Your input XML is in a namespace, therefore you need specify the namespace when matching against "Characteristic" element.
The first post in this forum contains a number of links to this very issue:
Hints for a good XSLT post
Basically define your namespace, with a prefix, and then use the prefix in the match attribute.
Code:
<xsl:template xmlns:ns0="urn:cidx:names:specification:ces:schema:all:5:0" match="ns0:Characteristic" />