d '///2'Jz- 1 AIR CONDITIONING AND X ^"-^ / / REFRIGERATION EQUIPMENT ^ PRODUCTION ► CONSUMPTION ^ TRADE Se/ecfecf Foreign Countries The University Library THE PtNNSYLVANfA STATSi UNiVfiRSITY STATE COLLEGE. PENNSYLVANIA U.S. DEPARTMENT OF COMMERCE BUSINESS AND DEFENSE SERVICES ADMINISTRATION AIR CONDITIONING AND REFRIGERATION EQUIPMENT PRODUCTION CONSUMPTION TRADE Selected Foreign Countries UNITED STATES DEPARTMENT OF COMMERCE Frederick H. Mueller, Secretary BUSINESS AND DEFENSE SERVICES ADMINISTRATION William A. White, Sr., Administrator General Industrial Equipment and Components Division Charles F. Hughitf, Director 1960 UNITED STATES GOVERNMENT PRINTING OFFICE, WASHINGTON: 1960 For sale by the Superintendent of Documents, U.S. Government Printing Office Washington 25, D.C. — Price 45 cents Foreword This survey of air conditioning and industrial-commercial refrigeration equipment discusses the production, consumption, and trade of selected foreign countries. Emphasis is given to competitive factors, market potential, trade opportunities, and other factors of interest to U.S. industry. Special appreciation is extended to the following members of the U.S. Foreign Service and others at Foreign Service posts abroad who supplied the basic data : Country Contributor Australia I. Mac Diarmid Belgian Congo and Ruanda-Urundi O. W. Roberts Belgium-Luxembourg W. A. Buell Brazil G. S. Pierce Colombia F. H. Thomas France I. Van Veen M. R. DeCapua French West Africa J. A. Harary India D. S. Sahi Italy M. Notari Japan R.N. Benson H. Ushijima Mexico C.A. Gendreau Netherlands J. A. Surig Pakistan D. X. Menezes Union of South Africa F. C. Carlucci United Kingdom R. H. Thompson Venezuela R. E. Olson West Germany R. C. Huffman Lists of principal manufacturers, importers, and dealers of air conditioning and refrigeration equipment in many of the countries discussed herein can be obtained at $2 each from the Commercial Intelligence Division, Bureau of Foreign Commerce, U.S. Department of Commerce, Washington 25, D.C., or through the nearest Field Office of the Department. Value figures have been converted from national currencies to U.S. dollar equiva- lents at applicable exchange rates. Only selected countries are treated in this survey. Further details on any of these countries or basic data on other countries may be obtained from the Division. William A. White, Sr., Administrator, June 1960 BUSINESS AND DEFENSE SERVICES ADMINISTRATION HI Contents Page Foreword iii Australia t 1 Belgian Congo and Ruanda-Urundi 4 Belgium-Luxembourg 7 Brazil 9 Colombia 12 France 14 French West Africa 18 India 20 Italy 23 Japan 27 Mexico 35 Netherlands 40 Pakistan 43 Union of South Africa 47 United Kingdom 52 Venezuela 56 West Germany 59 U.S. Export Statistics, by Country, 1956-59 65 Digitized by the Internet Archive in 2012 with funding from LYRASIS IVIembers and Sloan Foundation http://www.archive.org/details/airconditioningrOOunit Australia Production Production of air conditioning and refrigeration equipment in Australia was as follows, in fiscal year 1956, according to the Government: Units Approximate Product produced value Room air-conditioners 2,252 $538,000 All other air-conditioning equipment- Not 4,997,000 available Refrigeration equipment 1,500 7,616,000 Commercial refrigerators (over 12 cubicfeet) 4,100 2,289,000 $15,440,000 Detailed figures are not yet available for later years, except for room air-conditioners (in units) : 1956 2,252 1957 3,480 195S 4,434 First quarter 1959 1,307 Production of air conditioners has increased sub- stantially in recent years, and single installations worth several hundred thousand dollars each, which a few years ago were rare, are now commonplace. For example, one large companj^ increased its annual turnover from $450,000 to $4,500,000 during the last 9 years. The new M.L.C. Building in North Sydney has the largest air conditioning system in the country, installed at a cost of $13^ million. Room air conditioners and commercial refriger- ators are manufactured by electrical appliance firms, which also make washing machines, radios, tele- vision sets, electric irons, and similar items. Elec- trical appliance manufacturers usually have excess capacity, and some refrigerator plants are using less than half of their effective capacity. A number of these plants are now turning to the manufacture of package room air conditioners as an additional line. Raw materials are in adequate supply. Labor is mainly of the unskilled or semiskilled type, and is freely available. The industry currently employs 3,000-4,000 persons. It is mainly Australian-owned, although a number of firms produce under license from American and other overseas companies. Channels of Distribution Refrigeration and air conditioning units are dis- tributed by wholesale houses and normal retail outlets in all cities. More complex custom-built installations are usually^sold, installed, and serviced by the manufacturer. Consumption Present demand for commercial air conditioning is satisfied by local firms. The growing demand for custom-built air conditioning may soon exceed the existing capacity of these producers, now operating at full capacity. Package air conditioning units are not yet firmly established on the market, and supply has thus far kept pace with demand. Demand for air conditioning in commercial office buildings is increasing. At the present time, con- siderable building activity is occurring in the larger cities, particularly Sydney and Melbourne, and those firms specializing in commercial and industrial air conditioning are experiencing an upward trend. New and bigger buildings are planned for the future. Package air conditioning units were first marketed some years ago, but the 1-ton units then being made were too small for local conditions. When the ex- travagant claims made for them were not realized, the market collapsed. New units now being mar- keted are bigger, about 1}4 tons capacity, and the initial response to local advertisements has been excellent. Large air conditioning units capable of cooling an entire house are almost unheard of, and the potential of this market is considerable. Foreign Trade In comparison to domestic trade, imports and ex- ports are so small as to have little effect on the overall supply position. The major import items are components and control system parts for com- mercial refrigeration and air conditioning units. Imports of refrigeration parts are currently about 12 million per year, the United States share being 25-40 percent. Refrigerating appliances of the types used for food Australia Production Production of air conditioning and refrigeration equipment in Australia was as follows, in fiscal year 1956, according to the Government: Units Approximate Product produced value Room air-conditioners 2 , 252 $538 , 000 All other air-conditioning equipment- Not 4,997,000 available Refrigeration equipment 1,500 7,616,000 Commercial refrigerators (over 12 cubicfeet) 4,100 2,289,000 $15,440,000 Detailed figures are not yet available for later years, except for room air-conditioners (in units) : 1956 2,252 1957 3,480 1958 4,434 First quarter 1959 1,307 Production of air conditioners has increased sub- stantially in recent years, and single installations worth several hundred thousand dollars each, which a few years ago Avere rare, are now commonplace. For example, one large company increased its annual turnover from $450,000 to $4,500,000 during the last 9 years. The new M.L.C. Building in North Sydney has the largest air conditioning system in the country, installed at a cost of $13^^ million. Room air conditioners and commercial refriger- ators are manufactured by electrical appliance firms, which also make washing machines, radios, tele- vision sets, electric irons, and similar items. Elec- trical appliance manufacturers usually have excess capacity, and some refrigerator plants are using less than half of their effective capacity. A number of these plants are now turning to the manufacture of package room air conditioners as an additional line. Raw materials are in adequate supply. Labor is mainly of the unskilled or semiskilled type, and is freely available. The industry currently employs 3,000-4,000 persons. It is mainly Australian-owned, although a number of firms produce under license from American and other overseas companies. Channels of Distribution Refrigeration and air conditioning units are dis- tributed by wholesale houses and normal retail outlets in all cities. More complex custom-built installations are usually sold, installed, and serviced by the manufacturer. Consumption Present demand for commercial air conditioning is satisfied by local firms. The growing demand for custom-built air conditioning may soon exceed the existing capacity of these producers, now operating at full capacity. Package air conditioning imits are not yet firmly established on the market, and supply has thus far kept pace with demand. Demand for air conditioning in commercial office buildings is increasing. At the present time, con- siderable building activity is occurring in the larger cities, particularly Sydney and Melbourne, and those firms specializing in commercial and industrial air conditioning are experiencing an upward trend. New and bigger buildings are planned for the future. Package air conditioning units were first marketed some years ago, but the 1-ton units then being made were too small for local conditions. When the ex- travagant claims made for them were not realized, the market collapsed. New units now being mar- keted are bigger, about 1}4 tons capacity, and the initial response to local advertisements has been excellent. Large air conditioning units capable of cooling an entire house are almost unheard of, and the potential of this market is considerable. Foreign Trade In comparison to domestic trade, imports and ex- ports are so small as to have Uttle effect on the overall supply position. The major import items are components and control system parts for com- mercial refrigeration and air conditioning units. Imports of refrigeration parts are currently about $2 million per year, the United States share being 25-40 percent. Refrigerating appliances of the types used for food storage (up to and including 16 cubic feet gross in- ternal capacity), and associated driving units and apparatus are subject to the following ad valorem import duties: British preferential (B. P.) 20 per- cent; most favored nation 37^/2 percent; and General (G) 373^ percent. All other refrigerating appliances and parts are assessed 30 percent, 47^/2 percent, and 47^ percent, respectively. British Preferential (BP) rates apply to imports from the United King- dom, Canada, and other British Commonwealth countries. Most Favored Nation (MFN) duties are applicable to the United States and most non- Commonwealth countries. The General Tariff (G) applies to only a few countries. Licenses are required and they are obtained by importers in advance of shipment. Imports from nondollar sources are given "B" licensing treatment. Import licenses are issued for refrigeration equip- ment against quotas established for the importer. Goods from dollar sources — United States, Canada, and other countries — are subject to administrative control. Each application for license is dealt with individually on its merit. Licenses are usually is- sued if similar goods are not available from domestic or nondollar sources on commercial terms. Exports usually require export licenses, which are readily granted in most cases. Market Potential and Investment Oppor- tunities Sources within the industry compare the present domestic market for air conditioning to that exist- ing 10 years ago in the ITnited States. Because of Australia's present import restrictions, United States export opportunities are for the most part limited to items unobtainable, at better terms, from other sources of supply. An opportunity exists for dollar investment in firms manufacturing com- mercial air conditioning units, especially control equipment for these units. However, potential investors should consider the following points: Local equipment is as good as any available, and any new equipment marketed will need to be equally good; the climate is hotter than that of the United States, except in certain specific areas; and industry executives feel that opportunist manufacturers will tend to give the air conditioning industry excess capacity, as they have in the past with refrigerators and washing machines, and as a result only soundly established firms marketing first quality products will survive. Australia: Foreign Trade in Air-conditioning and Refrigerating Equipment, 1956, 1957, and January- June 1958 [Quantity in units; value in $1,000] Exports Imports Commodity and country of destination or origin 1956 1957 January-June 1958 1956 1957 January-June 1958 Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value No. 5511 — Mechanical refrig- erating appliances and parts thereof, household; United Kingdom United States 114 59 5 18 3 11 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 774 199 963 551 564 330 N.A. Total. 