The current tariff on imported textiles is 10-12%; this tariff used to generate about $100M per annum in revenue, but this amount has been reduced in recent years through:
- Government action to identify fabrics not made in Canada and eliminate duties paid on those fabrics;
- Expansion of the Designer Remission Order; and
- Tariff relief provided through individual applications to the Canadian International Tariff Tribunal (CITT) or the Department of Finance
The duties Canadian apparel firms pay when importing raw materials puts them at a competitive disadvantage. In many instances manufacturers based in countries such as Bangladesh can import fabric duty free from countries such as China and manufacture apparel for export to Canada duty free. However a Canadian based manufacturer using the same fabric would be disadvantaged not only because of lower production costs in Bangladesh, but also because he would have to pay duty on his import of the Chinese fabric.
Apparel Quebec and the CAF has successfully lobbied to reduce duties on many fabrics. Despite its efforts, many fabrics that are not produced in Canada remain subject to duties. Two major reports were completed by the Canadian International Trade Tribunal in 2005 and 2006, but for many reasons the industry considers these to be seriously flawed. The findings contained in these reports were implemented in December 2005 and December 2006. The end result has been reduction of duties on some fabrics, and not on others.
For fabrics that remain dutiable, there are currently three ways to get tariff relief for fabric imports:
- Seek eligibility for the Designer Remission Order (DRO). This applies to designers who import a relatively small quantity of a given fabric. For more details, please click here.
- Seek elimination of duties by applying to the Canadian International Trade Tribunal under the Textile Tariff Reference. Such applications require time (as much as 6-8 months) and resources (complex cases can cost up to $75,000 in legal and other costs). If applications are unopposed, the time will be reduced significantly.
- Apply for “fast-track” tariff relief from the Department of Finance. Where a fabric is subject to duty, but the importer is confident that eliminating the duty would cause no harm to Canadian textile manufacturers, the importing manufacturer may apply to the Department of Finance for the duty to be eliminated on the specified fabric. However the department will not proceed if there is any opposition from domestic textile producers.
In some instances the nature of tariff relief causes problems in identifying precisely whether goods might qualify for duty free entry. For example, tariff relief that has been granted to date has an end-use provision “duty free for use in the manufacture of apparel.” Where the importer is a fabric broker that sells to different firms in different industries, this may cause considerable problems. These problems are not insurmountable, but some firms are not able to track the end-use of fabrics they sell to different customers.