THE MINISTER OF FINANCE
REQUEST FOR TARIFF RELIEF BY
H.D. BROWN ENTERPRISES LIMITED
REGARDING WOVEN FABRIC, PLAIN WEAVE, OF POLYESTERS MIXED SOLELY
JULY 17, 1997
TABLE OF CONTENTS
Request No.: TR-96-007
Tribunal Members: Arthur B. Trudeau, Presiding Member
Patricia M. Close, Member
Lyle M. Russell, Member
Research Director: Réal Roy
Research Manager: Anis Mahli
Counsel for the Tribunal: John L. Syme
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 25, 1996, the
Tribunal received a request from H.D. Brown Enterprises Limited
(H.D. Brown) of St. George, Ontario, for the removal, for an
indeterminate period, of the customs duty on importations of
polycotton fabric, for use in the manufacture of car covers (the
On February 20, 1997, the Tribunal, being satisfied that the
request was properly documented, issued a notice of commencement of
investigation, which was distributed and published in the March 1,
1997, edition of the Canada Gazette, Part I. 
As part of the investigation, the Tribunal’s research staff sent
a questionnaire to potential producers of identical or
substitutable fabrics. A questionnaire was also sent to firms
identified as potential importers and users of the subject fabric.
A letter was sent to the Department of National Revenue (Revenue
Canada) requesting information on the tariff classification of the
subject fabric, and samples were provided for laboratory analysis.
Letters were also sent to a number of other government departments
for information and advice.
A staff investigation report, summarizing the information
received from these government departments, H.D. Brown and firms
that responded to the Tribunal’s questionnaires, was provided to
interested parties that had filed notices of appearance for this
investigation. These parties are H.D. Brown, the Canadian Textiles
Institute (CTI) and Doubletex.
A public hearing was not held for this investigation.
In the notice of commencement of investigation, the subject
fabric was described as woven fabric, plain weave, of polyesters
mixed solely with cotton, of a weight not exceeding 105
g/m2, of subheading Nos. 5407.91, 5513.11  and 5513.21, for use in the
manufacture of covers for motor vehicles.
Revenue Canada analyzed the samples of the subject fabric
provided by H.D. Brown and concluded that the fabric is woven from
single yarns of a blend of polyester staple fibres and cotton
fibres. The polyester staple fibres represent 65 percent of the
sample weight and the cotton fibres, 35 percent of the sample
weight. The fabric weighs 100 g/m2 and, for customs
purposes, the subject fabric is classified in subheading Nos.
5407.91 and 5513.21 of Schedule I to the Customs Tariff.
The subject fabric is dutiable in 1997 at 17.5 percent ad
valorem under the MFN tariff; at 2.5 percent ad valorem
under the US tariff; and at 15.0 percent ad valorem under
the Mexico tariff.
Subsequent to the commencement of the investigation, H.D. Brown
agreed to narrow the end use for the subject fabric, from “covers
for motor vehicles” to “covers for cars, minivans and trucks.”
According to Statistics Canada, in 1996, total imports of
polycotton fabric which is classified in subheading Nos. 5407.91,
5513.11 and 5513.21, amounted to 2.7 million kg, with an estimated
value of $16 million. The major proportion of this volume was
imported for the manufacture of end products other than automotive
covers; H.D. Brown’s share of this total volume was negligible. The
majority of these imports originated in the United States, the
People’s Republic of China, Pakistan, Italy and Indonesia.
H.D. Brown submits that it is the sole manufacturer of the
specified end product made from the subject fabric. H.D. Brown uses
the subject fabric in the manufacture of automotive covers (for
cars, minivans and trucks) at its production facility in St.
George. It also produces the same range of automotive covers in
“Tyvac” and “Evolution 4” (materials made from 100 percent
H.D. Brown contends that it had imported the subject fabric for
almost a decade before it began, in 1995, to supplement its imports
of the subject fabric with a substitutable fabric from Doubletex
because of cash flow problems, delivery problems and fluctuating
spot prices. H.D. Brown indicates that it has not purchased any
substitutable fabric from Consoltex Inc. (Consoltex) or Dominion
Industrial Fabrics Company (DIFCO), both of Montréal, Quebec, since
H.D. Brown states that, although substitutable fabrics are
available from Canadian suppliers, including Doubletex, their price
points are not competitive with those of the subject fabric. It
further contends that, without tariff relief, the low margins
resulting from having to use a substitutable domestic fabric will
not justify the continuing operation of H.D. Brown’s production
line of polycotton automotive covers.