888 258 968 569 567 341 N.A. N.A. N.A. N.A. N.A. N.A. Total reexports No. 5515 — Mechanical refrig- erating appliances and parts thereof {other than house- hold): United Kingdom United States... 18 N.A. N.A. N.A. 44 N.A. N.A. N.A. 15 N.A. N.A. N.A. 28 N.A. N.A. N.A. 2 N.A. N.A. N.A. 15 N.A. N.A. N.A. 90 29 5 64 62 6 76 58 6 45 112 6 4 40 2 11 65 Other countries 3 Total N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 124 1.32 1,190 541 136 140 163 1,168 599 150 46 79 No. 5519— Parts of mechani- cal refrigerators: 615 United States.. _ 223 93 Total N.A. 667 N.A. 178 N.A. 541 N.A. 158 N.A. 220 N.A. 70 1,867 N.A. 1,917 N.A. 931 No. .5520— Other than me- chanical refrigerators and parts thereof: Total N.A. N.A. N.A. N.A. Total reexports 33 4 9 1 1 negligible : Australia: Foreign Trade in Air-conditioning and Refrigerating Equipment, 1956, 1957, and January- June 1958 — Continued [Quantity in units; value in $1,000] Exports Imports CommcKiity and country of destination or origin 1956 1957 January- June 1958 1956 1957 January-June 1958 Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value No. 5525— Nonmechanical re- frigeration appliances, not elsewhere identified: N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 3 5 United States 1 65 neg. 5 Other countries 44 3 Total- N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 66 5 36 32 13 47 -K 8 No. 5529— Parts: 23 31 11 7 United States 18 Other countries 7 Total.. N.A. N.A. 93 42 2,379 N.A. N.A. 221 50 2,592 N.A. N.A. 177 22 1,321 81 7,056 4,089 2,065 65 8,006 3,635 2,690 32 No. 5999 — Machinery, not elsewhere identified: 3,995 United States 1,531 Other countries 2,489 Total 2,514 2,863 1,520 13,210 14,331 8,015 Total reexports 293 219 7 109 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. No. 9710 — Plant and special equipment for large scale projects: N.A. United States N.A. Other countries 748 867 360 N.A. Total 748 874 360 N.A. N.A. N.A. N.A. N.A. N.A. Total reexports. . 179 N.A. N.A. N.A. N.A. N.A. N.A. 189 N.A. N.A. N.A. N.A. N.A. N.A. 20 N.A. N.A. N.A. 1,811 1,132 1,103 3,396 2,661 813 No. 9719 — Other large-scale project machinery, not else- where identified: United Kingdom N.A. N.A. N.A. 2,085 United States 2,076 263 Total N.A. N.A. N.A. N.A. N.A. N.A. 4,046 6,870 4,424 N.A. — Not available. Source: Auslralia — Export and Import Statistics. Belgian Congo and Ruanda-Urundi Channels of Distribution Almost all air conditioning and the greater pro- portion of refrigeration equipment is sold in the six provincial capitals. About 50 percent of all sales are made to consumers in the Leopoldville area. Most sales are made through agencies distributing one make exclusively. United States equipment is imported directly from the manufacturer, and is installed and serviced by the local sales agency. Only one agency in Leopoldville is known to sell package air conditioning without installing it. The biggest agencies are usually held by well- established retail firms, such as CHANIC and SEDEC, which are affiliated with the state-affiliated companies controlling much of the country's econ- omy, but a few large independent agencies also distribute air conditioning products. Small inde- pendent retail outlets sell only a small percent of the air conditioning and refrigeration equipment, usually small European refrigerators and package air conditioners. Consumption No air conditioning or refrigeration equipment is produced in or exported from the Belgian Congo or Ruanda-Urundi, nor are specific statistics available on consumption. However, because such products are not produced locally, and re-exportation and stocking practices do not appear to be appreciable, the volume of imports is a reasonably reliable index of consumption. Government import statistics show no trans-shipment or re-exportation of equip- ment. Stocks are reportedly held to a minimum consistent with sales volume and the time required to receive orders. Cost and service facilities are considered to be the most important factors in sales. Small independent retail outlets have attempted sales, particularly of package air conditioning, without service facilities. The results have been poor. The technical ability required to provide service is both rare and ex- pensive. Another reason for the small volume of sales is expensive electricity. More important for United States exporters is the 220-volt, 50-cycle system in use. American equipment is normally not made for this current, and American products lose up to 15 percent of their original capacity when they are adapted to it. Unitary Air Conditioners. — Sales of room air con- ditioners are divided fairly evenly between private individuals and businesses. Sales to businesses are almost entirely for offices. Commercial consump- tion of package air conditioners should continue at a significant level as long as business hesitates to invest in central systems. House-size package units are not sold. Sales of package air conditioners have risen phe- nomenally in the last three years, and are expected to continue for the next few years. Original resist- ance to air conditioning as something new has been broken down. Introduction of air conditioning in offices has contributed greatly to its use in the home. However, the market is quite competitive, and the dominance of United States products is beginning to be challenged by European equipment. Central Plant Air Conditioning Equipment. — Business offices presently consume most of the central air conditioning. Industrial users, hotels, and theaters represent the remaining market. Original price and the cost of installation and power make these units too expensive for the private consumer. Consumption is increasing, but the demand is much less marked than for package units. Even large enterprises seem to be hesitant about purchas- ing because of the present unsettled economic and political conditions. Installation and upkeep of central systems requires technicians, who are rare and expensive. For this reason, a few agencies now specialize in the sale of central air conditioning sys- tems. Foreign competition, particularly from Den- mark, is starting to lessen the dominant position of United States products. Refrigeration Equipment. — The market for indus- trial and commercial refrigeration equipment is limited. The enterprises that might use this equip- ment are fewer than the size of the country would indicate and have not increased markedly over the last few years. Little increase in consumption is expected. No great demand exists for frozen food products, and thus processing is yet to be developed. Transportation is expensive, and so much handling is required that necessary minimum temperatures often cannot be maintained beyond a few population centers. Any substantial increase in sales will de- pend upon a general expansion of the economy. Commercial Refrigerators. — The sale of commer- cial refrigerators is restricted almost entirely to the provincial capitals and Leopoldville. Retail outlets, food processors, and hotels are the principal con- sumers. Only a moderate increase in the sale of walk-in refrigerators is expected because food proc- essing and distributing enterprises are growing slowly. The market for display cases is saturated; one sales agency reports sales of two or three units a year; another agency has sold none in 6 months. Self-service cases may find a small market as the European shopper gradually shifts from the tradi- tional day-to-day marketing to weekly buying. Only one American-type supermarket is in operation, and food outlets are slow in adopting American display and service practices. Imports Duties Freezers and commercial refrigerators and re- frigeration components are subject to a 6 percent ad valorem import duty; spare parts for freezers and commercial refrigerators, 5 percent. Market Potential market, but immediate prospects are not encourag- ing. Perhaps five air conditioners were sold in 1957 among the 3.50,000-400,000 Africans in Leopoldville. The income and savings of the great mass of Africans do not allow for the purchase of air conditioning and refrigeration cciuipment. An even more funda- mental factor limiting sales is the native pattern of life, in which air conditioning and refrigeration eciuipment does not play a role. However, one agency that has set up a financing plan looks forward to a slow increase in sales. The climate is not as universally hot as might be supposed. The best market for air conditioning is in the western and northern regions; relatively little need is felt in the east and in Elisabethville. The country is in an economic slump, and political events are creating uncertainty in African-European relations. Consumer sales are continuing, but the business community is holding back on its invest- ments. The market for air conditioning and refrigeration equipment is neither wide open, nor an easy one in which to sell. The predominance of a few big Belgian enter- prises in the Congo's economy affects sales of other countries. Much construction is planned in Bel- gium, and decisions on air conditioning and re- frigeration e 130 36 10 44 4 174 28 12 8 10,433 256 32 6 10 4,178 250 22 6 10 165 No. 84.15.90 — Spare parts for freezers and commercial refrigerators:^ 10,367 8,850 16,097 38 United Kingdom 14 14 3 Switzerland 16 52 52 17 Total 1 - 94 44 4 2 6 68 46 4 24 112 60 4 24 126 70 4 60 112 No. 84.15.51— Refrigerator components less than 3 horsepower: United States... _ . . 378 303 671 438 273 45 United Kingdom 16 Belgium 14 Union of South Africa 4 12 38 35 Total > 70 36 4 74 26 82 20 6 120 94 22 192 16 194 116 122 No. 84.15.52— Refrigerator components more than 3 horsepower: United States 24 26 3! 15 95 43 17 Belgium 70 30 87 16 66 Switzerland 60 75 Total' 170 382 6 82 4 234 520 2 4 144 694 288,312 437 768 4 2 241 No. 84.12.20 — Air-conditioning units (package and components) :2 United States.- 118,493 158,376 295,013 417,882 1,088 United Kingdom 6 12 France 2 2 West Germany 10 1 Union of South Africa _ 6 Total" 472 26 566 46 4 24 11,815 702 32 4 814 14 4 4 4 17,216 1,113 No. 84.10.90— Spare parts for air-conditioners:^ United States 10,121 25,178 4,508 .53 United Kingdom 5 4 2 Netherlands Total 1 32 76 38 24 60 ' Includes countries other than those listed. 