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Finance Canada Seeks Views On The Canadian International Trade Tribunal (CITT) Textile Tariff Reference
In 1994, the Minister of Finance established a standing textile tariff reference at the Canadian International Trade Tribunal (Tribunal) to conduct economic reviews of requests from Canadian downstream producers for tariff relief on imported textile manufacturing inputs and to make recommendations to him that would maximize the net economic benefits to Canada. (A copy of the current letter of reference from the Minister of Finance to the Chair of the Tribunal is attached as Appendix A).
Based on a review of the working of the textile tariff reference to date, and to ensure that it works in the overall interests of Canadian industry, it is considered that the terms of reference might benefit from certain clarifications to reinforce the original policy intent.
A copy of a draft letter of reference showing how this might be achieved is attached as Appendix B. It would replace the existing letter of reference that guides the Tribunal’s analysis and recommendations on requests it receives for tariff relief on imported textile manufacturing inputs. The main clarifications contained in the draft letter include the following:
- A preamble establishes the overall tariff policy context of the textile tariff reference as one where tariff relief on manufacturing inputs is generally considered to enhance the competitiveness of Canadian downstream producers, taking into account the impact that such relief might have on domestic producers of competing goods;
- There would be a broader set of economic factors for the Tribunal to consider when making its analysis of the costs and benefits of tariff relief, e.g. the Tribunal would be asked to assess the extent to which end-products made from domestic and imported inputs compete in the market, in addition to prices, technical composition and availability of the inputs themselves;
- Where there are claims of near term capability to supply an input, the Tribunal would still assess the costs and benefits of tariff relief, taking into account factors such as the likelihood of commercial production being achieved and the likelihood of the input under development meeting the needs of downstream producers;
- Investigations would be limited to inputs for which representative samples have been provided and the scope of recommendations could not be expanded beyond these inputs, without the agreement of all parties; and
- Where applicable, investigations would include the equivalent greige yarns or fabrics.
Comments on the proposal should be sent to:
Gilles Le Blanc
Acting Director
International Trade Policy Division
Department of Finance
140 O'Connor Street
14th Floor, East Tower,
Ottawa, Ontario,
K1A 0G5
Facsimile : 613-992-6761
E-mail : LeBlanc.Gilles@fin.gc.ca
The submission should be received no later than October 12, 2001.
At the same time, we would welcome any views you may wish to share with the Department on the market environment in which the textile tariff reference operates and the competitive challenges currently facing the Canadian textile and downstream industries.
Once these views have been received and analyzed, decisions on next steps will be made.
Mr. Peter Boutilier, Chief, Domestic Tariff Affairs would be pleased to respond to enquiries for additional information on the proposal. Mr. Boutilier may be reached by facsimile at 613-992-6761 or by e-mail at Boutilier.Peter@fin.gc.ca.
Appendix A
Textile Tariff Reference
Exiting Terms of Reference
August 19, 1999
Mr. Pierre Gosselin
Chairman
Canadian International Trade Tribunal
17th Floor, Standard Life Centre
333 Laurier Avenue, West
Ottawa, Ontario
K1A 0G7
Dear Mr. Gosselin:
I am writing further to my letters of July 6, 1994, March 20, 1996, July 24, 1996, and November 26, 1997, establishing the terms of reference for the Tribunal to follow in conducting, under section 19 of the Canadian International Trade Tribunal Act, investigations into requests from Canadian producers for tariff relief on imported textile inputs that they use in their manufacturing operations.
I am directing the Tribunal, when initiating new investigations on requests for tariff relief on imported textile inputs, within the rules of procedures developed for this reference, to:
a) examine any properly documented request that it receives from a domestic producer for tariff relief on any of the following textile inputs used in its downstream manufacturing activities: fibres, yarns1 and fabrics of Chapters 51, 52, 53, 54, 55, 56, 58, 59, or 60 of the Customs Tariff; certain monofilaments or strips and textile and plastic combinations of Chapter 39; rubber thread and textile and rubber combinations of Chapter 40; and, products of textile glass fibres of Chapter 70;
b) conduct open and transparent investigations of these requests, ensuring that reasonable steps are taken to advise interested parties of any properly documented request for tariff relief and that all parties that have indicated an intention to participate in an investigation have the opportunity to make their views known, through written submissions or public hearings, as the Tribunal may determine to be necessary;
___________________
1. Knitting yarns, solely of cotton or solely of cotton and polyester staple fibres, measuring more than 190 decitex, of Chapter 52 or subheading No. 5509.53 other than those used to make sweaters, having a horizontal self-starting finished edge and the outer surfaces of which are constructed essentially with 9 or fewer stitches per 2 centimetres (12 or fewer stitches per inch) measured in the horizontal direction, are not included in the textile tariff reference, at least until July 1, 2002.
