United States Tariff Commission

“ The patent situation of most synthetic resins is extremely complicated. In the case of tar-acid molding resins the basic Baekeland patents have expired, but for other synthetic resins either the basic patent is still in force, or it is difficult to say which is the basic patent, because of lack of adjudication by the courts. In all cases dozens of supplementary patents are in force and sometimes hundreds. As a result the patent situation, though one of the bars against entering into a new field, frequently forces some relationship between producing units in the same synthetic resin field. ”

“ Nor could it be said that such hats as were chosen were the only "similar competitive articles," since the foreign manufacturers can and do produce all types and styles sold in the United States. The fact that the American industry earned approximately 10 per cent on its invested capital (even after the payment of large salaries) must be chiefly explained by the profits earned on hats with respect to which there was no such acute competition. Obviously such more profitable hats strengthened the domestic industry's competitive resistance. ”

“ Horizontal relationships between companies are those between different units in the same industry (say two tar-acid resin producers) , or in different industries each operating at the same stage of industrial production (say a tar-acid resin producer and a producer of urea resin) . As a rule, extensive horizontal relationships are not common in relatively young industries, and this is true of the production of synthetic resins. ”

“ Organization of production.—The manufacture of straw hats is essentially a factory business and with few exceptions each concern carries on all of the major operations connected with the production of hats in a single establishment. Plaiting of straw braid is a separate industry, the domestic hat manufacturers being dependent upon foreign sources for their supply of braids. The bleaching of straw braids is performed by some of the hat manufacturers in their own establishments ”

“ Each material has its limitations and its special advantages and the consuming industry must choose the one best suited to its purposes. The tie-up between specific properties and particular uses is exemplified by vinyl resins, which because of their great elasticity at low temperatures, are used in safety glass, and by the polystyrene resins, which because of their electrical properties at high frequencies, are used in laminated electrical parts. As production of the various resins increases new uses will probably be found for most of them. ”

“ The overhead expenses in the United States include very considerable salaries paid to officers of the domestic manufacturing concerns, and the question is presented whether, as some accountants maintain, such salaries should not be charged exclusively to selling rather than manufacturing expenses, since such officers usually pay more attention to the selling end of the business. In the commission's records it appears that about 85 per cent of the total officers' salaries was charged to manufacturing and about 15 per cent to selling. ”

“ Coal, as is well known, yields a great variety of substances, many of which are essential to synthetic resin manufacture. Benzene is the starting point for synthetic phenol; naphthalene is used to make phthalic anhydride and maleic anhydride; coke is converted to calcium carbide, which in turn yields acetylene, acetic acid, and many other synthetics; carbon monoxide which is converted to methanol and formaldehyde; and the natural tar acids such as phenol, the cresols, and the xylenols. Limestone is a component of calcium carbide, and salt yields needed alkalies and acids. ”

“ There are three factors that together largely account for the small size of our foreign trade in synthetic resins. As a result of the comparative youth of the resin industry, the complicated patent situation, and the substantial tariff rates upon imports of resins into the United States, domestic producers have experienced little competition from [59] abroad. The first two of these forces plus the tariff barriers of other countries have caused them to pay little attention to export markets. ”

“ Some domestic firms deal only with jobbers, others only with retailers. A few of the largest firms sell to both jobbers and retailers. When the manufacturer dispenses with the services of jobbers his selling costs are, of course, increased. Foreign straw hats are distributed principally by importing jobbers. Such firms are usually engaged also in the marketing of domestic hats and in some instances are manufacturers or have financial interests in domestic factories. Foreign factories occasionally deal directly with large retailers in this country. ”

“ When home markets have been more fully exploited, problems of production have become less pressing, and most of the basic patents on resins have expired, international trade in synthetic resins may be expected to increase from its present low levels. If this occurs, the United States, with its large scale production for the home market and with its generally favorable position with regard to the raw materials and the technical skills necessary, is more likely to become a net exporter than a net importer of synthetic resins. ”

“ Styles for men's straw hats are set about one year in advance. Sample hats are manufactured in May and June and orders are taken by manufacturers in July, August, and September for hats to be delivered the following spring. This custom of the trade makes it possible for foreign manufacturers to copy and offer in competition the same styles as those made by American manufacturers. Imported hats have a wide range of styles and prices, including not only sewed hats of sennit braid but also those of fancy braids, and woven body hats such as leghorns. ”

“ The motorist provides his own light from his headlights which strikes the reflectors and is returned as a narrow beam of brilliant illumination. The chief of the United States Bureau of Public Roads states that this is a definite contribution to the safety and utility of the highways at night. ”

“ They are now more inclined to view the market as being limited by the price at which they can supply their product and by the physical properties of each resin rather than attempt to exploit it as a universal resin for all purposes. ”

“ A plastic is anything possessing plasticity; that is, anything which can be deformed under mechanical stress without losing its coherence or its ability to keep its new form. According to this definition the term includes such materials as putty, cement, clay, glass, and metals, as well as certain modified natural or semisynthetic products, such as cellulose acetate, cellulose nitrate, and casein more commonly so designated. ”

“ In addition to court action, the provisions of our tariff law prohibiting unfair competition in the import trade were invoked to prevent entry of synthetic phenolic (tar-acid) resin, form C, but when the basic patent for this material expired, the exclusion order no longer applied to single color material, except in the matter of certain marking requirements. [6]
The patent situation may militate against exports as well as imports. Where a company owns foreign patents it may set up a company to exploit them abroad, or it may license their use by others. ”

