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ANNUAL STATUS REPORT OCTOBER 1, 2000, TO SEPTEMBER 30, 2001
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February 20, 2002 The Honourable Paul M. Martin, P.C., M.P. Dear Minister: I am pleased to transmit to you, as requested in your letter dated August 19, 1999, the Annual Status Report of the Canadian International Trade Tribunal reporting on the Tribunal's inquiry process concerning requests for tariff relief on imported textile inputs for production. This report contains data for the period from October 1, 2000, to September 30, 2001. Yours sincerely, INTRODUCTIONOn July 6, 1994, the Minister of Finance (the Minister) asked the Canadian International Trade Tribunal (the Tribunal) to conduct investigations into requests from Canadian producers for tariff relief on imported textile inputs used in their manufacturing operations and to make recommendations, based on these requests, that would maximize net economic gains for Canada. Since then, there have been four minor modifications to the terms of reference.1 This report describes the highlights of the textile tariff relief program during the period from October 1, 2000, to September 30, 2001, followed by a more detailed description of the activities undertaken by the Tribunal. The appendices contain a general description of the tariff relief program (Appendix I), as well as a statistical overview of requests received, investigations completed and in progress as of September 30, 2001, and tariff relief recommendations currently in place. HIGHLIGHTSDuring the period covered by this report, the Tribunal received seven requests for tariff relief, while six requests were received for the comparable period in 1999-2000. During the year, six investigations were completed, covering seven requests. In all cases, the Tribunal concluded that granting tariff relief would maximize net economic gains for Canada and, consequently, recommended that tariff relief be granted for an indeterminate period. The Textile Reference provided tariff relief valued at approximately $24 million in 2000-2001, covering imports of textile inputs worth about $183 million. The removal of these duties has allowed Canadian textile-using producers to enhance their competitiveness. On August 13, 2001, the Department of Finance informed stakeholders that it considered that the terms of reference governing the Tribunal's standing textile reference might benefit from certain clarifications to reinforce the original policy intent. Parties were invited to comment on the proposal. The Minister has not yet published the results of these consultations. NEW REQUESTSDuring the period covered by this report, the Tribunal received seven requests for tariff relief. Forty-three percent of all the requests for tariff relief received in 2000-2001 originated with producers in the apparel industry. The balance of the new requests came from the adhesive tape, sleeping bag and awning industries. The apparel industry has consistently been the largest user of the program since its inception in 1994, accounting for 69 percent of all requests to date. The furniture industry and the textile industry have each filed about 6 and 5 percent of all requests to date, respectively. Less frequent users have included a diverse group of industries, including, among others, those that manufacture footwear, tents and rope. The majority of the requests for tariff relief received during 2000-2001 originated in Ontario, with Quebec being a close second. While requests for tariff relief have covered a fairly broad spectrum of the textile inputs specified in the Minister's reference, all the requests received during 2000-2001 were for tariff relief on fabrics, as opposed to other textile inputs. This generally follows the pattern that has emerged since the implementation of the program. Since the majority of firms requesting tariff relief are engaged in the manufacture of apparel, the majority of the requests for tariff relief have involved fabrics, rather than yarns or other textile inputs. The terms of reference limit the application of the textile program to certain chapters of the Customs Tariff.2 During 2000-2001, all requests pertained to textile inputs contained in Chapters 51 ("Wool, fine or coarse animal hair; horsehair yarn and woven fabric"); 52 ("Cotton"); 54 ("Man-made filaments"); and 55 ("Man-made staple fibres"). Appendices III to VI provide details of the requests by industry sector, geographic distribution, type of input and distribution by Customs Tariff chapter respectively. As of September 30, 2001, there were two investigations in progress (covering two requests) and two requests were awaiting commencement of investigation. Overall, during the year, six investigations were completed covering seven requests. In all these requests, the Tribunal concluded that granting tariff relief would maximize net economic gains for Canada and, consequently, recommended that tariff relief be granted for an indeterminate period. In total, seven reports to the Minister were issued during the period. Table 1 provides a summary of these activities.
