THE MINISTER OF FINANCE
REQUEST FOR TARIFF RELIEF BY
CAULFEILD APPAREL GROUP LTD.
A CERTAIN COTTON FABRIC
MARCH 31, 1999
TABLE OF CONTENTS
Request No.: TR-98-007
Tribunal Members: Anita Szlazak, Presiding Member
Peter F. Thalheimer, Member
Richard Lafontaine, Member
Research Director: Réal Roy
Research Manager: Paul R. Berlinguette
Counsel for the Tribunal: Gerry Stobo
Registration and Distribution
Officer: Pierrette Hébert
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
October 21, 1998, a request from Caulfeild Apparel Group Ltd.
(Caulfeild) of Downsview, Ontario, for the removal, for an
indeterminate period of time, of the customs duty on importations
from all countries of cotton flannel fabric, for use in the
manufacture of men’s nightshirts, pyjamas, bathrobes or similar
articles, and boxer shorts. On December 21, 1998, the Tribunal,
being satisfied that the request was properly documented, issued a
notice of commencement of investigation, which was widely
distributed and published in the January 2, 1999, edition of the
Canada Gazette, Part I.  The fabric under investigation was described in
the notice as woven fabric, solely of cotton, brushed on both
sides, of yarns of different colours, of subheading No. 5208.43,
for use in the manufacture of men’s nightshirts, pyjamas, bathrobes
or similar articles, and boxer shorts, of heading No. 62.07 (the
As part of the investigation, the Tribunal’s research staff sent
questionnaires to potential producers of fabrics identical to or
substitutable for the subject fabric. A request for information
also was sent to potential importers 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 a sample was provided for laboratory analysis.
Letters were sent as well to a number of other government
departments requesting information and advice.
A staff investigation report was not necessary for the purposes
of this investigation since potential producers of fabrics
identical to or substitutable for the subject fabric did not oppose
A public hearing was not held for this investigation.
The subject fabric is a 3-thread twill weave and is woven from
single yarns of different colours. The yarns are composed solely of
cotton fibres. The subject fabric is lightly brushed on both sides
and weighs approximately 144 g/m2. The cotton flannel
fabric, as described in the notice of commencement of
investigation, is subject to different tariff treatments, depending
on its end use.
In general, the subject fabric is classified for customs
purposes under tariff item No. 5208.43.90 of the schedule to the
Customs Tariff  and, as of January 1, 1999, is dutiable at 14.5
percent ad valorem under the MFN tariff, at 6.5 percent
ad valorem under the Mexico tariff, and at 7.0 percent ad
valorem under the Chile tariff and is duty free under the US
tariff and the Canada-Israel Agreement tariff. Where, as in
Caulfeild’s case, the woven fabric of cotton contains 85 percent or
more by weight of cotton and is for use in the manufacture of
apparel or apparel accessories, the fabric is classified under
tariff item No. 9935.00.00. As of January 1, 1999, it is
dutiable at 10.0 percent ad valorem under the MFN tariff,
and at 8.0 percent ad valorem under the Mexico tariff and is
duty free under the US tariff, the Canada-Israel Agreement tariff
and the Chile tariff. However, where the fabric is used in the
manufacture of women’s, boys’ or girls’ nightshirts, nightdresses,
pyjamas, negligées, bathrobes, dressing gowns or similar articles,
and boxer shorts, of heading No. 62.07 or 62.08, it is classified
under classification No. 5208.43.30.00 and is duty free. 
Caulfeild has been manufacturing apparel since 1886 and employs
a total of 71 people. It imports the subject fabric from the
People’s Republic of China, Pakistan and Portugal. It performs the
design, marker making and merchandising functions, while it
contracts out operations such as cutting, sewing and finishing.
