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FINA Committee Report

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DUTY REMISSION AND THE CANADIAN APPAREL INDUSTRY

In cases where Canadian companies require relief from tariffs — including changes to the country’s tariff regime — the federal government has, in the past, provided duty remission to affected companies. Duty remission is the conditional or unconditional waiver, in whole or in part, of import duties or taxes on imported goods. According to the Department of Finance, duty remission “is generally introduced only in exceptional circumstances where a genuine need for tariff relief has been clearly demonstrated. Duty remissions are sometimes used to rectify short-term anomalies or inequities in the tariff structure ².
As shown in Table 1, the Canadian apparel industry is currently covered by several duty — remission orders, most of which are set to expire on 31 December 2004. These remission orders renewed remission orders put into place with the introduction of the Canada-United States Free Trade Agreement in 1989. The President of A&R Dress Company Inc. told the Committee that these remission orders were introduced “largely as compensation for extremely stringent rules of origin, which restricted effective market access into the U.S. by Canadian apparel manufacturers.”

Table 1: Canadian Apparel Industry Duty-Remission Orders
Ending 31 December 2004

Remission order	Regulation no.	Registration date
Tailored Collar Shirts Remission Order, 1997	SOR/97-291	17 June 1997
Outerwear Greige Fabrics Remission Order, 1998	SOR/98-86	29 Dec.1997
Shirting Fabrics Remission Order, 1998	SOR/98-87	29 Dec.1997
Outerwear Apparel Remission Order, 1998	SOR/98-88	29 Dec.1997
Blouses, Shirts and Co-ordinates Remission Order, 1998	SOR/98-89	29 Dec.1997
Outerwear Fabrics Remission Order, 1998	SOR/98-90	29 Dec.1997

Source: Library of Parliament.

According to the Regulatory Impact Analysis Statements filed by the Department of Foreign Affairs and International Trade when these regulations were published in the Canada Gazette Part II, the remission benefits provide Canadian manufacturers with annual duty savings of approximately $13 million for shirt makers, $18 million on imported women’s blouses, shirt and co-ordinates, $5 million on outerwear apparel, $2 million on finished and greige outerwear fabrics, and $2 million on shirting fabrics.
Witnesses told the Committee that apparel manufacturing-importers would be negatively affected by the joint decisions to extend the Least Developed Country Tariff (LDCT) and the General Preferential Tariff (GPT) as proposed by Bill C-21 and the scheduled expiration of the duty-remission orders. These Canadian companies must compete against countries covered by the LDCT, and tariffs on the importation of some inputs places Canadian companies at a disadvantage with respect to their competitors in other countries. In an industry that depends so much on fabric — representing, according to the President of the Canadian Apparel Federation, “50% to 75% of total input costs” — any extra duties faced by the industry can be quite harmful. Witnesses told the Committee that the duty-remission orders have been a critical factor in their ability to compete with other countries’ producers.