H.D. Brown disagrees with the CTI that polycotton covers occupy
the upper end of the automotive cover market. H.D. Brown submits
that automotive covers made from non-woven fabrics command higher
prices in the marketplace, because they offer superior protection
qualities, such as water-repellent finish, breathable material and
ultraviolet stability, while polycotton automotive covers are
marketed as an entry level/opening price point product which
provides only protection against dust.
Concerning the extent of H.D. Brown’s participation in the
domestic market for polycotton automotive covers and the export
opportunities that it could have in the US automotive cover market,
H.D. Brown submits that the CTI submission on these matters does
not reflect the realities of those markets. According to H.D.
Brown, it continues to experience, in the domestic market, downward
pressure on its selling prices from lower-priced imports.
Similarly, H.D. Brown does not export to the US market, because the
prices at which mass merchandisers such as Wal-Mart sell their
imported polycotton automotive covers from the People’s Republic of
China and other developing countries make it impossible for H.D.
Brown to penetrate that market.
With respect to Doubletex’s submission, H.D. Brown states that
the Tribunal should ignore it, because it deals with speculative
issues and does not provide any concrete data for a comparative
Finally, H.D. Brown submits that tariff relief would allow it to
meet price competition from offshore polycotton automotive covers,
keep its production of automotive cover line in operation and
prevent the layoff of 13 employees located in a region already
plagued with high unemployment.
Doubletex is Canada’s largest, non-integrated fabric converter.
Doubletex finishes polycotton fabrics imported from around the
world.  The
majority of its production of polycotton fabric is sold to the
apparel trade, while a small volume is used to produce automotive
Doubletex opposes the request for tariff relief because it
considers H.D. Brown to be an important customer and has taken all
the measures to meet the latter’s needs. Doubletex adds that it
customizes the fabric it sells to H.D. Brown by offering a special
width (183 cm) with a unique glaze and water-repellent finish.
Doubletex submits that it is the only domestic producer that
produces a substitutable fabric for the specified end use.
Doubletex indicates that the price comparison in the staff
report is incomplete, because it does not take into account the
non-monetary benefits such as financial and order cycle terms and
just-in-time delivery offered by Doubletex. With respect to the
provision for loss of employment made in the cost/benefit analysis
included in the staff report, Doubletex indicates that it ignored
Doubletex’s claim concerning lost jobs at its own plants should
tariff relief be granted.
Doubletex suggests that H.D. Brown should not take the position
that tariff relief is the only solution to its one client
dependency problems. Doubletex adds that H.D. Brown must diversify
its customer base at home and should export to the US market.
Doubletex is concerned that, if the Tribunal extends tariff
relief to H.D. Brown, every Canadian user of domestic polycotton
fabric would then be eligible for the same treatment. The resulting
costs to Canadian weavers and converters, according to Doubletex,
would be hundreds of jobs and millions of dollars in lost
The CTI opposes H.D. Brown’s request for tariff relief because
it submits that three of its members, Consoltex, Doubletex and
DIFCO, have identified themselves as producers of fabrics identical
to or substitutable for the subject fabric.
The CTI submits that the evidence before the Tribunal proves
that availability of a substitutable domestic fabric is not an
issue in this case. The CTI adds that there are at least three
companies which have supplied H.D. Brown with fabrics for use in
the production of covers for cars, minivans and trucks. Doubletex,
for example, has demonstrated that it is able to produce a fabric
that can compete effectively with the subject fabric. According to
the CTI, competitiveness entails more than just an arithmetic
comparison of laid-in prices. Finally, the CTI contends that, in
comparing the selling prices of Doubletex’s fabrics with those of
the subject fabric, the Tribunal should consider the non-monetary
benefits that take the form of added value, such as quality of
fabric, order cycle, financial terms and just-in-time delivery.
The CTI submits that the subject fabric is a non-prime fabric;
because it is a non-prime fabric, it is typically sold at below the
production costs and should not be used as a basis for price
comparison or justification for tariff relief. As far as Consoltex
is concerned, the CTI suggests that the Tribunal should not expect
this producer to provide a continuous supply of prime fabrics at
With respect to the domestic market for automotive covers, the
CTI is at a loss to understand why, in the Canadian Tire catalogue,
automotive covers from non-woven fabrics command higher prices than
those made from polycotton woven fabrics.
The CTI disagrees with the cost/benefit model used in the staff
report, because: (a) it does not account for Consoltex’s concerns
about the repercussion of tariff relief on the non-subject fabric
cover market; (b) it considers, as unsubstantiated speculation,
H.D. Brown’s statement that, without tariff relief, Canadian
polycotton automotive cover production will cease; and (c) it does
not properly take into account H.D. Brown’s allegedly overstated
payroll and profit/loss data.