2 Quantities in kilograms. Source: Bulletin Mensual des Stalistiques au Congo el Ruanda-Urundi. Belgium-Luxembourg Production The Grand Duchy of Luxembourg, whose popula- tion is only 315,000, does not manufacture or export any air conditioning and refrigeration equipment. Only one manufacturer of air conditioning equip- ment operates in Belgium, also producing commer- cial and household refrigerators and hot-air systems. The firm manufactures about 1,000 package air conditioning units annually, of which 50 percent are the window-type. Most of the window-type units are exported, principally to the Congo. From 15-20 air conditioning systems are manufactured annually on order for theaters and industrial concerns. The same manufacturer produces annually 5,000- G,000 ice cream cabinets, 4,000 bottle coolers, and 3,000 beer coolers, the latter for sale to cafes. It also turns out 3,000 standard display cases for food retailers, and builds to order about 200 additional display cases and 50 walk-in units. Producing areas are Antwerp, Wavre (near Brussels), and Turnhout. Producers of mechanical (as opposed to absorption) refrigeration eciuipment import piston compressors and controls manu- factured by a United States concern having licensing agreements in Denmark and Italy. Mechanical parts are not produced. Therefore, manufacturing processes are largely limited to cabinets, interiors, tubing, and assembly. Semifinished materials are freely available. Industrial labor earns an average of 26 francs (U.S. $0.52) per hour. Skilled labor is in adequate supply. Consumption No statistics on air conditioner consumption in Belgium are available, but it is probably negligible. The climate is chilly and damp. Even in mid- summer, temperatures seldom get into the 80's. Heat waves are rare and of short duration. One dealer reports that even the small number of units purchased are shipped to the Congo. Likewise, air conditioning systems in retail stores, movie theaters, and factories are rare. However, installations have increased rapidly over the past 2 or 3 years. One importer installed 11 large (3-15 hp) units in 1958. Commercial refrigeration equipment, such as dis- play cabinets, ice cream cabinets, and beef coolers, is purchased by food retailers, cafe operators, slaughter houses, and ice cream manufacturers. Ice cream is especially popular, as is beer. Com- merical refrigerators in use totaled 120,000 in 1958. Air conditioning equipment is not used in Luxem- bourg in homes or public buildings because the climate does not require it. A large air conditioning system has been installed in the only cigarette manufacturing plant; and a few laboratories, re- search, testing, and medical facilities are equipped with units. Service facihties are readily available for connnercial refrigeration eciuipment. No information is available on commercial and industrial refrigeration equipment sales in Luxem- bourg, but more food stores tend to use such equip- ment, especially the supermarkets in the larger cities. Imports ^Import figures for Luxembourg are not available, but units reportedly come from the United States, England, Germany, France, and Sweden. Air conditioning is assessed a 6 percent ad valorem import duty in Belgium-Luxembourg, as are also all refrigeration eciuipment and parts, except for complete refrigerators having an external volume not exceeding 2 cubic meters. Duty for the latter category is 12 percent. Sales tax is 5 percent of duty-paid value for air conditioning equipment, 15 percent for complete refrigerators having an ex- ternal volume not exceeding 2 cubic meters, aird 10 percent for all other refrigeration equipment. No import or export license is required. Ef- fective January 1, 1959, the above duties were reduced by 10 percent for imports from the other Eui'opean Economic Community countries (France, West Germany, and Italy). Market Potential and Investment Oppor- tunities The possibility of the United States expanding its export position in Belgium-Luxembourg should be considered in terms of the Common Market. The two countries will naturally depend on the Common Market partners, such as Germany and France, for equipment. Therefore, unless the United States makes sales through Common Market subsidiaries or licensees, lower labor costs in the Common Market area, coupled with the possible free exchange of goods, could adversely affect United States exports. Medium-sized manufacturers in the two countries want to attract foreign capital to strengthen existing enterprises and establish new lines of production. However, the presence of a limited domestic market and competition from established West European manufacturers would make an exacting market survey necessary to determine whether the location would be desirable within the Common Market area. United States sales through subsidiaries in third countries shoidd contribute to sales in Belgium- Luxembourg. Such sales are entirely feasible and are already significant in the market. Private LTnited States investors will encounter no special impediments in the refrigeration industry. Local capital participation is not recjuired but can be arranged. Belgium-Luxembourg: Value of Foreign Trade in Refrigerat- ing Equipment, 1950, 19.56, and 1957 [Dollars] Commodity and country 1950 1956 1957 Imports Refrigerators of volume not exceeding 2 cubic meters: 2.322,920 1,395,580 690,940 3,949,540 United States 2,807,500 403,760 1,434,860 670,940 Total' Miscellaneous refrigerating equipment: West Germany 3,616,100 4,881,480 727,620 329,960 192,120 91,640 6,947,800 427,300 United States 844,480 90,220 460,340 United Kingdom 309,800 72,720 Totali 1,073,580 1,422.800 1,463,260 Exports Refrigerators of volume not exceeding 2 cubic meters, total Miscellaneous refrigerating equipment, total 162,000 182,120 535,920 396,900 640,120 483,600 1 Includes countries other than those listed. Source: National Statistical Institute, Brussi Belgium-Luxembourg: Foreign Trade in Air-conditioning and Refrigerating Equipment, #839b, 1955-58 [Quantitj' in metric tons; value in ?].000] 1955 1956 1957 1958 Country of origin or destination Quantity Value Quantity Value Quantity Value Quantity Value Imports, total' 646 1,084 784 1,311 766 1,359 700 1,327 United States 75 571 266 180 904 482 153 631 220 315 996 360 229 537 273 440 919 372 132 568 173 287 Other countries . .._ 1,040 Exports, total' 376 119 147 226 256 61 159 98 262 168 105 179 193 49 124 129 Other countries. 247 1 None from the Belgian Congo. 2 None to the United States. Source: Bulletin Uensuel du commerce Eiterieur de L'union Economique Bclijo-Luxembourgeoise, Royaume de Belgique Ministere des .Affaires Economiques, Institute National de Statistique, Brussels. Brazil The Brazilian air conditioning and refrigeration equipment industry has developed considerably in the last four years, mainly because the Government has tightened its exchange regulations on importa- tion. Foreign investors have found it good business to begin the local manufacture and assembly of air conditioners and refrigerators. To some extent, local capital has been invested. With a few excep- tions, all air conditioning and refrigeration eciuip- ment is manufactured either by local subsidiaries of United States firms or by local companies licensed by United States firms. Production Most component parts of air conditioning and refrigeration equipment are manufactured domes- tically. Parts which are imported include com- pressor units, thermostats, and some copper tubing. For use in manufacture and assembly, the industry imported in 1957 some |4.5 million worth of com- pressors, parts, and accessories. At present, the industry is somewhat short of steel plate for equip- ment bodies. However, this shortage is felt by industry as a whole and the Government is improv- ing the situation by importing steel plates to supplement the production of Coynpanhia Siderurgica Nacional. The plastics industry supplies dials, interior lin- ings, shelves, drawers, knobs, and similar com- ponents. Insulating materials are also locally produced. Electric motors are manufactured by the firms themselves or contracted for with local motor manufacturers . Only one manufacturer of package air condi- tioners advertises that the complete compressor unit "with motor" is imported from the United States. Because exchange regulations and heavy import duties usually make the cost of imported motors prohibitive, most manufacturers prefer the local product. The main producing area for commercial and in- dustrial refrigeration equipment is the city and state of Sao Paulo, but Rio de Janiero and Porto Alegre also do some manufacturing. In the field of commercial refrigeration, the location of the princi- pal producing areas has strongly influenced con- sumption, mainly because only in those areas are proper installation and servicing facilities readily available. Commercial refrigerating units, such as ice cream cabinets, beverage refrigerators for restau- rants and bars, and display cases, may he installed in other cities, either by manufactvu'ers' representa- tives or bj^ local firms. However, local firms cannot always guarantee proper installation and servicing. Throughout the country are a number of re- frigeration "technicians" who are usually only mechanics having limited knowledge of refrigeration eciuipment and who may be unable to install or service properly a commercial refrigerator. Local sources advise strongly against the employment of these "technicians" and state that in the long run the cheapest and speediest way to insure proper servicing and installation is to have it done either by the manufacturer or by firms he recommends. Projects are under way which should insure a steady supply of electric power for the industry. The Sao Paulo industrial area, which at present is short of electricity, will receive additional power this year when operation of two new thermoelectric plants begin. New installations in Sao Paulo and Minas Cerais will also contribute considerably to a larger supply of electric power. At present, labor is in adec[uate supply. Tech- nical know-how is supplied by foreign technicians or by Brazilian nationals trained abroad. Local labor is easily trained and skilled labor is available. Foreign capital is involved to a large extent; about 80 percent of the total industry is controlled by subsidiaries of foreign firms or firms having foreign participation. The Government does not subsidize the industry, but stringent exchange and import regulations protect it. Channels of Distribution Every major city has an appliance store, which is either a representative or an agent for a manu- facturer. One company, for instance, has named distributors in every major city. Distributors may cover a given area and also name subagents. 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B \ \ \ \ \ \ \ \ \ \ \ : s !;;:;;::::; 1 O .1111 1 <■> 1 1 1 1 1 1 1 t 1 1 1 I -o 1 ! 1 1 1 1 1 ; 1 1 1 : i 1 : ; 1 ! : j : 1 I ; i "s^ i i : i : : ; i ; i i : as :::;;:; i ; 1 i 1 O tifi 1111 I '^-2^ 1 1 ! 1 1 I I 1 1 ! : 1 "^ S ! 1 I I I I 1 I 1 I I 1 "^ "S I 1 I I 1 1 I I 1 I I ; 11 ; i ;:;;;; i i : : a-" : : 1 ; :a : : ; ; ; I (^ [/■ 1 1 1 1 . o 1 I 1 1 ^ -Si^ a.s g S5j >,§-o:s 1'" 3 ^ i 10 i service the equipment. In large cities such as Rio de Janeiro, Sao Paulo, Belo Horizonte, Recife, and Porto Alegre, a single manufacturer may have more than one authorized distributor. Consumption The entire production of air conditioning and re- frigeration equipment is consumed within the country. Package air conditioners vary in price from $325-1615, and commercial installations aver- age around $2,530 per 5 hp unit. Central systems may cost anywhere from $87,000-1217,000 or more, depending on their capacity. Commercial re- frigerators and display cases, freezers, ice cream freezers, etc., are priced according to capacity. Commercial refrigerators range between $455- $1,475; display cases, $880-$l,212; freezers, $527- $780; and ice cream batch freezers sell for $1,655. Air Conditioning Equipment. — Package air condi- tioners are used in residences, offices, and small shops. Demand is now far above production and is expected to increase. Commercial and central air conditioning systems are installed on contract. Consumption trends are upward in all categories. In the Rio de Janeiro business area, several buildings already have central air conditioning systems and many buildings under construction will be so equipped. Many pharmaceutical plants, hotels, theatres, movies, banks, factories, and stores are already consumers of central plant systems. Refrigerating Equipment. — Commercial refrigera- tors are used by enterprises such as supermarkets, butcher-shops, fish dealers, bars, restaurants, pastry shops, hospitals, and hotels. Refrigeration e(}uip- ment is used in breweries, food processing plants, chemical plants, ice plants, and cold storage ware- houses. Consumption of refrigeration equipment may be expected to expand along with the present increase and improvement of electric production and distribution systems. Installation and servicing facilities should improve as the use of refrigeration becomes more common. Foreign Trade Imports of completely assembled refrigerating and air conditioning units were negligible in 1957. Equipment has not yet been exported because pro- duction is as yet insufficient to supply the domestic jnarket. Import duties on air conditioning and re- frigeration are as follows: 120 percenfad valorem; 5 percent surcharge; 1 percent port improvement assessment; and 5 percent of the marine freight charge (if shipped by sea) . Market Potential and Investment Oppor- tunities No restrictions are imposed on direct investments by foreign companies, or on local capital participa- tion. Laws regulating foreign investments offer some advantages to investors desiring to transfer ecjuipment for entire plants to Brazil. However, import tariffs must be paid on the eciuipment, unless otherwise exempted by a specific law. Joint par- ticipation with local capita] has been successful in many industries. The market for air conditioning and refrigeration equipment is growing. It expands with the growth of electric power supply, with a rise in personal in- come, and with population increases. As the elec- tric power lines reach into more remote areas, consumption will naturally increase. Existing firms will doubtless expand their production capacities, but new investment still appears profitable. 