“ Being young industries and having potentially large home markets awaiting development, the synthetic resin industries in the United States naturally began by concentrating first on their numerous production problems to meet a rapidly expanding domestic demand, improving their products and devising useful applications.
The tar-acid-formaldehyde resins for molding were the first to develop. The industry producing them may be said to have started around 1910, but did not become important until after the World War, when the drop in price of phenol made the resins available at lower prices. ”

“ No description of the organization of a rapidly expanding industry can be expected to remain accurate for long. But regardless of future changes that may be expected, the general pattern seems definite enough to make possible a few broad generalizations. At present the producers of synthetic resins may be classified in two groups: those making alkyd and tar-acid resins, and those making all other synthetic resins.
The alkyd resins and the tar-acid resins are produced in large volume, and for these resins the patent situation is such that there is nothing to exclude new producers. ”

“ A more expensive resin will be used in preference to a cheaper one, only if the higher cost is more than offset by some physical property, such as color, which makes it more desirable in a particular use. The most common molding resin at present is the tar-acid type, but it is available only in the darker colors and therefore has been at a disadvantage, where a light color is desired, in competition with cellulose nitrate (celluloid) and cellulose acetate plastics or with urea and cast phenolic resins. ”

“ Cresylic acid.—Domestic production and sales statistics for so-called crude cresylic acid are not publishable. It is known, however, that production of the crude is small compared with our output of refined cresylic acid. It is usually more economical for the producer [121] to prepare the mixture of tar acids to the specifications of the purchaser, rather than to leave part of the refining operations to be performed by the latter. The fact that imports of cresylic acid are chiefly of crude is largely due to the different tariff treatment of crude and refined. ”

“ As in the United States, glycerin is produced in foreign countries, as a byproduct of the soap and fatty acid industries. The United Kingdom, Germany, and France, and recently the Soviet Union, are the leading producers. The output in each of these countries is estimated to be less than a third of the output in the United States. The British Census of 1930 reports the production of crude glycerin in the United Kingdom at 44 million pounds. Authentic statistics on production in other leading countries are not available, but most estimates show lower figures than for the United Kingdom. ”

“ Although tar-acid resins comprise the bulk of the German output, considerable gains are shown for other types, notably injection molding resins of the polystyrene and vinyl types. The development of completely automatic injection molding machinery has given an impetus to these types. While technical progress, including improvement of molding equipment, has contributed to the expanded production, the use of synthetic resins in Germany has had a strong stimulus because they are made almost wholly of domestic materials. ”

“ A vertical relationship is one between producers operating at different stages of industrial production, such as a firm producing resin and a firm producing a resin raw material or between the former and a firm that is a resin consumer. The incentive for a consuming industry operating on a large scale to make its own resins is naturally greater than for one using only small quantities. ”

“ Tar-acid resin coatings may be varied in composition and properties to meet a particular purpose. Possible variations depend on the type or mixture of tar acid used (phenol, cresols, xylenols, tertiary amyl phenol, tertiary butyl phenol, phenyl phenol) , whether the condensation takes place in the presence of an acid or an alkali, and on the proportion of formaldehyde used. The resin so formed may be modified with natural resins, synthetic resins of the alkyd type, fatty acids, or other materials. The almost endless opportunities for different types can, therefore, readily be appreciated. ”

“ Although not classified as a resin, synthetic rubber is discussed here because of its close chemical relationship to the vinyl resins. It is made commercially by E. I. du Pont de Nemours & Co., Wilmington, Del., and is marketed as Neoprene. It is sold as a plastic polymer which is vulcanized and processed much the same as natural rubber except that sulphur is not essential to vulcanization. Synthetic rubber is higher in price than natural rubber, but it has certain properties which make it suitable for service conditions where natural rubber is unsatisfactory. ”

“ Domestic distillers have sold cresylic acid, creosote oil, naphthalene, etc., in local markets in competition with duty-free imports from the United Kingdom, the Netherlands, Belgium, and Germany, but have found it difficult to dispose of pitch. The domestic production of coal tar ordinarily exceeded 600 million gallons, approximately one-half of which has been burned as fuel. Since the profit in distilling depends upon the markets for all of the joint [132] products of the distillation, the large amount remaining undistilled can be understood. ”

“ A measured amount of molding powder or a pellet of compressed molding powder is applied to each cavity by the press operator, who controls by hand the time of application of heat and pressure and removes the article from the press. The cycle is a matter of minutes, and since each cycle produces a finished article if the molding is large, or a number of them if it is small, daily production per worker is high. The estimated average costs of the different elements in the process have been apportioned as follows: the cost of raw material is about one-third the cost of the finished product ”

“ In the United States, consumption of most of the tar acids greatly exceeds the quantities extracted from tar, necessitating large production of synthetic phenol and importation of large quantities of the cresols and xylenols. ”

“ Synthetic resin.—A complex, substantially amorphous, organic semisolid or solid material (usually a mixture of substances) built up by chemical reaction of comparatively simple compounds and, depending upon the temperature at which the examination is made, approximating the natural resins in various physical properties: namely, luster, fracture, comparative brittleness, insolubility in water, fusibility or plasticity when heated or exposed to heat and pressure, and, at a certain more or less narrow temperature range before fusion, showing a degree of rubberlike extensibility ”

“ During the period 1910-16 the research laboratories of the General Electric Co., engaged in research on a synthetic resin from glycerin and phthalic anhydride. As a result of these studies numerous patents were granted for this type of resin to which the trade name Glyptal was applied. Intensive research was carried on by several firms, many variations were developed, and literally hundreds of patents were granted. ”