A second factor involved in limiting international trade in resins is that relating to patents. The basic patents on tar-acid resins have expired; but while they were in force, they prevented imports into the United States. In the United States a valid patent can be enforced at law not only against domestic products which infringe but also against imports. 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. Again, mutual interest may dictate an exchange (by cross-licensing) of certain patents. International licensing of patents is usually accompanied by divisions of international markets through formal or informal understanding. Such agreements may outlive the life of the patents, especially if bolstered with financial connections. But unless the original producers continue to dominate their respective markets, any agreements between them are likely to diminish in importance, because after the patents expire new competitors would have a free hand in foreign as well as domestic markets.
The original United States producer of tar-acid resins set up or licensed companies to manufacture in a number of foreign countries. The urea-formaldehyde process was developed in Europe and the first American producer was a licensee of a British corporation. Similar arrangements exist with regard to most of the other resins.
The United States tariff on resins and resin products.
Synthetic resins.—Imports of tar-acid, alkyd, coumarone and indene, styrol, adipic, and aniline resins are dutiable under the provisions of paragraph 28 of the Tariff Act of 1930, which reads in part: “synthetic phenolic resin and all resinlike products prepared from phenol, cresol, phthalic anhydride, coumarone, indene, or from any other article or material provided for in paragraph 27 [coal-tar intermediates] or [paragraph] 1651 [coal-tar crudes], all these products whether in a solid, semisolid, or liquid condition; ... 45 per centum ad valorem [based on American selling price[7] or United States value[8]] and 7 cents per pound.” Where these resins are produced in the United States, imports are “competitive” and the dutiable value is based upon American selling price. If the American selling price is higher than the foreign value, the effect of this method of valuation is to increase the duty to which imports are subject. The duty of 45 per cent ad valorem and 7 cents per pound was equivalent to 54 per cent ad valorem on the American selling price of the small imports of coal-tar resins in 1937. If it could calculated upon foreign value it would be much higher.
Synthetic resins of non-coal-tar origin, except vinyl resins, are dutiable under paragraph 11, which reads “synthetic gums and resins not specially provided for, 4 cents per pound and 30 per centum ad valorem” on foreign value. This rate was the equivalent of 48 per cent ad valorem upon the small amount of imports in 1937. The most important resins included are the urea and acrylate resins.
Between 1930 and 1936 there was some doubt whether vinyl resins were dutiable under paragraph 11 at the rate quoted or under paragraph 2 which provided for “vinyl alcohol ... homologues and polymers of all the foregoing; ethers, esters, salts and nitrogenous compounds of any of the foregoing, whether polymerized or unpolymerized, ... not specially provided for, 6 cents per pound and 30 per centum ad valorem” on foreign value. But the Canadian trade agreement, effective January 1, 1936, reduced the rate on vinyl resins under either paragraph 2 or paragraph 11 to 3 cents per pound and 15 percent ad valorem.[9] The reduced rate was equivalent to 25 percent ad valorem upon the imports in 1937.
Under these rates, imports of synthetic resins, other than vinyl resins, have been insignificant.[10] After the reduction of duty, imports of vinyl resins in 1936 amounted to approximately 600,000 pounds, valued at $145,000 and in 1937 to 650,000 pounds, valued at $200,000. (See table [11].)
Articles made of synthetic resins.—Laminated products of which synthetic resin is the chief binding agent and manufactures of such products are dutiable under paragraph 1539 (b) at the following rates: 15 cents per pound and 25 percent on laminated sheets or plates[11]; 50 cents per pound and 40 percent on laminated rods, tubes, blocks, strips, blanks, or other forms; and 50 cents per pound and 40 percent on manufactures of such laminated products. Paragraph 1539 (b) also provides a duty of 50 cents per pound and 40 percent on manufactures of any other product of which any synthetic resin is the chief binding agent. These are, for the most part, molded synthetic resin articles. Paragraph 1539 (b) does not cover articles made entirely of synthetic resin (cast synthetic resin articles). Such articles unless specifically provided for in the law are dutiable under paragraph 1558 as manufactured articles, not specially provided for, at 20 percent ad valorem.
A great many articles, which are made in whole or in part of synthetic resin, are not dutiable under either paragraph 1539 (b) or paragraph 1558. These are articles which are specifically mentioned in other paragraphs and subject to the duties provided therein. Table [15] lists a number of them.