As of September 30, 2001, 78 of the 81 requests for which the Tribunal recommended that tariff relief be granted had been implemented by order of the Governor in Council, on the recommendation of the Minister, pursuant to paragraph 68(1)(a) of the Customs Tariff, and a further two recommendations were under consideration by the Minister. A total of 10 recommendations were implemented during 2000-2001. On average, it took more time for the Tribunal's recommendations to be implemented during this year than it did last year (203 days in 2000-2001 compared to 100 days in 1999-2000). Excluding two of the recommendations, which each took over a year to implement, the average implementation period is reduced to 132 days, more in line with past years' experience. The level of activity within the Tribunal regarding the investigation of requests for tariff relief was, in 2000-2001, about equal to the previous year, and approximately 3 percent of the Tribunal's human resources were committed to the program. REVIEWSNo expiry or review investigations were undertaken in 2000-2001. RECONSIDERATION OF A RECOMMENDATIONAs reported last year, the Tribunal reconsidered the recommendation that it made in Request No. TR-99-003, collected supplementary information and, subsequently, issued revised pricing data. All parties to the investigation were given the opportunity to comment on the new evidence. After considering the submissions of all parties to the investigation, the Tribunal, on October 6, 2000, re-affirmed its original recommendation. EFFECTS OF THE PROGRAMBy the end of September 2001, the government had added 1603 new tariff items to implement Tribunal recommendations. These tariff items covered imports worth $183 million during 2000-2001 and provided tariff relief worth approximately $24 million.4 Table 2 provides a year-to-year comparison of imports benefiting from tariff relief.
During 2000-2001, imports benefiting from tariff relief provided by these tariff items represented 0.76 percent of all imports ($24.1 billion) reported during the year by Statistics Canada and classified in Chapters 39, 40, 51 to 56, 58 to 60 and 70 of the Customs Tariff. Details on these benefits, by chapter of the Customs Tariff, are presented in Appendix VII. Tariff relief principally affected textile inputs falling in five chapters of the Customs Tariff: Chapter 51 ("Wool, fine or coarse animal hair; horsehair yarn and woven fabric"); Chapter 52 ("Cotton"); Chapter 53 ("Other vegetable textile fibres; paper yarn and woven fabrics of paper yarn"); Chapter 54 ("Man-made filaments"); and Chapter 55 ("Man-made staple fibres"). The percentage of total imports accounted by the imports benefiting from tariff relief, for these chapters, ranged from 3.3 to 7.7 percent. Tariff relief recommendations are also implemented by the government through the issuance of remission orders. As of September 30, 2001, two remission orders were in place: P.C. 1997-1668 (Les Collections Shan Inc.); and P.C. 1998-1118 (Alpine Joe Sportswear Ltd.). Over the years, remission orders have provided additional tariff relief worth approximately $1.2 million in 1995-96, $100,000 in 1996-97, $120,000 in 1997-98, $93,000 in 1998-99, $139,000 in 1999-2000, and $89,000 in 2000-2001. The intent of the tariff relief program is to remove the burden of duties from imported textile inputs that are used in the manufacturing operations of Canadian producers, where it has been determined that this would be in the best economic interest of Canada. In its seven years of existence, the program has provided tariff relief worth more than $116 million. The removal of these duties has allowed Canadian producers to reduce their production costs. In turn, this has assisted these producers in enhancing their competitiveness. LENGTH OF INVESTIGATIONSAs specified in the terms of reference, the Tribunal's recommendations should be made within 120 days from the date of receipt of a properly documented request or within any earlier specified time frame, which the Tribunal determines to be appropriate, in cases of critical circumstances, after receipt of a properly documented request. In practice, the 120-day period starts with the issuance of the notice of commencement of investigation and ends with the distribution of the Tribunal's report. In 2000-2001, it took, on average, 96 days to conduct a tariff relief investigation. This compares to 189 days in 1999-2000, 137 days in 1998-99 and 158 days in 1997-98. However, the 2000-2001 period was not typical, as four of the seven requests investigated were unopposed and, consequently, were subject to very short investigations, one lasting only 65 days (Request No. TR-2000-003). TRAININGThe Tribunal provides its members and staff with continuous in-house training seminars on a variety of topics relevant to their responsibilities. During the year, three members of the Tribunal visited the operations of Consoltex (Alexandria, Ontario) and AstenJohnson (Kanata, Ontario). These visits were organized by the Textiles Human Resources Council. PUBLIC HEARINGDuring the year, no public hearing was held, and all investigations were handled by way of written submissions.