Caulfeild alleged that identical or substitutable fabrics are
not available in Canada and that this has been demonstrated in
previous cases handled by the Tribunal. Caulfeild stated that
requests for tariff relief on similar or virtually identical
fabrics have been granted.  Caulfeild claimed that lower fabric costs
resulting from tariff relief would allow it to be more competitive
with imported ready-made garments in both domestic and export
markets. The company submitted that increased sales would translate
into the hiring of new employees, the purchase of new equipment and
spin-offs for local support industries. Caulfeild also claimed that
it is already feeling the impact of tariff relief granted to
manufacturers of women’s apparel that may be diverting some of
their fabrics to the men’s sector.
Majestic Industries (Canada) Ltd., of Montréal, Quebec, a
manufacturer of men’s bathrobes, sleepwear, shirts, swimwear and
fleece garments, supported Caulfeild’s request for tariff relief.
Universal Mfg. Inc., of Montréal, a company that specializes in the
production of women’s and children’s sleepwear, and Stanfield’s
Limited (Stanfield’s), of Truro, Nova Scotia, a manufacturer of
underwear, pyjamas, loungewear, knit shirts, hosiery, T-shirts and
turtlenecks, also supported Caulfeild’s request for tariff relief.
Stanfield’s indicated that identical or substitutable fabrics are
not available in Canada and that the removal of the customs duty on
the subject fabric would reduce the cost of garments to the
retailer which, in turn, would lower the cost to the consumer.
According to Stanfield’s, tariff relief also would make it more
competitive with offshore products, protect jobs and possibly
The Canadian Textiles Institute (CTI) identified Consoltex Inc.,
Doubletex, DIFCO Performance Fabrics Inc. and Rayonese Textile Inc.
as possible manufacturers of fabrics identical to or substitutable
for the subject fabric. The companies were sent Tribunal
questionnaires, but no replies were received. Consoltex Inc.,
however, advised the Tribunal that it did not oppose Caulfeild’s
request for tariff relief because similar fabrics, when used in the
manufacture of women’s and children’s sleepwear and loungewear, are
Metro Textiles Inc. (Metro) of Downsview, imports the subject
fabric and sells it to manufacturers of men’s and women’s apparel.
Metro supported the request for tariff relief. It stated that it
makes no sense to limit the duty-free entry to fabrics for use
solely in the manufacture of women’s, boys’ or girls’ sleepwear,
loungewear and boxer shorts. Metro indicated that the removal of
the customs duty on the subject fabric would enable Canadian
manufacturers to compete.
MWG Apparel Corp. (MWG) of Winnipeg, Manitoba, a manufacturer of
shirts, jackets and headwear, supported the request for tariff
relief. MWG stated that the current textile tariff structure
imposes duties on fabrics which are not produced in Canada, thereby
artificially inflating the cost of inputs and making the company
less competitive with imports of finished products.
Telio and Cie (Telio) of Montréal, and Trend-Tex Fabrics Inc.
(Trend-Tex) of Port Coquitlam, British Columbia, importers which
sell fabrics to manufacturers of apparel and to fabric retailers,
also supported Caulfeild’s request. Telio indicated that tariff
relief would make Canadian manufacturers more competitive,
stimulate production and discourage the importation of finished
goods. However, Telio submitted that the end use should not be
restricted to men’s sleepwear, loungewear and boxer shorts. It
argued that such end-use restrictions are impossible to monitor and
create an unnecessary paper burden. Trend-Tex stated that identical
or substitutable fabrics are not available in Canada and that
tariff relief would reduce the cost of inputs.
The Department of Foreign Affairs and International Trade
(DFAIT) informed the Tribunal that Canada does maintain quota
restraints on woven cotton fabric, finished (subcategory 32.2),
imported from the People’s Republic of China, Hong Kong and Taiwan.
Accordingly, this coverage includes cotton fabric of subheading
5208.43. The bilateral agreement, which provides for this
restriction, between the Government of Canada and the Government of
the People’s Republic of China, has been in place since 1987. The
bilateral agreements between the Government of Canada and the
Government of Hong Kong and the Taiwan Textile Federation have been
in place since 1979.
DFAIT also indicated that it will consider requests for ex-quota
entry on textile inputs where a recommendation has been made by the
Tribunal to remove customs duties on the basis of non-availability.