c) assess the economic impact on domestic textile and downstream producers (on a commercial cost/benefit basis) of reducing or removing the tariff; and,
d) make recommendations:
-- with reasons described as transparently as possible, while respecting the confidentiality of commercially-sensitive business information, on the appropriateness of reducing or removing the tariff;
-- which are administrable on a cost effective basis and which could include textile input, time and/or "end-use" specific tariff provisions and, in the case of requests for tariff relief on textile inputs used in the manufacture of women’s swimsuits, co-ordinated beachwear and co-ordinated accessories only, could include company-specific relief;
-- specifying whether relief should be granted for a specific or indeterminate period, which could include elements such as duration and initiation procedures - who and when - for renewal, extension or amendment investigations, as circumstances warrant. (Where indeterminate relief is recommended, the Tribunal should establish a framework under which the recommendation would be reconsidered, if the circumstances that led to the initial recommendations have changed sufficiently to warrant such an investigation, including who may apply and when);
-- which should not cover goods beyond those established at the initiation of the investigation, except where sufficient notice is given for interested parties to respond;
-- which should be consistent with Canada's international rights and obligations under its bilateral and multilateral trade agreements; and,
-- which, ultimately, should maximize net economic gains to Canada.
In performing its economic impact assessments, the Tribunal is directed to take into account all relevant economic factors, including, where appropriate:
a) the extent to which the current and requested textile tariff structures represent, or would represent, a significant factor in investment and/or business decisions by domestic producers;
b) the impact of tariff rate differentials, particularly those between Canada and the U.S., on competitiveness and investment;
c) a domestic versus foreign price comparison, of the relevant textile input, based on recent attempts by the applicant to source the specific textile input from domestic and foreign producers;
d) substitutability of imported textile inputs with domestic textile inputs (in terms of such factors as commercial availability of directly competing textile products and market acceptance); and,
e) the ability of domestic producers, vis-à-vis foreign producers, to serve the Canadian downstream industries (bearing in mind such things as: industry sourcing patterns/market share; history of company sales; marketing and service history; repeat orders; delivery and other technical requirements; investment and business plans of current and potential suppliers; and, any extenuating circumstances).
The Tribunal should ensure that its recommendations are made as soon as practicable:
i) within 120 days from the receipt of a properly documented request, and,
ii) within any earlier specified timeframe, which the Tribunal determines to be appropriate, in cases of critical circumstances, after receipt of a properly documented case.
In assessing requests for tariff relief, the Tribunal should bear in mind:
a) the effect on domestic textile and downstream producers of tariff and non-tariff liberalization flowing from the Canada-U.S. Free Trade Agreement, the North American Free Trade Agreement and the World Trade Organization Agreement; and,
b) the effect of the elimination of full manufacturing duty drawback on non-NAFTA inputs post-1996, in the case of exports to the U.S. and 2001, in the case of exports to Mexico.
Finally, I would ask that the Tribunal continue to provide, on an annual basis, a status report on this investigation process and make recommendations for changes that may be appropriate to maximize net economic gains for Canada.
Sincerely,
The Honourable Paul Martin, P.C., M.P.
Appendix B
Textile Tariff Reference
Proposed Clarified Terms of Reference
Preamble
The tariff policy context in which the reference was established is that unilateral tariff relief is generally considered on inputs to assist Canadian downstream producers to meet their competitive challenges, taking into account the impact that relief might have on domestic producers of competing goods. Since 1994, the Tribunal has had the mandate to make recommendations, consistent with Canada's international rights and obligations under its bilateral and multilateral trade agreements, on requests for tariff relief from domestic downstream producers on textile inputs that would maximize net economic gains to Canada. This mandate is to continue.
