WORLD TRADE  
ORGANIZATION  G/SG/N/6/CAN/2 
1 March 2005 
 (05-0855) 
Committee on Safeguards Original:   English 
  
 
NOTIFICATION UNDER ARTICLE 12.1(a) OF THE AGREEMENT 
ON SAFEGUARDS ON INITIATION OF AN INVESTIGATION 
AND THE REASONS FOR IT 
 
 
CANADA 
 
Bicycles
 
  
 The following communication, dated 28 February 2005, is being circulated at the request of 
the Delegation of Canada.  
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 1. Specify the date when the investigation was initiated 
 
The global safeguard investigation was initiated by the Canadian International Trade Tribunal 
(Tribunal) on 10 February 2005.  2. Specify the product subject to the investigation 
 
The products under investigation are bicycles, asse mbled or unassembled, with a wheel diameter 
greater than 15 inches or 38.1 centimetres, and finished painted bicycle frames, assembled or unassembled.   3. Provide the reasons for initiating the investigation  
 
On 22 November 2004, the Canadian Bicycle Manufacturers Association (CBMA) submitted a 
complaint to the Tribunal, alleging that the in creased volume of imported bicycles and frames has 
caused, or threatened to cause,  serious injury to Canadian bicycle manufacturers.  On 
11 January 2005, the Tribunal determined that the complaint is properly documented, i.e., that it 
contains the elements needed by the Tribunal to d ecide whether or not there are sufficient grounds to 
warrant the launching of an inquiry.  The Tribunal is satisfied that the information it examined discloses a reasona ble indication that the 
goods that are the subject of the complaint are be ing imported in such increased quantities and under 
such conditions as to cause, or threaten to cause,  serious injury to domestic producers of like or 
directly competitive goods.  G/SG/N/6/CAN/2 
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 4. Additional information 
 
In the investigation, the Tribunal will determine whether the goods subject to the inquiry are being 
imported into Canada from all sources in such incr eased quantities and under such conditions as to be 
a principal cause of serious injury, or threat th ereof, to domestic producers of like or directly 
competitive goods. 
 Notice of initiation of the investigation can  be found on the Tribunal’s website at 
http://www.citt.gc.ca
.  This notice contains all pertinent in formation relating to the conduct of the 
investigation, including the schedule of inquiry an d the procedure for participation by persons or 
governments. 
 
CITT STATEMENT OF REASONS 
BACKGROUND 
1. On 22 November 2004, pursuant to subsection 23(1) of the Canadian International Trade 
Tribunal Act ,1 the Canadian Bicycle Manufacturers Association (CBMA) submitted a complaint to the 
Canadian International Trade Tribunal (the Tribuna l) requesting that the Tribunal initiate a global 
safeguard inquiry into the importation of bicycles, assembled or unassembled, with a wheel diameter 
greater than 38.1 centimetres or 15 inches, and finished painted bicycle frames, assembled or unassembled.  The members of the CBMA are: Gr oupe Procycle Inc. (Procycle), including its 
division, Rocky Mountain Bicycles, and Raleigh Industries of Canada Limited (Raleigh). 
2. As part of its examination of the complaint to determine whether it was properly documented, 
the Tribunal requested, on 3 December 2004, pursuant to subsection 24(1) of the CITT  Act, that the 
CBMA provide additional information.  On 20  December 2004, the CBMA provided further 
information in response to the Tribunal’s request. 
3. Based on its examination of the complaint, th e Tribunal determined, pursuant to subsection 
25(1) of the CITT Act , that the complaint was properly documented.  A notice of receipt of a properly 
documented global safeguard complaint was issued  on 11 January 2005, and was published in the 
22 January 2005, edition of the Canada Gazette , Part I. 
4. Pursuant to subsection 26(1) of the CITT Act , the Tribunal has decided to commence an 
inquiry into the complaint to determine whether the goods subject to the inquiry are being imported into Canada from all sources in such increased quantities and under such conditions as to be a 
principal cause of serious injury or threat thereof to domestic producers of like or directly competitive 
goods.  Pursuant to subsection 26(2), the Tribunal wi ll notify the CBMA and other interested parties 
of its decision to commence this inquiry.  In add ition, the Tribunal will send a copy of this decision 
and a copy of the public complaint and other releva nt public information examined by the Tribunal to 
the Minister of Finance (the Minister). 
PRODUCT 
 