11 Colombia Demand continues strong for refrigeration units in Colombia. These are now being produced by several firms who import certain parts, such as compressors and condensers. Production of air conditioning units is limited. An expanding market is expected for refrigeration and air conditioning units. However, the future market for completed American-made units appears poor. Participation by United States firms in the local air conditioning- refrigeration industry could l)e increased through licensing arrangements with the local firms or through the sale of parts. Production Three large and several smaller plants manu- facturing household and commercial refrigerators have been operating since the latter part of 1956. The largest plant in Bogota, Industria Colombiana de Artefactos {ICASA), now produces commercial .units on a large scale. By late 1959, the firm ex- pected to double its plant size to 10,000 sciuare feet, increase production, and begin production of air conditioners, stoves, automatic wringer washers, and perhaps other related items. The company also plans to in.stall its own enameUng facilities. Several small producers of stoves, hot water heaters, etc., now send their enameling work to Industrias Metalicas ij Es7naUcs de Colombia, Ltda., a Bogota plant specializing in enameling. A second appliance plant in Bogota, Industria Centrales de Acero (INDUCERO), produces, on a large scale, such units as water heaters, gas stoves, kitchen cabi- nets, and sinks. The plant was recently expanded and modernized, and no plans for further expansion are reported. However, the firm is considering the assembly of American-designed air conditioners. Other firms are Industria dc Refrigeracion {ACECOL) Ltda. and Nestor Moseres (Friotechnico) Ltda. of Barranquilla. Both firms produce com- mercial refrigeration units on a modest scale, and the latter company assembles some package air conditioners. Another firm is the Industria de Refrigeracion Commercial {INDUFRIAL) Ltda. of Cartagena, which produces a small number of commercial refrigeration units. Among the new firms expected to enter the ap- pliance industry are: General Electric International, which is planning to begin building a large plant this year, probably in Bogota, eciuipped to produce an extensive line of refrigerators, air conditioners, washers, and perhaps other related appliances; Cocinas y Neveras de Colombia {CONDESA) S.A. of Bogota, which has been negotiating with various United States firms for licensing arrangements; and The Centro Electro Mecanico San Diego {Industria Salman) Ltda. of Bogota, which now produces stoves and water heaters on a small scale and expects to expand its operation and manufacture other apphances as yet unspecified. Most new appliance manufacturing firms appear to prefer Bogota as the site for their plants. In- dustry spokesmen point out that the area is the best source for technicians and semiskilled labor (average monthly wage: $50 for laborers, plus fringe bene- fits), has adequate power facilities, is the largest single local market, and perhaps most importantly, is the site of the Government, customs, and import offices, where top management personnel conduct daily business. Air Conditioning Equipment. — Production has been limited to a few package units {^4 and 1 ton), assembled by a firm in Barranquilla. Central plant units are not produced locally. Two firms expected to begin an assembly-type operation for package air conditioners, manufacturing a few parts, by the end of 1959. Refrigeration Equipment. — Few refrigeration parts are produced locally, except those used by the plants in their own production. Rubber gasket-lining material and other rubber parts are made by do- mestic rubber plants, and many plastic parts are now being manufactured by independent factories. Metal shelves, ice trays, and similar items are being made by refrigerator-producing plants. Commercial refrigeration units, such as bottle coolers, reach-in and walk-in boxes, and display cases have been produced locally by one large- and 12 one medium-size plant since 1956. Total output of all models (no data are available by unit types) is estimated at about 2,500 units in 1957 and 4,000 units in 1958. Although several types of common commercial refrigerators are manufactured locally, bottle coolers account for most of the production. With the advent of severe Government import restrictions on all completed units and on many unassembled parts, several firms in 1958 began manufacturing units from basic materials of sheet steel, copper tubing, insulating material, thermo- static valves, and finished compressor units. Channels of Distribution Distribution is usually made from the factory directly to retail outlets, or to a few wholesale organizations, all of whom receive the same discount and are expected to sell at the same retail price. Consumption Consumption of refrigeration and air conditioning units has been limited largely to local production since 1955, when importation of all household ap- pliances was sharply curtailed. The Government insisted that such appliances could and should be made locally, even though costs of locally produced units would be higher than for the imported equivalent. Manufacturers and assemblers are selling all they can manufacture. Production is expected to meet demand in 1960, when local demand should be ap- proximately 10,000 commercial refrigerators and units and 7,000 package air conditioners. Accord- ing to a private industry study, estimated consump- tion in 1965 will be: Commercial refrigeration, 20,000 units; package air conditioners, 32,000 units. About 25,000 commercial refrigeration units and 11,000 package air conditioners are now in use in the country, according to estimates based on import figures. Foreign Trade Import duties on commercial refrigeration equip- ment were the same in 1958 as 1950, according to Anuario de Comer do Exterior de 1954-1957 = 2 centavos per gross kilo plus 6 percent ad valorem. The same rate applied to air conditioners in 1950, but the percentage rate dropped to 3 percent in 1958. Ac- cording to reliable sources, the Government is plan- ning a new import list which may lift/ the restrictions on refrigeration and air conditioning units. It is even possible that future imports will be controlled through tariffs only. No refrigeration or air conditioning units are ex- ported. Prices of locally manufactured products are considerably higher than their imported counter- parts. However, a Colombian-Ecuadoran trade commission met recently to discuss the possibility of increased trade between the two countries, and Ecuador reportedly included locally made re- frigerators in the list of desirable trade commodities. Market Potential and Licensing Oppor- tunities Future sales possibilities for refrigeration and air conditioning units appear poor. With a tariff, the higher price imposed on United States products keep them from competing with locally made units. However, a market for American products exists through the use of licensing, subsidiaries, and similar arrangements between American and Colombian firms and through direct sale of parts and equipment such as compressors and tubing. Colombia: Imports of Air-conditioning and Refrigerating Equipment, 1954-57 [Qiian tity in gross metric tons; value m dollars] 1954 1955 1956 1957 Commodity and country of origin Q"antity Value Quantity Value Quantity Value Quantity Value No. 838-9 — Air conditioners not elsewhere specified, domestic and commercial: United States 246 12 427,407 15,696 73 8 180,796 2,814 20 34,228 1 11 2,277 30,351 Total 258 450 35 443,103 702,943 48,523 81 314 84 183,610 472,765 153,881 20 1,034 10 34,228 1,762,155 20,017 12 333 12 ,32,628 No. 839-5 — Other refrigerating equipment: United States 753,634 Other countries... 27,905 Total.. . 485 751,466 398 626,646 1,044 1,782,172 345 781,539 Source: Anuario de Comercio Exterior de 195i-1957s 13 France Production Air Conditioning Equipment. — The manufacture of air conditioning eciuipment in France is com- paratively new. Household units are made by two or three manufacturers, but a considerably larger number of manufacturers specialize in industrial and commercial units. However, most of these also produce heating equipment, fans, blowers, and the like. In 1956, about 3,500 household air conditioners were sold; in 1957 production and sales rose to 9,800 units. Exports totaled 90 percent of produc- tion for both years, going principally to the French Overseas Territories. New types of more powerful household air conditioners adaptable for use in desert climates have been developed, and both production and demand are continually increasing. Refrigerating Equipment. — Approximately 70 firms manufacture commercial, industrial, and house- hold refrigeration equipment. Production of commer- cial refrigeration units totaled $19.4 million in 1956; and $21.4 million in 1957, when 55,000 units were produced. Industrial refrigeration production to- taled $9.1 million in 1956 and $10.0 million in 1957. Since the beginning of 1959, the refrigeration equipment industry has slowed markedly. Consumption Air Conditioning Equipment. — The market for household air conditioners is small because of the moderate temperatures, and to some degree, the high cost. Production has increased as a result of an ever-growing demand in the Sahara region. The perfection of new techniques has stimulated the introduction of air conditioning equipment on ships, trains, offices, hospitals, and theatres. Although sales of industrial air conditioning equipment have increased, the field is still insufficiently exploited. Air conditioning equipment is usually sold by the manufacturer direct to the user. Prices range from $400-$500 per unit. Refrigeration Equipment. — Sales of industrial re- frigeration equipment, though they have increased in the past few years, are still considered insufficient in agricultural areas. Only about 5 out of 100 farmers have their own refrigeration equipment, and only 10 out of 100 slaughterhouses are equipped with refrigeration systems. The refrigeration in- dustry, as well as Electricite de France, is making special efforts to promote sales by sponsoring and financing extensive advertising campaigns. Up to December 31, 1958, the Ministry of Agri- culture granted a subsidy of 20 percent of the price of refrigeration equipment in addition to the 15 per- cent discount previously granted to purchasers of all types of agricultural material. However, in order to be eligible for the 20 percent subsidy, the refrigera- tion equipment purchased had to be manufactured in France, of the compression type, and specially designed for milk refrigeration. In addition, ac- cording to the Ministry of Agriculture, to obtain the 15 percent discount, the applicant had to satisfy the Government that he did not possess sufficient financial means of his own, and that the equipment was necessary for the improvement of his business. Such benefits were cut in 1959. The use of food preservation equipment has in- creased greatly in the last 10 years. The trans- portation company Societe de Trans'ports et Entrepots Frigorifiques transported in 1957 approximately 1 million metric tons of fresh food, fruits, vegetables, meats, fish, and dairy products. This company owns 2,900 refrigerated rail cars, 1,400 isothermal insulated rail cars, 250 refrigerated semitrailers, and 240 refrigerated tank cars. Considerable progress has been made recently in truck transportation of perishable products. All isothermal and refrigera- tion conveyances are s^ystematically tested in ex- perimental stations, and their quality is reported to be excellent. The market for industrial refrigeration is seen in the 140 pulilic or semi-public refrigerated warehouses having a total capacity of 670,000 cubic meters, and in the 520 ice-producing plants whose annual pro- duction of ice amounts to 1,300,000 metric tons. In 1939, the capacity of cold storage rooms had amounted to only 550,000 cubic meters. Refriger- 14 ators and refrigeration equipment are normally distributed through "concessionnaires," who handle a single brand, and through about 15,000 retail outlets. Costs of steel, the prime component of a re- frigerator, and costs of energy (coal, water, elec- tricity') compare with German figures. The "Turn Over Value" (TVA) tax is not a factor in competi- tion with German refrigerators, because the TVA tax is added to the price when they are imported. However, a French-made refrigerator exported to the (Overseas Territories franc zone) is not assessed the TVA tax, thereby gaining an advantage. Using the official rate of exchange, economists re- ported the average 1955 hourly wages for the iron and steel industry, including all charges, were 8-1 cents in France and 83 cents in Germany. Average wages, including all charges, in all manufacturing industries were computed for October 1956, using the free market rate of exchange to reflect actual purchasing power, at 72 cents for France and 73 cents for Germany. The total proportion of na- tional income taken by the state in the form of taxes and charges of all kinds appears approximately equal in France and Germany. In France, a very high proportion of such taxes and charges are passed on to the consumer through the TVA and excises, and therefore are not a direct burden on the manu- facturer. In the light of the above considerations, the French industry under the Common Market arrangement will apparently not be at any particular disadvantage, and its prices should be competitive. Imports The J ournal-Officiel indicates that restrictions have not been lessened on imports of refrigerators and subassemblies from the Common Market countries, except for compression-type refrigerators, nor have imports of air conditioners been liberalized. Liberalization has not been extended to United States imports of air conditioners or refrigerators. Air Conditioning Equipment. — Imports of air conditioning equipment were as follows in recent years : Franc zone (Overseas Other Territories) countries 1956 $5,508 $501,046 1957 371 1501,734 Jan.