Conducting Investigations
1. When initiating new investigations on requests for tariff relief on imported textile inputs, within the rules of procedures developed by the Tribunal for this reference, the Tribunal is to:
b. limit the scope of any investigation to the "subject inputs", that is to (i) the specific textile inputs for which the applicant has requested tariff relief, and for which the applicant has provided representative samples, and (ii) where applicable, the equivalent greige yarns or fabrics to manufacture the textile input under investigation; and
c. conduct open and transparent investigations of these requests, ensuring that reasonable steps are taken to advise interested parties of any properly documented request for tariff relief and that all parties that have indicated an intention to participate in an investigation have the opportunity to make their views known, through written submissions or public hearings, as the Tribunal may determine to be necessary.
2. On the basis of the information provided by parties and its own research, the Tribunal is to fully assess the broad economic impacts of tariff relief by comparing the economic benefits of such relief for downstream producers to the economic costs for domestic textile producers through an examination of all relevant economic andother factors, including, where appropriate:
b. whether the availability of duty-free or duty-reduced imported textile inputs would result in serious financial pressures, such as price or margin erosion, for domestic textile producers;
c. whether current users of domestically-produced textile inputs would switch to the imported inputs if full or partial tariff relief were granted;
d. the ongoing ability of domestic textile producers to adequately service the domestic downstream industries, bearing in mind factors such as the quality, reliability and technical suitability of the textile inputs, as well as the minimum order sizes, delivery times, and range of services provided by producers;
e. the prices of domestic versus foreign textile inputs;
f. the composition and technical specifications of domestic versus foreign textile inputs;
g. the extent to which the current and requested textile tariff structures represent, or would represent, a significant factor in investment or other business decisions by domestic textile or downstream producers;
h. the impact of tariff rate differentials among Canada, the United States, and Mexico on competitiveness and investment ;
i. the impact of not granting tariff relief on the competitiveness of downstream producers in domestic and world markets;
j. the effect on domestic textile and downstream producers of tariff and non-tariff liberalization flowing from international trade agreements; and
k. in the case of claims of capability to produce and supply a competing textile input in the near term
- the likelihood that the textile input under development would meet the requirements of manufacturers and users of the end-products in question;
- the extent to which the downstream producer has made serious efforts to source the textile input from domestic sources;
- the extent to which the domestic textile producer has made serious efforts to meet the needs of the requester;
- the likelihood that commercial production can be achieved in the near term, with regard to evidence such as actual capital investment and additional planned investment, production planning documents, research results, purchase orders for inputs, employee training forecasts, marketing materials, and customer orders for trial quantities; and
- the impact of granting tariff relief on the financial viability of the product development project.
3. The Tribunal is to make recommendations:
b. that are effectively administrable on a cost efficient basis, and if required, could include "end-use" tariff provisions;
c. that are restricted to the subject inputs, with the Tribunal having the option to narrow the scope of relief - however, all parties to an investigation would need to agree to any expansion of relief;
d. that specify whether relief should be granted for a specific or indeterminate period, and
e. that specify whether full or partial tariff relief should be granted.
4. The Tribunal should ensure that its recommendations are made as soon as practicable, generally within 120 days from the receipt of a properly documented request, and, within any shorter timeframe that the Tribunal determines to be appropriate in cases of critical circumstances.
5. Except in extraordinary circumstances, the Tribunal should not reconsider its recommendations for one year. After that period, the Tribunal may reconsider its recommendations if it determines that the circumstances that led to the initial recommendation have changed sufficiently to warrant such an investigation. The Tribunal should establish a framework to determine who may apply to have a recommendation reconsidered, and what constitutes a sufficient change in circumstances.
Reporting to the Minister of Finance
6. The Tribunal should provide, on an annual basis, a status report on its investigation process, and, as appropriate, make recommendations to enhance the reference.
1. Knitting yarns, solely of cotton or solely of cotton and polyester staple fibres, measuring more than 190 decitex, of Chapter 52 or subheading No. 5509.53 other than those used to make sweaters, having a horizontal self-starting finished edge and the outer surfaces of which are constructed essentially with 9 or fewer stitches per 2 centimetres (12 or fewer stitches per inch) measured in the horizontal direction, are not included in the textile tariff reference, at least until July 1, 2002. [Return]