Product Definition and Description 
 
5. The products that are the subject of the complaint are bicycles, assembled or unassembled, with 
a wheel diameter greater than 38.1 centimetres or 15 inches (bicycles), and finished painted bicycle frames, whether assembled or unassembled (frames). 
                                                     
 
1  R.S.C. 1985 (4th Supp.), c. 47 [ CITT Act ].  G/SG/N/6/CAN/2 
 Page 3 
 
 
 Production Process 
 
6. The CBMA submitted that the manufacturing process is virtually the same in Canada as it is 
elsewhere.  The manufacturing process begins with  the construction and finishing of the major 
components.  The frames are constructed by welding together the three main tubes and fitting the fork 
that connects the front wheel to the frame, as well as attaching the rear triangle.  The frame and fork 
are separately painted and polished and decals are applied before the parts are joined. 
7. The construction of the wheel begins with the hubs and rims to which nipples and spokes are 
attached, ensuring that the torque on each spoke is th e same.  This process is often automated.  Before 
being attached to the frame, the assembled wheels are individually tested to ensure balance. 
8. Component parts, such as the handlebars, the seat , the drive train and the brake system, each 
assembled from several component parts, are then  attached.  The component parts are generally 
purchased from specialized part suppliers that provide complete sets of selected parts. 
9. The members of the CBMA construct frames, as well as some handlebars, backstays and 
rims, and assemble the wheels from Canadian and imported parts.  Certain bicycle components are 
imported from the United States, Europe and the Far East.  Many of the assembly operations, such as 
wheel assembly and the welding and painting of frames, are highly automated. 
Classification of Imports and Tariff Treatment 
 
10. Bicycles are classified under classificati on Nos. 8712.00.00.12, 8712.00.00.20, 
8712.00.00.30, 8712.00.00.40, 8712.00.00.50 and 8712.00.00.90 of the schedule to the Customs 
Tariff .2  The Most-Favoured-Nation (MFN) Tariff rate  of customs duty applicable to imports of 
bicycles in 2004 was 13.0 per cent, whereas the General Preferential Tariff (GPT) rate was 
8.5 per cent.  Imports of bicycles from the United States and Mexico are duty free under the North 
American Free Trade Agreement .3 
11. Frames are classified under classification No. 8714.91.90.00.  The MFN Tariff rate of 
customs duty applicable to imports of frames in 2004 was 5 per cent.  Frames enter duty free under all 
other tariffs. 
DOMESTIC INDUSTRY 
 
12. According to the complaint, the Canadian prod ucers of bicycles are Procycle, Raleigh, Norco 
Products Ltd. and Cycles Devinci Inc. Victoria Precis ion Inc. (Victoria Precision) is believed to have 
had very limited production in 2003 and did not produce any bicycles in 2004. 
Position of the CBMA4 
13. The CBMA alleged that its current members a ccounted for the majority of the volume and 
value of domestic production of bicycles every year since 1999 and that they produce goods that are like or directly competitive with the subject goods. 
                                                     
 
2 S.C. 1997, c. 36. 
3 32 I.L.M. 289 (entered into force 1 January 1994) [NAFTA]. 
4 This section outlines a number of key submissions made by the CBMA. It is not intended to be 
exhaustive. G/SG/N/6/CAN/2 
Page 4  
 