-July 1958 26 2 283,929 ' Includinf? $189,656 from the United States. = Including $191,575 from the United States. Self-contained air conditioners are imported principally from the United States, Belgium, Luxembourg, and Sweden. In addition, air hu- midifiers and air filtering and purifying ecjuipment are imported from the United States, Germany, and the United Kingdom. Imports of both re- frigerators and air conditioning ecjuipment consist mainly in processes and patterns for manufacturing under license. Some parts and subassemblies are imported, principally from the United States and Great Britain. The minimum import duty rate applying to the United States for all air conditioning and refrigerat- ing eciuipment, except for "furniture and installa- tions incorporating a refrigerating unit," is 18 percent ad valorem. The excepted category is assessed a 15 percent duty. All ^ir conditioning and refrigerating equipment is subject to a 25 per- cent sales tax based on c.i.f. duty-paid value except for nonprofessional installations of 300 liter and less capacity. These are subject to a 30 percent sales tax. In addition, a 3-percent customs stamp tax is imposed, based on total customs charges, e.g. 18 percent ad valorem X 3 percent. Import licenses are required. Refrigerating Equipment. — Before World War II, most refrigeration equipment sold in France was imported. Owing to the shortage of foreign ex- change, the Government exercises strict control over imports of refrigerating equipment. Imports of refrigeration equipment, subassemblies, and parts, probably including household refrigerators, are shown below: Franc zone (Overseas Other Territories) countries 1956 $23,276 $1,909,6.56 1957 23,270 2,364, .541 .Jan.-July 1958 3,691 460,000 Included in the 1957 total was $937,349 in value imported from the United States. France imports refrigeration equipment chiefly from the Ignited States, Germany, and the United Kingdom. Exports Exports are limited principally to the overseas territories because of the high price of the equip- ment. Exports of refrigeration equipment, sub- assemblies, and parts (probably including household refrigerators) in recent years are shown in the follow- ing tabulation : Franc zone (Overseas Other Territories) countries 1956 $5,827,731 $567,580 1957 8,800,164 '490,803 Jan.-July 1958 9,356,073 272.3^003 1 Including $3,192 to the United States. 2 Including .$1,174 to the United States. 15 Exports of self-contained air conditioners were as follows : Franc zone (Overseas Other Territories) countries 1956 .1513,531 $505,086 1957 1,090,233 467,631 Jan.-July 1958 1,190,169 290,465 France exports air conditioning equipment, chiefly to Algeria. Air humidifiers, dehumidifiers, and filters are exported to Belgium and Luxembourg. Market Potential It is not expected that activation of the Common Market will bring about important changes in the French industry. Production and demand for air conditioning and refrigeration eciuipment is con- tinually increasing. The limited use of refrigera- tion in agriculture, food preservation, and trans- portation indicates much room for expansion in its use. The present limited exports of air conditioning eciuipment, because of noncompetitive prices, can be expected to be overcome by improved manufac- turing methods and increased volume. The rising trend of living standards, the change from small to larger units, the introduction of supermarkets, and changes in marketing habits — all indicate a growing market. France : Foreign Trade in Air-conditioning and Refrigerating Equipment, 1956-58 [Quantity in metric tons; value in thousand dollars] Imports Exports Commodity and country 1956 1957 1958 1956 1957 1958 Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value No. 84 . 12 . 00— Air-condition- ing machines, self-contained, comprising a motor-driven fan and elements for chang- ing the temperature and hu- midity of air: 3 .35 169 5 161 341 1 34 253 Neg 190 312 Neg 1 184 514 336 1,090 569 1,671 United States Other countries. 125 421 299 505 254 468 234 546 Total- 207 507 288 502 125 422 483 38 1,019 82 590 109 1,558 242 803 14 2,217 No. 84.59.81— Aerothermic, aerorefrigerating, humidify- ing and drying units and similar appliances, self-con- tained, comprising a motor- driven fan and eitder a heat or cold exchanger or ele- ments for changing the hu- midity of air.i Franc zone 27 United States 34 60 159 234 42 55 163 184 175 303 356 665 161 369 5 13 Total 94 393 97 347 175 303 394 747 270 611 19 49 40 No. 84.59.82— Humidifiers and dehumidifiers:^ 94 United States 31 32 191 134 101 327 Total 63 2 45 395 325 4 87 649 150 5,656 421 No. 84.15.01— Refrigerators and refrigerating equipment, furniture and installations incorporating a refrigerating unit: Franc zone United States Neg 390 388 1 665 534 1 263 476 3 425 715 2,225 4,993 3,368 7,694 11,876 Other countries 56 112 152 303 792 1,186 Total... 778 1,200 740 Neg 1,143 Neg 442 740 2,281 35 5,105 56 3,520 72 7,997 107 6,448 84 13,062 No. 84.15.11— Furniture and installations designed to be fitted with a refrigerating unit: 135 other countries. .... 203 226 305 327 274 336 20 39 3 6 30 43 Total 203 226 305 327 274 336 55 95 75 113 114 178 16 France: Foreign Trade in Air-conditioning and Refrigerating Equipment, 1956-58 — Continued [Quantity in metric tons; value in thousand dollars] Imports Exports Commodity and country 1956 1957 1958 1956 1957 1958 Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value No. 84.15.21— Refrigerating equipment with constituent elements, fixed on a common base or forming a group, compression type: Franc zone United States 6 54 139 22 98 265 6 49 96 18 189 184 2 68" 5 8 113 110 286 106 258 235 562 75 175 40 70 43 115 Total No. 84.15.22— Absorption- type refrigerating eq-jip- ment: 199 385 151 .391 70 126 185 33 461 78 146 43 328 / 86 278 64 677 135 United States 5 25 20 26 59 91 184 120 5 16 Other countries 51 18 19 14 17 17 27 Total No. 84.15.23— Other refriger- ating equipment: Franc zone 30 46 Neg 150 304 21 51 51 62 97 91 57 93 103 192 81 65 162 117 United States... 16 29 28 67 17 49 61 123 34 35 104 209 Total _.. No. 84.15.31— Parts and de- tached pieces: Franc zone 16 29 28 Neg 5 59 67 2 115 34 17 1 24 61 49 1 127 64 123 133 214 323 127 155 227 463 169 212 326 561 United States 22 11 3g- 16 Other countries 62 100 16 60 8 28 Total... 33 52 64 151 86 192 195 423 171 523 220 589 Neg — Negligible. 1 Discontinued as of 1/15/58. sAdded as of 1/15/58. Sources; Republique Francaise, Direction Generale des Douanes et Droits Indirects, Tableau Generale du Commerce Exterieur, Paris; Ministere des Finances et des Affaires Eco- nomiques. Direction Generale des Douanes et Droits Indirects, Statistique Mensualle du Commerce Exterieur de la France, Paris (1958). 17 French West Africa The market for air conditioning and refrigeration equipment in French West Africa is fairly important and growing. The use of such equipment, which was minimal before World War II, has increased substantially in the last 10 years. One factor ac- counting for the increase has been the generally warm year-round climate. For example, in Dakar the annual mean temperature is 80.6° and the humidity 77 percent. A dry season lasts from mid-November through May, and a rainy season, called "hivernage," from June through October. The dry season is usually not unpleasant, but during the rainy season both the temperature and hu- midity are extremely high, and the atmosphere is sticky and enervating. Another factor is that the standard of living of the European residents has improved. Most resi- dents are Government officials and employees of large companies, often assigned to the country for several years. Thirdly, the large companies and the French and African Governments now recognize the need to offer more comfortable offices and dwellings to their employees, particularly their executives. Finally, industrialization has increased, mostly in plants w^here refrigeration is part of the manufacturing process. Channels of Distribution Equipment is imported by some large companies, whose operations involve wholesale and retail out- lets. In addition, some importers sell to retailers and users. Consumption No air conditioning or refrigeration equipment is produced or exported. All requirements are im- ported. Therefore, consumption about equals im- ports. The principal items in use are room air conditioners, and an estimated dozen or more central-type units located in some of the larger stores in Dakar and elsewhere; refrigeration equip- ment for ice and cold-storage plants and for food processing and preservation; and commercial I'e- frigerators. The principal consumers of air conditioners are the Government; the large companies, for their offices and the dwellings of their employees; stores; and individuals. Commercial or industrial de- humidifiers are used by large companies in their warehouses and by some food-processing plants, such as flour mills. Consumers of refrigeration equipment are ice plants, cold-storage plants, food- processing plants, meat wholesalers, butcher shops, grocery stores and food departments of variety stores, hotels, ice-cream parlors, cafes, and pastry shops. Imports of room air conditioners are not expected to increase much because construction of homes and apartment buildings has slowed down. However, refrigeration equipment demands should increase substantially because a backlog still remains to be filled. Accurate estimates are not available on the French West Africa: Imports of Air Conditioning and Re- frigerating Equipment, 1956 Commodity and country of origin Units Metric tons Value (dollars) No. 192410— Refrigeration appliances: United States 4,074 4,348 501 516 875 Other countries..- 753 Total 8,422 69 48 1,017 10 7 1,628 No. 192420— other refrigeration appli- ances: United States . 34 17 Total 117 17 7 36 61 No. 192490 — Parts and spare pieces of appliances: United States 23 71 Total 43 195 37 94 No. 192500— Group listing, all aerother- mal appliances: United States 487 90 Total 232 1 1,718 577 No. 192600— Other thermal machines and appliances: United States 2 2,685 Total 1,719 2,687 Source: Statistiques du Commerce Exterior de L'A.O.F. 18 French West Africa: Imports of Air Conditioning and Re- frigerating Equipment, 1957 Commodity and country of origin Units Tons refrigerating capacity Value (dollars) Air-conditioning units: United States N.A. N.A. N.A. 69 16 N.A. 2,994 1,318 476 320 105 80 20 539 138 116 50 18 15 14 4 15 N.A. N.A. N.A. N.A. N.A. N.A. N.A. 236.5 33.2 N.A. 20.0 4.1 N.A. 427.3 174.5 70.1 62.4 9.0 8.5 3.6 67.1 32.2 14.0 3.4 1.4 1.5 1.0 2.9 24.8 16.9 15.8 N.A. N.A. N.A. N.A. N.A. 475,000 France - _ 93,686 224 Commercial and industrial dehumidifiers: 40,524 8,386 Denmarli _ , _ _ 938 Commercial refrigerators, including house- fiold freaoh-in, walls-ins, display case, etc.): United States _. _ _ __. 687,095 United Kingdom 215,876 Sweden _ _ 87,424 109,890 West Germany 15,214 Switzerland 12,652 Denmark Miscellaneous refrigerating equipment. 