APPENDIX I THE PROGRAMUnder its terms of reference, the Tribunal is mandated 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. Scope of the Reference A domestic producer may apply for tariff relief on an imported textile input used, or proposed to be used, for production. The textile inputs for which tariff relief may be requested are the fibres, yarns and fabrics of Chapter 51, 52, 53, 54, 55, 56, 58, 59 or 60; 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 of the schedule to the Customs Tariff. However, since July 24, 1996, and at least until July 1, 2002, some yarns are not included in the textile reference.5 Types of Relief Available The tariff relief that may be recommended by the Tribunal to the Minister ranges from the removal or reduction of tariffs on one or several, partial or complete, tariff lines, textile- and/or end-use-specific tariff provisions. 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, the recommendation could include company-specific relief. The recommendation could be for tariff relief for either a specific or an indeterminate period of time. The Tribunal will only recommend tariff relief that is administrable on a cost-effective basis. What Constitutes a Request A properly documented request shall contain all the information requested in the Textile Reference Guide questionnaire, including, for the public record, the reasons for the request, a description of the textile input and its end use, the specific tariff relief sought, experience with sourcing domestic identical or substitutable textile inputs and anticipated benefits from the requested tariff relief. Confidential information in respect of such things as price comparisons between the imported textile input and domestic identical or substitutable textile inputs, and various production, import, export and cost data are also required. Samples of the textile input must accompany the request unless the requester has previously obtained an NCR for the textile input from the CCRA. Notification of a Request Upon receipt of a request for tariff relief, and before commencement of an investigation, the Tribunal issues a brief electronic notice announcing the request. The minimum period of time for the notification of a request before an investigation is commenced is 30 days. This notification is designed to: · increase transparency; · identify potential deficiencies in the request; · avoid unnecessary investigations; · provide an opportunity for the domestic textile industry to contact the requester and agree on a reasonable domestic source of supply; · inform other users of identical or substitutable textile inputs; · prepare the domestic industry to respond to subsequent investigation questionnaires; and · give associations advance time for planning and consultation with their members. Investigations When the Tribunal is satisfied that a request is properly documented, it commences an investigation. A notice of commencement of investigation is sent to the requester, all known interested parties and any appropriate government department or agency, such as the CCRA, the Department of Foreign Affairs and International Trade, the Department of Industry and the Department of Finance. The notice is also published in the Canada Gazette. In any investigation, interested parties include domestic producers, certain associations and other persons who are entitled to be heard by the Tribunal because their rights or pecuniary interests may be affected by the Tribunal's recommendations. Interested parties are given notice of the request and can participate in the investigation. Interested parties include competitors of the requester, suppliers of goods that are identical to or substitutable for the imported textile input and downstream users of goods produced from the textile input. To prepare a staff investigation report, the Tribunal staff gathers information through such means as plant visits and questionnaires. Information is obtained from the requester and interested parties, such as other users and potential domestic suppliers of the textile input, for the purpose of determining whether the tariff relief sought will maximize net economic gains for Canada. In normal circumstances, a public hearing is not required, and the Tribunal will dispose of the matter on the basis of the full written record, including the request, the staff investigation report and all submissions and evidence filed with the Tribunal. The procedures developed for the conduct of the Tribunal's investigations envisage the full participation of the requester and all interested parties. A