 14. The CBMA alleged that the subject goods are being imported in such increased quantities and 
under such conditions as to cause or threaten to cau se serious injury to domestic producers of like or 
directly competitive goods. It alleged that the increase has been sudden and significant. 
15. The CBMA alleged that the high degree of substitutability between domestic and imported 
products, and the fact that price is the single most  important determining factor in purchase decisions 
of mass merchandisers, buying groups and independen t bicycle dealers, demonstrate a direct causal 
relationship between the increasing presence of low- priced imports in Canada and the declining 
volume of sales from Canadian production. 
16. It is the CBMA’s contention that the domestic i ndustry is suffering serious injury in the form 
of lost employment, reduced revenues, reduced margin s and net income (lost profits), lost sales, price 
suppression, price erosion, reduced ability to ra ise capital and innovate, unsatisfactory capacity 
utilization, and increased fixed costs. 
17. In response to the Tribunal’s request, date d 3 December 2004, to provide additional 
information pursuant to subsection 24(1) of the CITT Act , the CBMA alleged threat of serious injury 
to domestic producers of bicycles by imports of fram es.  It argued that, should safeguard protection 
regarding bicycles be implemented without the inclusion of frames in the scope of such protection, 
effective protection against increased imports of bicycles would be greatly jeopardized. 
ANALYSIS 
18. Pursuant to subsection 26(1) of the CITT Act , the Tribunal shall commence an inquiry into the 
complaint if it is satisfied that the following conditions are met: 
• that the information provided by the complainant and any other information examined by the 
Tribunal disclose a reasonable indication that the goods that are the subject of the complaint are being imported in such increased quantities and under such conditions as to cause or 
threaten serious injury to domestic producers of like or directly competitive goods; 
• that the complaint is made by or on behalf of domestic producers who produce a major 
proportion of domestic production of the like or directly competitive goods;  and 
• where an inquiry, in relation to like or directly competitive goods has been completed or 
terminated by the Tribunal under the CITT Act during the 24-month period preceding the date of receipt of the complaint, that the circumst ances are sufficiently different to warrant a new 
inquiry. 
 
Like or Directly Competitive Goods 
 
19. Before addressing each of the three conditio ns in turn, the Tribunal will make some 
observations with respect to the issue of like goods. 
20. The Tribunal’s jurisdiction under subsection 26(1) of the CITT Act  is to inquire into 
complaints concerning injury or threat of injury  by imported goods to “domestic producers of like or 
directly competitive goods”. 
21. The complaint alleges threat of injury to the domestic producers of bicycles by imported 
frames.  It does not allege injury or threat of injury to the domestic producers of frames by imported 
frames.  Accordingly, the Tribunal only has jurisdic tion to inquire into the threat of injury to the 
production of bicycles by imported frames if bicycles are “like or directly competitive goods” in 
relation to frames.  G/SG/N/6/CAN/2 
 Page 5 
 
 
 22. Because the information on the record at this time does not allow the Tribunal to come to a 
conclusion on the question of “like or directly  competitive goods”, the Tribunal has decided that, 
solely for the purposes of its decision on the commencement of this inquiry, the goods that are the subject of the inquiry consist of both bicycles and frames.  The Tribunal will be seeking submissions 
from parties on this issue before making its decision on whether bicycles and frames are “like or 
directly competitive goods”. 
Reasonable Indication of Increased Imports 
23. Data obtained by the Tribunal from Statistics Ca nada show that imports of bicycles increased 
from approximately 650,000 units in 1999 to close to 1 million units in 2003, a 54.0 per cent increase.  
The imports of bicycles continued to increase in 2004.  During the first nine months of 2004, imports of bicycles increased by over 40,000 units, or 4.5 per cent, over the same period in 2003. 
24. Imports of bicycles increased by essentially the same amount as domestic production 
declined.  Imports as a percentage of domes tic production increased from 66.6 per cent in 1999 to 
over 146.0 per cent in 2003. 
25. Based on Statistics Canada data, the value
5 of goods imported under tariff item 
No. 8714.91.90 more than doubled over the period,  increasing from $5.5 million in 1999 to over 
$13.0 million in 2003.  However, the description for this tariff item includes both painted and 
unpainted frames, as well as forks, parts and other accessori es.  It is therefore not clear at this time to 
what extent the large increase in imports is attributable to frames. 
Reasonable Indication of Serious Injury or Threat of Serious Injury 
 