5,881 122,005 West Germany France - - 49,938 25,100 Denmark _ _ 5,019 2,148 United Kingdom 1,890 Sweden > 1,148 Refrigerating ecjuipment, compressor ca- pacity, 10 horsepower or more: 2,857 Refrigerating equipment spare parts: 22,229 47,495 France 29,852 6,252 Denmark. United Kingdom _ Switzerland - Sweden 6,186 3,010 467 419 N.A. — Not available. Source: SMtistiques du Commerce Exterior de I'A.O.F. quantity of air conditioning and refrigeration equip- ment in use. Service facilities are far from adecjuate because of the chronic shortage of qualified technicians and spare parts, which frequently must be imported after a breakdown has occurred. Furthermore, the charges for such service are extremely high. Whole- sale and retail prices are also abnormally high be- cause of distance from sources of supply, customs duties and local taxes, slow turnover, and excessive profit margins. Imports Import prospects for United States equipment exist and should continue. One limiting factor is the variable availability of Exportations Frais Accessories (incidental cost of exports) (EFAC) dollars, which can be used freely for imports in spite of the currency control regulations, and which are derived from the percentage of dollars exporters re- ceive from sales to the dollar zone (usually 10 per- cent). Some items, such as air conditioners, are considered in the "luxury" class, for which severe import cjuotas are set. Import duties for air conditioning and refrigeration equipment are fiscal 10 percent plus customs 5 percent. Market Potential and Investment Oppor- tunities The country lacks all the elements necessary to make an air conditioning and refrigeration industry successful, such as a high consumption rate, avail- ability of raw materials, and a qualified labor force. Therefore, the desirability of direct United States investment in such an industry, with or without local participation, is remote. 19 India The air conditioning and refrigeration industry in India was unorganized before World War II, and only after the conclusion of hostilities was produc- tion begun, stimulated by a gradual tightening of imports. Although the industry still depends on imports for some important basic raw materials and components, it has made considerable progress in the manufacture of less complicated parts, ma- chinery, and components. Production Production of air conditioners and refrigerators consists mostly of manufacturing simple parts and assembling them into complete units using imported parts and components, such as compressors and controls. However, manufacture of small equip- ment, mostly for domestic use, has increased in recent years. Package-type room air conditioners, up to 2-ton capacity, and water coolers are now manufactured to a large extent, except for such essential parts as the hermetic compressors, controls, and cooling coils. These are imported. Commercial refrigeration and air conditioning equipment of larger capacity is not produced on any organized basis, although attempts have been made during the last 2 years to erect such plants on the basis of local manufacture of some parts and accessories, and the importation of compressors, controls, condensing units, and chillers. Production of room air conditioners and water coolers during the period 1954-58 was as follows (quantity in units and \\alue in dollars) : Air Conditioners Water Coolers Year Quantity Value Quantity Value 1954 720 272,160 Not available Not available 1955-- '- 876 331, 12S 760 319,200 1956.. - .5,824 2,201,472 967 406.140 1957 _ _ 6,983 2,639,574 1.390 583,800 1958 8,896 3,362,688 1,630 684.600 (Jan. -Sept.) Foreign manufacturers do not invest directly in the industry. However, Indian manufacturers have technical "know-how" arrangements with foreign firms, primarily American companies, for the local manufacture of complete equipment and certain essential components. The country is still dependent on imports of basic raw materials such as soft copper tubing, deep draw- uig quality sheets, and fiberglass insulation. How- ever, manufacturers have successfully used mineral wool and foam plastic as substitute insulation material. The industry depends almost entirely on imports of hermetic compressors, condensing units, chillers, thermostat control equipment, and certain types of coils. The Government recently granted an Indian firm a license to manufacture refrigeration coils in col- laboration with an American firm. The Govern- ment has also approved proposals for the manufac- ture of small compressors for room air conditioners. Domesticall^y manufactured components have in- creased in percentage of usage among the major manufacturers of air conditioners, between 65-88 percent; and in water coolers and refrigerators, between 60-75 percent. Channels of Distribution Manufacturers of air conditioning and refrigera- tion equipment have made two types of selling arrangements: the manufacturer appoints a sole selling agent, who in turn appoints distributors and dealers in various parts of the country; or the manu- facturer appoints agents or distributors by district or sells direct to consumers. In both instances the manufacturer pays either a commision, or a trade discount, and an over-riding commission on the sale of the equipment, through the selling agents or distributors. These distribution arrangements are also followed by producers in foreign countries who sell their products in India. However, the amount of the commission paid by such producers may vary. Consumption No official estimates are available concerning present annual consumption. However, the Plan- ning Commission estimates that by 1960-61 the 20 I country would annually require the following- quantities of equipment (in units) : Package-type room air conditioners 24, 500 Central air conditioners 1,700 Ice making machinery 50 Cold storage plants 35 Commercial refrigerators 2, 300 Import Duties Air conditioning and refrigeration equipment is suljject to a 10-percent ad valorem import duty. No import licenses are granted for complete unit or packaged-type air conditioners. However, import licenses are granted for parts of air conditioners. The quota for each established importer is 23^2 PPi'- cent of the ^-alue of his base-period imports of com- plete units. The importer is able to select as his base-period any fiscal year between April 1, 1945 and March 31, 1956. Because the quotas are granted on a 6-month basis, only one-half the value of an importer's base-year imports is considered in the calculation of his ciuota. The import quota for other refrigeration and air conditioning machinery (except cabinet-type refrigerators) is 5 percent of the importer's base-period imports. No import licenses are granted for complete cabinet-tj^pe refrigerators. However, import li- censes are granted for parts of refrigerators. The quota for each established importer is 66f percent of the value of his base-period imports of complete refrigerators. Base-year and quota-calculation criteria are the same as for air conditioners. Exports The country exported 161 package type room air conditioners, valued at approximately .158,317, to Pakistan and Aden during the 22-month period beginning January 1957. This insignificant quan- tity of exports is primarily because several leading manufacturers who have collaboration agreements with foreign firms are, under the terms of their agreements, precluded from exporting their products. Secondly, the domestic demand for these products is so heavy that few manufacturers are inclined at present to explore new markets. Market Potential and Investment Oppor- tunities A natural local market exists for air conditioning and refrigeration eciuipment, and since World War n the people have become more and more air con- ditioning conscious. Although only a few homes have air conditioning in any form, industrial and commercial applications continue to increa.se. Resi- dential and industrial air conditioning and re- frigeration will undoubtedly increase considerably in coming years because of the gradual improvement of economic conditions, and a greater need for climate control. Prospects are excellent for the local manufacture of air conditioning and refrigerating efiuipment by United States companies, in collaboration with domestic interests. Consumers have always shown a marked preference for American equipment. However, the Government does iivot favor mere assembly operations, and interested firms would be required to enter into firm commitments regarding their programs of production. Proposals from foreign firms will be considered favorably onlv if they involve production of eciuipment and com- ponents not presently manufactured in India. The following excerpts are quoted from the Bombay Free Press Journal of April 7, 1959: Shre Fazal D. Chinoi, President of the Refrigeration and Air Conditioning Trades Association, Appealed to the Government for the Liberalization of imports of essential components by the refrigeration and allied industries. Basicoly the Association comprises manufacturers and as- semblers, engineers and contractors, importers and retailers, in- cluding service and m.aintenance personnel. There has been an encouraging progress of indigenous produc- tion of air conditioning equipment. The year under review (1958) has been one of great hope to the future of our industry. Dependence on the import of finished goods has given place to indigenous production. We have today about ten (10) different groups of manufac- turers of air conditioners of various capacities in the country. . . . We have the manufacture of industrial air conditioning plants, water coolers, bottle coolers, walk-in coolers, ice cream cabinets etc. It has not yet been possible to assess the total and in- stalled capacity of these items and also their actual production individually. ... it can be roughly estimated that 80 percent of the com- ponents including centrifugal fans, chillers, air ducts, cooling towers, condensers, cooling coils, motors, etc. are being made locally and the remaining 20 percent of the components which are to be imported cover compressors and controls such as thermostats, relays, etc. The total turnover of all these locally manufactured items may roughly be estimated to be on the order of ten crores. . . . the demand and supply position is thoroughly unbalanced today. Even the established industries have not been able to produce to their full installed capacity, due to their short-supply of raw-materials needed by the industry which is caused by acute shortage of foreign exchange. The vital component that is needed to be imported for the manufacture of refrigeration and air conditioning equipment is the compressor, open or sealed type. Unless and until compressors 21 are being manufactured in the country, we cannot hope to achieve acute shortage of trained personnel responsible for maintenance self-sufficiency in the field. ... I understand that two firms, one and service of equipment is being felt. in Bombay and another in Calcutta, have been given license It may be that demand upon production at present is so great under the Industrial (Development and Regulation) Act, 1951, that the supply is not adequate to the demand. But for the manufacture of compressors for domestic refrigerators and the pendulum should swing as far in the other direction, sooner air conditioners for the capacity of about 4,000 units each. or later; and we may enter a time when our productive capacity While rapid progress is being made in the field of manufacturing, would be much more than we could actually digest. 