respect to the requests for retroactive tariff relief to
September 1994, the Tribunal does not believe that there are
extraordinary competitive circumstances in the domestic market that
would warrant such a recommendation. However, the Tribunal is
recommending to the Minister that the implementation of this
recommendation be effective as of the date of this report.
In its representation, Montreal Fabrics stated that, should the
Tribunal recommend tariff relief on the subject fabrics, the
removal of the duties on certain fabrics classified under
classification Nos. 5184.108.40.206 and 5513.41.00.30 for use in the
manufacture of mattresses should also be considered. The Tribunal
notes that the notice of commencement of investigation did not
cover precisely these fabrics. It is the Tribunal’s view that
expanding the recommendation to cover these fabrics would be unfair
to and could prejudice persons who, on the basis of the notice,
elected not to participate in the investigation on the
understanding that they did not have an “interest” in it. Should a
Canadian producer wish to obtain tariff relief on fabrics not
covered by this report, it should file a properly documented
request concerning these inputs with the Tribunal.
In light of the foregoing, the Tribunal hereby recommends to the
Minister that the customs duty be removed for an indeterminate
period of time on importations of stitch-bonded warp-knit fabrics,
printed, consisting of a blend of viscose rayon and polyester
staple fibres, stitch-bonded with nylon filament yarns, weighing
more than 100 g/m² but not more than 150 g/m², of tariff item No.
6002.43.90, for use in the manufacture of mattresses, box springs
and upholstered furniture.
The Tribunal further recommends that the tariff relief be
effective as of the date of this report.
Arthur B. Trudeau
Arthur B. Trudeau
Robert C. Coates, Q.C.
Robert C. Coates, Q.C.
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. The requests were
amended on August 15, 1996.
4. R.S.C. 1985, c. 41
5. Vol. 130, No. 40 at
6. Material used on
the underside of removable cushions, chairs, love seats and
7. SOR/96-461, October
8, 1996, Canada Gazette Part II, Vol. 130, No. 22 at 2951.
[Table of Contents
Initial publication: February 12, 1997