The terms of reference direct the Tribunal to evaluate the
economic impact that reducing or removing a tariff would have on
domestic textile producers and downstream producers and, in so
doing, to consider all relevant factors, such as the
substitutability of the subject fabric with a domestic fabric, the
ability of domestic fabric producers to serve the Canadian
downstream industries and the competitiveness of those downstream
industries at home and abroad. Consequently, the Tribunal’s
decision to recommend tariff relief is based on the extent to which
it considers that such tariff relief would provide net economic
gains for Canada.
On the basis of the evidence on file, the Tribunal is satisfied
that a fabric substitutable for the subject fabric is produced in
Canada in sufficient quantities to meet the needs of H.D. Brown. In
fact, the evidence shows that, in 1995 and 1996, H.D. Brown
purchased significant volumes of a substitutable fabric from
Doubletex for use in the production of automotive covers.
H.D. Brown, while acknowledging the existence of Canadian
production, nevertheless requested tariff relief, stating that
using the domestic fabric, which commands a higher price than the
subject fabric, adversely affects the profitability of the
polycotton automotive cover line. H.D. Brown further submitted
that, if tariff relief is not granted, high fabric prices, either
of foreign or domestic origin, will force it to close down the
production line of polycotton automotive covers because it will be
uneconomical to continue producing these covers in Canada.
With respect to price, H.D. Brown submitted that the price of
the domestic product is much higher than that of the subject
fabric. A comparison of H.D. Brown’s pricing data indicates,
however, that, while there is a marked difference between these
prices, when the better quality and the non-monetary benefits which
H.D. Brown enjoys when purchasing a substitutable fabric from
Doubletex are factored in, the price differential becomes much less
pronounced in favour of the subject fabric.
The Tribunal notes that, despite its higher price, H.D. Brown
has continued to purchase large volumes of a substitutable fabric
from Doubletex. This practice would likely not continue if tariff
were removed. Moreover, other than contending that it would close
down its production line of polycotton automotive covers if tariff
relief were not granted, H.D. Brown did not submit any concrete
evidence in support of this contention.
In assessing the net economic costs/gains for Canada, the
Tribunal notes that the estimated direct benefits of granting
tariff relief, based on the 1996 volumes of imports of the subject
fabric, would be less than $85,000 per annum. This figure is based
on the duties payable, under the MFN tariff, for the subject
fabric, and assumes no further changes to the import volumes and
prices estimated for 1997. However, the evidence is clear that the
costs which would be incurred by the domestic textile industry,
should tariff relief be granted, would be greater than $85,000 per
annum. These costs, as estimated by the Tribunal, would take the
form of reduced revenues as a result of lost sales in favour of
offshore suppliers of the subject fabric.
In summary, the Tribunal finds that the domestic textile
industry produces a fabric substitutable for the subject fabric and
that the net economic costs of granting tariff relief would be
greater than the economic benefits of granting relief to H.D.
Brown. Removing or reducing tariff protection presently available
to domestic producers of substitutable polycotton fabrics, in this
particular instance, could adversely affect their market
Because the removal of tariff would result in tangible costs to
the domestic textile industry, the Tribunal believes that tariff
relief would not provide net economic gains for Canada. Therefore,
the Tribunal recommends that tariff relief not be granted.
In light of the above information and evidence before the
Tribunal in this matter, the Tribunal hereby recommends to the
Minister that tariff relief not be granted on importations from all
countries of woven fabric, plain weave, of polyesters mixed solely
with cotton, of a weight not exceeding 105 g/m2, for use
in the manufacture of covers for cars, minivans and trucks.
Arthur B. Trudeau
Arthur B. Trudeau
Patricia M. Close
Patricia M. Close
Lyle M. Russell
Lyle M. Russell
1. On March 20 and
July 24, 1996, the Minister revised the terms of reference.
2. R.S.C. 1985, c. 47
3. Vol. 131, No. 9 at
4. Subheading No.
5513.11 was included in this investigation by the Tribunal for the
end use specified in the request to cover greige fabric imported by
Doubletex for converting in Canada.
5. R.S.C. 1985, c. 41
6. See Report to the
Minister of Finance: Request for Tariff Relief by Lingerie Bright
Sleepwear (1991) Inc. Regarding Printed Polycotton Woven Fabric,
Canadian International Trade Tribunal, Request No. TR-95-005, March
[Table of Contents
Initial publication: July 17, 1997