12 Italy Production Unitary Air Conditioners. — Production of package air conditioners in Italy has grown slowly but steadily in recent years, reaching an estimated 2,000 units in 1958. The process has been partly the fabrication of the outside metal covering for such units and assembly using imported compressors, and partly complete fabrication. The two major producers, both located in Milan, are Ercole Marelli and Compania Generale Elettrica (CGE). Central Plant Air Conditioning Equipment. — The industry received orders for some 45 new marine air conditioning installations in 1958, including an un- known number for ships under construction in foreign yards. Almost all components for marine air conditioning are manufactured in Italy. Growth has been steady in the newer field of centrahzed air conditioning of Iniildings, which has developed only within the past 5 years. In this period, the largest producer, Marelli, completed 31 installations involving a total of 8,243 rooms. Although some individual parts for compressor elements and control instruments may be imported, producers are now thought to be able to manufacture locally almost the complete system. The principal producing firms in this field are Ercole Marelli, Aster and Termonova in Milan, De Micheli in Florence and Termomeccanica lialiana in La Spezia (naval air conditioning, fabricator of centrifugal com- pressors) . Refrigerating Equipment. — The Italian refrigerat- ing equipment industry is well developed. So far as known, almost all standard types of refrigerating equipment are manufactvu'ed locally. The major producers are Termomeccanica ItaUana in La Spezia and Soc. lialiana Pompe e Compressori Worthington in Milan. At present, production of central re- frigeration systems is equally divided between those for use in naval and land-based installations — the latter mostly in cold storage and quick freezing plants, ice-making plants, and plants processing chemicals at low temperatures. Commercial Refrigerators and Freezers. — Produc- tion of commercial type and domestic refrigerators reportedly reached a new high in 1958, totaling about 450,000 units, compared with 400,000 in 1957 and 320,000 in 1956. However, one manufacturing source estimates the 1958 total at 4iot more than 400,000 units. Local sources report that approximately 180,000 compressor units (sealed type) were imported an- nually in 1957 and in 1958. Therefore, apparently half the production of commercial and household refrigerators represents fabrication and assembly using imported compressor units and half complete fabrication. This proportion will probably change radically in the next several years as production of sealed-unit type compressors under American license expands. Until now Italian production of re- frigerator compressors has reportedly been confined pretty much to units of 1 horsepower or less. In the next 2 or 3 years, the country is expected to be able to satisfy almost all its compressor requirements from domestic production. No data are available on production and consump- tion of commercial-type refrigerators. Almost all types are fabricated in Italy, using mostly compressor units imported from the United States. Wage Scales L'nder the sliding-scale system in effect, wage rates are tied to the retail price index. In the mechanical industries wages increased 8 percent between July 1957 and August 1958. Reportedly, average hourly earnings of workers in the metal- mechanical and transportation industries as of April 1958 amounted to 241.03 lira (US $0.39). These industries include foundries (2" fusione) ; various mechanical establishments; electrical machinery and equipment; and vehicles and transportation equip- ment. The above hourly rates do not include vacation and holiday pay, bonuses, family allow- ances, and other supplemental benefits that amount to approximately 65-70 percent of basic wages. Social security contributions, almost wholly payable by the employer, are over and above the "take home" pay and represent an additional cost to the employer 23 that is eciiiivalent to about 75 percent of the "take home" pay. The above wages are the minimum established under the national labor contract. Most leading firms in the Milan area pay higher wages — from 10-20 percent of the basic rate — to skilled workers in order to retain their services. Channels of Distribution Distribution of package air conditioners is handled normally through retail stores, but some of the lead- ing manufacturers (CGE, Marelli, Electrolux, Sie- mens) also operate their own retail outlets. For the most part, wholesale distribution is handled by the manufactui'ers themselves (or by an exclusive import agent in the case of imported products) chrect to authorized retail stores. Authorized sales agents as well as domestic manufacturers offer complete servicing facilities. Sales of air condi- tioning systems, industrial refrigeration eciuipment, and commercial refrigerators are made direct from producers or importers to consumers. Consumption Air Conditioning Equipment. — Current annual consumption of package air conditioners is estimated at about 3,500-4,000 units, of which 2,000 are pro- duced domestically and 1,500-2,000 are imported. Consumption has been increasing slowly, and trade sources do not expect any dramatic expansion be- cause of the relatively high price of such units (.S320 for a ^i hp. unit), the high cost of installation, and high operating cost. Sash windows are rare, French windows being the rule, so considerable alteration is recjuired for satisfactory installation of Avindow air conditioners. The fact that electricity costs three to five times as much in Italy as in the United States puts the use of household air condi- tioners in the "luxury" class. However, the use of self-contained room air conditioners in restaurants and coffee bars is growing, and consumption is ex- pected to expand steadily. The largest number of centralized air conditioning systems, 15 in the past five years, were for new office buildings, mostly in Milan, and 12 were in new hotels located throughout Italy. The remain- ing installations were for three new telephone exchanges and a hospital. Other end-uses were in large department stores, movie theaters, and deluxe confectionery stores. Demand from industrial firms for the air conditioning of factories and laboratories is expected to increase steadily. Refrigeration Equipment. — The principal consum- ers of refrigeration ecjuipment in Italy as in other countries, are shipyards, the canned food industry. slaughter houses, cold storage warehouses, and the chemical industry. Sales declined 20 percent in 1958, after several years of sharp increases in de- mand — about 20 percent annually. Part of the decline was attributable to a temporary slowdown in capital investment by private industr3^ Con- tinued steady growth is expected now that increased emphasis is on commercial refrigeration and proc- essing of fruits and vegetables in order to take fullest advantage of the European common market. Increases in commercial refrigerator sales have also been influenced by "self service" in food marketing. Prices are reportedly high by American standards. Manufacturers' retail prices for commercial re- frigerators on December 20, 1958, were as follows — wholesale prices being 10-15 percent below retail prices : Commcrcia], reach-in type Reco7ii mended {liter size) retail price 400 $4.35 600 503 900 653 1,200 734 1,500 789 2,000 870 2,500 1,0.34 3,000 1,251 Display cases {meter leneilh) Glass enclosed Self-service 2 $1,040 $1,152 2.5 1,168 1,373 3 1,360 Import Duties Tariff No. General Conventional Temporary Take Loue.il Rat 84.15 c-2 Complete refrigerators {refriger- ated cabinets, tanks, refriger- ated benches, refrigerating dis- play windows, refrigerated fountains, and the like) weigh- ing per unit: (a) over 500 kg 45 80 18GATT 22 GATT 16 (b) 500 kg or under 20 84.15 c-1 Insulated refrigerator cabinets (not fitted with their refriger- ating equip.), isotherniic fur- niture, ice cream freezers, and the like 35 23 GATT 21 84.15 a Rcfrigerative units of which the constituent elements are fixed on a common base: (a) compressor type, weigh- ing per unit: (Dover 250 kg 45 18 GATT Switz 16 (2) 250 kg or less 80 22 GATT 20 (b) Other absorption, reab- sorption, evaporation. etc., types 80 22 G.\TT 20 84.15d Parts and detached parts of re- frigerators and refrigerating equipment, electrical and others . . .. 35 23 GATT 21 84.17 b Air heating, air cooling, humidi- fying and similar apparatus, comprising (in a single unit) a motor driven ventilator, a temperature changer, with or without filters, control de- vices, burners, humidifiers. 1. without refrigerating eqmpmen t 40 ! 18 GATT 24 Tariff No. 84.17 c Air conditioning units for the textile industry 2. with refrigerating equip- ment. _ Detached parts (heat exchangers, humidifiers, etc.) - General Conventional Temporary Take Lowest Rate 18 Switz 18 GATT 18 GATT Other Taxes on Importation: Sales or turnover tax=3 percent of duty paid value. Compensatory import tax on 84.17 b = 4 percent of duty paid value. On the others, 3 percent of duty paid and sales tax paid value. Application of above duties and taxes: CIF Value X lowest duty X 1.03 X 1.04 (if applicable ) X 1.03. Foreign Trade The only official statistics available on the Italian industry are those on foreign trade. These statistics are broken down into the following categories: Air conditioning units, with and without refrigeration equipment; complete refrigerators of all types; and eciuipment and components for refrigerators. Ac- cording to local sources, compressor units for air conditioners and refrigerators, the largest single item imported from the United States, are included m either "air conditioning units with refrigeration equipment" or "equipment and components for re- frigerators," depending upon mtended end-use. However, even the trade association {Associazione Nazionale Industrie Eldtroteche (ANIE), Milan) is unable to supply data or firm estimates on the number, type, and value of compressor units or other components imported. Further details on the composition of imports might be obtamed by analysis of export statistics of the United States and West Germany, the principal sources of air condi- tioning and refrigeration products. Italy: Estimated Capacity, Production, and Sales of Industrial and Commercial Refrigeration Equipment, 1958 [Value in SI, 000; 625 lire equals US $1] Capacity Production Sales .Standard power in F/h ' Number of complexes - Value Number of complexes - Value Percent domestic Percent foreign Freon: 10,000- 20,000-. 130 130 65 20 130 65 40 20 288 560 624 680 344 624 512 320 65 50 15 10 45 15 25 5 144 224 144 336 120 144 320 80 60 60 80 60 90 80 70 90 40 20,000- 80,000 40 80 000-170,000 20 170,000-500,000- 40 NH 3: 10,000- 30,000 .30,000- 70,000 70,000-250,000 10 20 30 250,000-800,000 . 10 Total 600 3,952 230 1,512 'F/h = 3.97 B.T.U./h. 2 Complexes include all material normally required for a central refrigeration installation, e.g. compressors, condensers, evaporators, valves, and tubing. Source: A major Italian producer of refrigeration equipment. Italy: Exports of Air Conditioning and Refrigerating Equipment, 1956-58 [Quantity in metric tons; value in Stl,O00| 195G 1957 1958 Commodity and country of destination Quantity Value Quantity Value Quantity Value No. 4235 — Air-conditioning without refrigerating equipment: Portugal Algeria Belgium-Luxembourg Spain Other countries 23 7 43 117 24 7 184 98 34 1 2 125 117 2 .3 136 29 2 4 2 48 82 5 9 3 144 Total No. 4236 — Air-conditioning with refrigerating equipment: Spain.. Argentina Yugoslavia Other countries 190 28 5 4 313 92 12 12 162 14 22 24 258 38 27 89 85 14 4 8 243 64 U 40 Total _ No. 4237 — Air-conditioning parts: Portugal.. United Kingdom... India Netherlands 37 2 1 2 116 3 4 7 60 2 1 54 24 154 2 87 46 26 37 31 115 61 142 Total 5 14 81 142 68 203 25 Italy: Exports of Air Conditioning and Refrigerating Equipment, 1956-58 — Continued [Quantity in metric tons; value in 31.0001 1956 1957 1958 Commodity and country of destination Quantity Value Quantity Value Quantity Value No. 4258— Complete refrigerators over 500 kilograms: Spain Cuba 125 10 14 44 215 26 30 84 2 13 45 47 46 6 35 42 112 106 16 51 40 88 34 Austria ___ Yugoslavia ___ Other countries- __ 50 48 169 Total No. 4261 — Compressor type refrigerating units over 250 kilograms: France _ 193 6 3 1 355 10 6 3 153 61 1 17 301 84 2 38 195 10 2 7 301 Yugoslavia. 18 Venezuela __. Other countries. _ 2 22 Total _ 10 5 10 1 19 3 3 2 79 3 2 7 124 4 9 11 19 2 I 3 42 Yugoslavia 20 Brazil ._ Other countries 4 10 Total. 16 8 12 24 16 41 Source: Slatistica del Commercio con Estera, Central Institute of Statistics, Rome. Italy: Imports of Air Conditioning and Refrigerating Equipment, 1956 58 (Quantity in metric tons; value in -SI. 000] 1956 1957 1958 Commodity and country of origin Quantity Value Quantity Value Quantity Value No. 4235 — Air-conditioning without refrigerating equipment; United States ._ 83 4 57 23 17 7 181 6 86 61 24 24 111 74 34 4 292 7 99 84 1 5 104 289 France... West Germany 47 41 17 10 59 156 Sweden.. 22 Other countries 39 Total.. 191 135 25 2 382 345 30 7 225 202 37 1 2 488 467 54 1 9 219 347 5 1 15 2 565 No. 4236 — Air-conditioning with refrigerating equipment: United States 889 22 Switzerland. 7 United Kingdom . . 66 7 Total 162 11 58 11 3 382 29 52 15 11 242 40 127 13 4 2 531 124 145 21 8 8 370 11 35 18 44 10 991 No. 4237 — Air-conditioning parts: United States... 37 West Germany 89 20 France... 39 Other countries . 34 Total... 83 2 7 6 2 107 5 20 10 2 186 23 4 306 48 9 118 9 7 8 7 219 No. 4258 — Complete refrigerators over 500 kilograms: 16 West Germany . . 10 United Kingdom. 13 Other countries. . 