party, other than the requester, may file submissions, including evidence, in response to the properly documented request, the staff investigation report and any information provided by a government department or agency. The requester may subsequently file submissions with the Tribunal in response to the staff investigation report and any information provided by a government department or agency or other party. Where confidential information is provided to the Tribunal, such information falls within the protection of the Canadian International Trade Tribunal Act.6 Accordingly, the Tribunal will only distribute confidential information to independent counsel who are acting on behalf of a party and who have filed a declaration and undertaking to protect the confidentiality of any information received. Recommendations to the Minister The Tribunal will normally issue its recommendations, with reasons, to the Minister within 120 days from the date of commencement of the investigation. In exceptional cases, where the Tribunal determines that critical circumstances exist, the Tribunal will issue its recommendations within such earlier specified time frame as the Tribunal determines to be appropriate. The Tribunal will recommend the reduction or removal of customs duties on a textile input where it will maximize net economic gains for Canada. Review Process Where the Minister has made an order for tariff relief pursuant to a recommendation of the Tribunal, certain domestic producers may make a request to the Tribunal to commence an investigation for the purpose of recommending the renewal, amendment or termination of the order. A request for amendment or termination should specify what changed circumstances justify such a request. APPENDIX II TRANSMITTAL LETTER REVISING TERMS OF REFERENCEAugust 19, 1999 Mr. Pierre Gosselin 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; 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; 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, 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, 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. APPENDIX III REQUESTS BY INDUSTRY SECTOR
APPENDIX IV GEOGRAPHIC DISTRIBUTION OF REQUESTS
APPENDIX V REQUESTS BY TYPE OF INPUT
APPENDIX VI REQUESTS BY CUSTOMS TARIFF CHAPTER
APPENDIX VII PERCENTAGE OF TOTAL IMPORTS ACCOUNTED FOR BY IMPORTS BENEFITING FROM TARIFF RELIEF FURTHER TO TRIBUNAL RECOMMENDATIONS, BY CUSTOMS TARIFF CHAPTER
APPENDIX VIII SUMMARY OF INVESTIGATIONS COMPLETED BETWEEN OCTOBER 1, 2000, AND SEPTEMBER 30, 2001
APPENDIX IX SUMMARY OF INVESTIGATIONS IN PROGRESS AS OF SEPTEMBER 30, 2001
APPENDIX X TARIFF RELIEF RECOMMENDATIONS IN PLACE AS OF SEPTEMBER 30, 2001
1. A review of Request No. TR-95-009. 1 1. On March 20, 1996, following consultations with industry officials and after having reviewed the Tribunal's first annual status report, the Minister revised the terms governing the textile reference. On July 24, 1996, the Minister further revised the terms of reference by removing certain knitting yarns from the purview of the textile reference. On November 26, 1997, the Minister modified the terms of reference to remove the possibility of company-specific relief in future requests for tariff relief, except with respect to requests for relief on textile inputs used in the manufacture of women's swimsuits, co-ordinated beachwear and co-ordinated accessories. Finally, on August 19, 1999, the Minister further modified the terms of reference (see Appendix II) to continue, until at least July 1, 2002, the removal of certain knitting yarns from the purview of the reference and to replace the GATT 1994 Agreement with the World Trade Organization Agreement as one of the agreements that the Tribunal should bear in mind when assessing the effect of tariff and non-tariff liberalization on domestic textile and downstream producers. 2 2. R.S.C. 1985 (3d Supp.), c. 41. 3 3. Up to December 31, 1997, the government implemented Tribunal recommendations by adding specific codes to the Customs Duties Reduction or Removal Order, 1988 made by Order in Council P.C. 1987-2738 dated December 31, 1987. As of January 1, 1998, these codes have all been replaced by new tariff items, and new implementations have been made by adding new tariff items to the Customs Tariff. 4 4. Estimates based on 2000 or 2001 MFN rates, as applicable. 5 5. 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. 6 . R.S.C. 1985 (4th Supp.), c. 47. 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. [Table of Contents] Initial publication: March 18, 2002 |
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