26. The Tribunal reviewed data contained in the complaint concerning domestic production, loss 
of market share, employment, reduced prices, pr ice suppression, lost sales, and reduced revenues, 
margins and net income.  The CBMA noted that  domestic producers do not sell frames into the 
market. 
27. Between 1999 and 2003, domestic  production of bicycles, as estimated by the CBMA, 
declined by close to 30 per cent.  Based on th e evidence, this estimate would appear to be 
conservative, given the uncertainties regarding Victoria Precision’s production volume in 2003. 
28. Data in the complaint and those obtained by th e Tribunal from Statistics Canada indicate that, 
in a relatively stable market, the domestic producers’  share of the market fell by 20 per cent between 
1999 and 2003. 
29. In the complaint, both Procycle and Raleigh pr ovided data that demonstrate that they have 
suffered employment losses since 1999 and 2000 respectively. 
30. The average unit price of imported bicycles fluctuated considerably from 1999 to 2003. 
Average import prices in 2003 were almost 9 per cent lower than in 1999. 
31. In the complaint, the CBMA provided injury allegations concerning lost sales volumes, and 
price suppression and erosion suffered by domestic producers at a number of major accounts due to 
imports. 
32. The evidence in the complaint also shows that the domestic industry has suffered reduced 
revenues, margins and net income.  Between 1999  and 2003, Procycle and Raleigh experienced 
                                                      
5 There is no data available from Statistics Canada regarding the volume of imported frames. G/SG/N/6/CAN/2 
Page 6  
 
 declines in revenues.  Income before taxes has d eclined considerably since 2001, notwithstanding 
some slight improvements reported in 2004.  In th is regard, the Tribunal also notes that Victoria 
Precision (a long-time member of the CBMA) ceased  manufacture in Canada and made an assignment 
in bankruptcy in the fall of 2003. 
33. The capacity utilization data provided in the Bicycles and Frames
6 expiry review was 
43 per cent for the 2001 calendar year.  In its co mplaint, the CBMA indicates that the capacity 
utilization for the 2003 calendar year remained the same. 
34. The information available to the Tribunal de monstrates that there is evidence of increased 
imports at decreasing prices.  The evidence also  shows that the domestic industry experienced 
decreased production and market share, reduced revenues, and price suppression and erosion over the 
period from 1999 to 2003. 
35. With respect to threat of seri ous injury caused by imports of frames, the Tribunal notes that 
the values of imports reported under tariff item No. 8714.91.90 has more than doubled since 1999.  Therefore, the evidence shows a reasonable indicati on that there has been a significant increase in 
imports of frames.  Further, the CBMA submitted that  painting the bicycle frames is one of the largest 
cost components in the production of bicycles.  Ba sed on the evidence and information available at 
this time regarding the increased imports of frames, the Tribunal is of the view that there is a reasonable indication of a threat of serious injury by imported frames to the production of bicycles. 
36. Accordingly, the Tribunal is satisfied that ther e is a reasonable indication that the goods that 
are the subject of the complaint are being impor ted in such increased quantities and under such 
conditions as to cause or threaten serious injury to  domestic producers of like or directly competitive 
goods. 
Standing 
 
37. Pursuant to paragraph 26(1)( b) of the CITT Act , the Tribunal must be satisfied that the 
complainants, Procycle and Raleigh, account for a major proportion of domestic production of the like 
or directly competitive goods.  The CITT  Act does not define what is meant by “major proportion”.  
Information in the complaint indicates that the volume of domestic bicycle production accounted for 
by Procycle and Raleigh ranged between 58 a nd 69 per cent over the period from 1999 to 2003. 
38. On the basis of this information, the Tribunal is satisfied that the complaint is made by or on 
behalf of producers that produce a major proportio n of domestic production of the like or directly 
competitive goods. 
No Recent Similar Cases 
 
39. Finally, paragraph 26(1)( c) of the CITT  Act provides that, if the Tribunal has completed or 
terminated an inquiry under this act in relation to the like or directly competitive goods, during the  
24-month period preceding the date of receipt of the complaint, it has to be satisfied that the 
circumstances are su fficiently different to warrant a new i nquiry.  The Tribunal has never conducted a 
global safeguard inquiry relating to bicycles or frames. 
                                                     
 
6 (9 December 2002), RR-2002-001 (CITT).  G/SG/N/6/CAN/2 
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 CONCLUSION 
 
40. Based on the foregoing, pursuant to subsection 26(1) of the CITT Act , the Tribunal has 
decided to commence a global safeguard inquir y into the complaint on bicycles and frames. 
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