Ex-quota treatment will be granted only in cases where it can be
demonstrated that there is an extra charge for using products under
quota or where goods are not otherwise available in Canada.
Revenue Canada indicated that there would be no additional
costs, over and above those already incurred by it, to administer
the tariff relief.
The CTI and the Canadian Apparel Manufacturers Institute filed
notices of appearance with the Tribunal, but did not make any
representations regarding the request.
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 so doing, to take into
account all relevant factors, including the substitutability of an
imported fabric for a domestic fabric and the ability of domestic
producers to serve the Canadian downstream industries.
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.
Caulfeild claimed that there is no domestic production of
fabrics identical to or substitutable for the subject fabric. This
claim was not contested by any domestic fabric producers.
Therefore, other than the corresponding duty revenues forgone by
the government, the Tribunal does not believe that there will be
any direct commercial costs associated with the removal of the
customs duty on the importation of the subject fabric.
The Tribunal also notes that Order in Council P.C. 1998-1119
dated June 18, 1998, amended the schedule to the Customs
Tariff, inter alia, by removing the customs duty on the
importation of woven fabric, solely of cotton, brushed on both
sides, for use in the manufacture of women’s, boys’ or girls’
nightshirts, nightdresses, pyjamas, negligées, bathrobes, dressing
gowns or similar articles, and boxer shorts, of heading No. 62.07
or 62.08. The request for tariff relief filed by Caulfeild is for a
fabric similar to that covered by Order in Council P.C. 1998-1119,
except that the end products are men’s sleepwear, loungewear and
On the basis of the information available to the Tribunal,
granting tariff relief would result in yearly benefits to Caulfeild
and other users in excess of $100,000. In addition, tariff relief
would provide benefits to users in the form of cost reductions
which could translate into the hiring of new employees, the
purchase of new equipment and the provision of further spin-off
benefits for local support industries.
In summary, the Tribunal finds that the tariff relief requested
by Caulfeild would provide net economic gains to Canada.
The Tribunal has reviewed Telio’s request to expand the end-use
provision to cover all other end uses. Generally, the Tribunal will
only consider such requests when received prior to the initiation
of the investigation. Exceptionally, the Tribunal will consider the
feasibility of a minor expansion of the scope of the investigation
such as for slightly heavier fabric and, when it does so, will
communicate with the parties for their views on the proposal. To
expand the scope of the investigation at such a late stage in the
process, in order to cover all other end uses, would require that
the Tribunal re-open its investigation and issue a notice of
amendment to the notice of commencement of investigation. The
Tribunal is of the view that to do so would unduly delay the
issuance of a recommendation in respect of Caulfeild’s request for
tariff relief. In the circumstances, the Tribunal has decided not
to expand the scope of the investigation beyond the goods described
in the notice of commencement of investigation. Should Telio wish
to obtain tariff relief for all other end uses, a new request must
be filed according to the Tribunal’s Textile Reference
The Tribunal hereby recommends to the Minister that tariff
relief be granted, for an indeterminate period of time, on
importations from all countries, of woven fabric, solely of cotton,
brushed on both sides, of yarns of different colours, of subheading
No. 5208.43, for use in the manufacture of men’s nightshirts,
pyjamas, bathrobes or similar articles, and boxer shorts, of
heading No. 62.07.
Peter F. Thalheimer
Peter F. Thalheimer
1. On March 20 and
July 24, 1996, and on November 26, 1997, the Minister of Finance
revised the terms of reference.
2. R.S.C. 1985, c. 47
3. Vol. 133, No. 1 at
4. R.S.C. 1985, c. 41
5. Classification No.
5208.43.30.00 was introduced into the Customs Tariff as a result of
the implementation of a recommendation by the Tribunal in Request
Nos. TR-97-002 and TR-97-003.
6. This refers to the
Tribunal’s recommendation in Request Nos. TR-97-002 and TR-97-003,
which was implemented on June 18, 1998.
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Initial publication: April 7, 1999