16 Total 17 12 1 7 48 37 33 2 14 64 27 36 36 57 129 64 31 21 9 3 55 No. 4261 — Compressor type refrigerating units over 250 kilograms: United States 69 Austria West Germany . ...... 25 United Kingdom... 7 1 Total No. 4263 — Other refrigerating equipment: United States .... 68 Negligible 5 17 14 1 113 Negligible 8 6 18 2 5 6 193 9 12 33 9 3 5 16 5 102 34 West Germany _ 8 Netherlands United Kingdom 11 23 Other countries 6 Total 37 34 11 21 38 82 Source: Siatistica del Commercio con Estera, Central Institute of Statistics, Rome. 26 Japan The Japanese air conditioning equipment and re- frigeration industry has increased its production tremendously in recent years. Production in num- ber of units in 1957 was more than two and one-half times that in 1956. Foreign investments, largelj^ of American origin, have been important in the de- velopment of the industrj^ These have been chiefly in the form of technological assistance contracts, but some equity investments have been made. Indica- tions are that the Ministry of International Trade and Industr}^ (MITI) may apiDrove fewer requests for foreign investment in the future, possibly re- flecting confidence in domestic technical competence. Domestic consumption of package and window- type air conditioning units has shown the greatest increase. However, high domestic prices undoubt- edly have inhibited sales. Currently the Govern- ment is not approving requests for use of foreign exchange to import household air conditioning, and any future increase in imports is unlikely. Imports of air conditioning and refrigeration ecjuipment, largely for industrial purposes, are from the United States and Western Europe. Equipment is ex- ported chiefly to Southeast Asia. Although domes- tic consumption of air conditioning equipment as a whole will probablj^ increase, the shortage of foreign exchange fenders unlikely-^in 'the absence of important new technological developments over- sea.s — any appreciable increase of imports in the near future. Production The principal producing areas are concentrated in Tokyo and Osaka, followed by Tochigi and Kana- gawa Prefectui'es. Most firms manufacture all major parts, such as compressors, and assemble the complete units. Items such as valves, thermostats, and some auxiliary apparatus are usually supplied by small subcontracting firms. Substantial increases in production were made during the period 1955-57. Until 1955, the manu- facturers used, to a considerable extent, imported parts, such as specific types of valves and thermo- stats, which were substantially superior to .lapanese grades. However, because of recent technical im- provements, domestic producers now account for almost 95 percent of total requirements of raw materials and parts. MITI's import approval is limited to specific parts of marine air conditioning and refrigeration equipment, the majority of which are used on ships built for export. Labor and power are in adequate supply. Foreign investments guaranteeing the right to remit future profits in foreign exchange must be ap- proved by the Government, under the provisions of the Foreign Investment Law. Postwar invest- ment of foreign capital began in 1949. Foreign investments in air conditioning and refrigeration equipment have been in three forms: Technological assistance contracts, acquisition of stocks and pro- prietary interest, and acquisition of claimable assets arising from loans. Foreign investments validated by the Government were as follows during the period 1949-58: Validated Foreign Capital Investment in Japan's Air Conditioning and Refrigeration Equipment Industry, 1949-1958 Technological Assistance Contracts 1. Date of validation. 2. Country of origin of investor. 3. Technique. Ishikawajima Jukogyo K. K. (Ishikawajima Heavy Industries Co., Ltd.) 54 Tsukudajima, Chuo-ku, Tokyo 1. March, 1953. 2. U.S.A. 3. Manufacture of ice-making machines. Mitsui Zosen K. K. {Mitsui Shipbuildi7ig & Engi- neering Co., Ltd.) Mitsui Bldg., Muromachi, Nihonbashi, Chuo-ku, Tokyo 1. December, 1953. 2. Switzerland. 3. Manufacture of rotary piston compressors for refrigeration equipment and other heat pumps. 27 Nihon Sahroe K. K. {The Sabroe Co. of Japan, Ltd.) Nisan Seimei BIdg., 8 Eiraku-cho, Kitz-ku, Osaka 1. 1926. 2. Denmark. 3. Manufacture of refrigeration systems for marine use. Niigata Worthington K. K. {Niigata Worthington Co., Ltd.) 11 Suda-cho 2-chome, Kanda, Chiyoda-ku, Tokyo 1. October, 1953. 2. U.S.A. 3. Manufacture of compressors and pumps. Toyo Cargocaire K. K. (Toyo Cargocaire Co., Ltd.) 51 Saioji-machi, Shiba, Minato-ku, Tokyo 1. 1954. 2. U.S.A. 3. Manufacture of ventilating and dehumidify- ing systems for cargo holds and other marine uses. Toyo Carrier Kogyo K. K. {Toyo Carrier Industry Co., Ltd.) 24 Kabuto-cho 3-chome, Nihonbashi, Chuo-ku, Tokyo 1. March, 1951. 2. U.S.A. 3. Manufacture of air conditioning machines, and the Uke. Acquisition of Stocks and Proprietary Interest 1. Date of Validation. 2. Country of origin of investor. Niigata Worthington K. K. {Niigata Worthington Co., Ltd.) 11 Suda-cho 2-chome, Kanda, Chiyoda-ku, Tokyo 1. March, 1951; June 1953; and August 1955. 2. U.S.A. Tokyo Shibaura Denki K. K. {Tokyo Shibaura Elec- tric Co., Ltd.) 2. U.S.A. Air conditioning and refrigeration equip- ment. Mitsubishi Denki K. K. {Mitsubishi Electric Manu- facturing Co., Ltd.) Air conditioning and refrigeration equipment. Acquisition of Claimable Assets Arising From Loans 1. Date of Validation. 2. Country of origin of investor. Toyo Carrier Kogyo K. K. {Toyo Carrier Industry Co., Ltd.) 24 Kabuto-cho 3-chome, Nihonbashi, Chuo-ku, Tokyo 1. March 1951; April 1954; and September 1954. 2. U.S.A. The only wage scale information obtainable from reliable sources is the total amount and monthly average of salaries paid to all employees in the industry in 1955. The following data were obtained from MITI: Salaries paid to all employees, annual total $3 , 025 , 001 Salaries paid to all employees, monthly average $252,084 Number of permanent employees, total 5,495 Average monthly salary per employee $46 Channels of Distribution Most manufacturers have arrangements with sub- contractors or specially designated shops to install air conditioning and refrigeration equipment. From the factories, the products are shipped direct to these installations contractors. However, some of the large manufacturers do their own installing. Department stores also handle retail and some wholesale sales of air conditioning equipment. Consumption Production of most types of air conditioning and refrigeration equipment have increased steadily during the past few years, paralleling growth trends in domestic consumption. MITI's statistics show production or shipments of air conditioning and refrigeration equipment from 1953-57 as follows: Percent Year Value (1953 =100) 1953 $7,101,310 100 1954 9,883,603 139.2 1955 13,218,073 186.1 1956 17,844,709 251.3 1957 15,840,570 223.1 The above data includes reciprocating, centrifugal, and absorption systems but excludes ice cream freezers, ice cream stockers, water coolers, and household refrigerators. Shipments of package-type and window-type air conditioning and centrifugal refrigeration equipment increased conspicuously between January- June 1957 and January- June 1958. Estimates of future con- sumption are not available. Data on shipments in the first G months of 1958 show a remarkable in- crease in window-type air conditioners. In the January 1957-June 1958 period, reciprocating and 28 I absorption refrigeration equipment, ice cream freez- ers, and water coolers declined. Consumption of equipment for industrial use should follow closely the future business trends of heavy industries. Consumption of window-t.ype air conditioners will probably increase even more. Tendencies toward economic recovery noted during the last quarter of 1958 indicated that those types which declined in 1957 and the first half of 1958 may increase in 1959. Major appliance producers recently reduced prices for household room air conditioners, hoping to en- courage buying by the medium-level income group as well as by the high income group. One manu- facturer consulted pointed out that the typical well-ventilated Japanese style room requires an air conditioner having about twice the capacity of one needed to cool to the same degree a western-style room of equal size. Consequently, he expects that these air conditioners will be purchased mainly for use in apartments, western style houses, or in the western style parlor or guest room found in most homes owned by wealthy or middle-class persons. Because these rooms are usually small, the ]/2r^i hp. air conditioners are expected to account for the majority sold in consequence of the price reduction. Following are the price reductions made by one representative manufacturer : Commercial refrigerators 1958 Price 1959 Price 7.7 cubic ft $558 $464 11.0 cubic ft 689 639 Household air conditioners J2hp Not on sale 275 ?4hp 722 444 % hp 694 444 1 hp 9.31 597 li^hp 1,292 1,042 5hp 1,917 1,472 Air Conditioning Equipment. — Air conditioning ecjuipment is mainly used in western style buildings, such as offices and apartments. Design and con- struction of the average residence presents a con- siderable obstacle to widespread residential use of room or window-type air conditioners. All equip- ment is classified under one of three categories: Central system; unit system — including package type air conditioners and unit coolers — (window type, console floor type, ceiling type) ; and automo- bile air conditioners. These air conditioners are used in office buildings, hotels, theaters, hospitals, railway cars, department stores, restaurants, warehouses, power transmitting stations, photofilm developing dark room studios, libraries, and similar buildings. A relatively small quantity of automotive vehicle air conditioners are consumed, mainly in the manufacture of high class sight.seeing buses for domestic and export uses. Refrigeration Equipment. — All refrigeration ecjuip- ment is classified under one of the following categories : Reciprocating System. — Ammonia refrigera- tion machines, Freon condensing units, and high speed multicylinder compressor units. Major consumers are ice making plants, cold storage plants, food processing and preservation industries, synthetic fiber, soda, and phar- maceuticals ; Centrifugal System. — Centrifugal refrigera- tion machines, rotary compressors, and gear compressor type units. Used mainly for de- partment stores, office buildings, theaters, hotels, and similar large buildings; Absorption System. — Produced in relatively small quantities; consumers are limited to ships, gas plants, and the like. Imports Import duties on air conditioning and refrigera- tion eciuipment are as follows: All refrigerators, air conditioners, and freezing units fall under the tariff classification of Machinery, not specifically pro- vided for, at the ad valorem rate of 15 percent. Parts for this eciuipment fall in the category of Parts of Machinery, not specifically provided for, at the ad valorem rate of 15 percent. A commodity tax of 40 percent, plus tariff, is levied on the landed price of the following classes of refrigerators and parts: Electric refrigerators and gas refrigerators, excluding those having a box of 50 or more cubic feet or those having a special apparatus keeping temperature at a constant level. Freezing machines employed for these re- frigerators (limited to the machines of less than K H.P.). No regulations apply specifically to the import or export of refrigeration equipment. However, as for all imi)orts, foreign exchange and import licenses must be obtained. Due to balance of payments difficulties the use of dollar exchange is limited to the importation of essential goods. Therefore, imports of package air conditioners are likely to be small in the future. Market Potential MITI permits no imports of equipment — com- plete sets or compressors — except for the following: 29 Nonchaft (not involving foreign exchange remit- tance) imports, e.g. those sent from overseas firms to their branch offices; equij^ment brought into this country for use in foreign trade fairs, etc.; refrigera- tion equii3ment for export ship construction, which is fitted at the request of the foreign ship buyers; and equipment imported in accordance with special trade agreements. MITI allows the importation under the fund al- location system of certain parts such as special valves, thermostats, carbon seals, shock absorbers, and burners, which are not yet economically pro- duced by the domestic manufacturers. However, approval ih limited to parts used in industrial re- frigeration equipment. In an attempt to foster general industrial welfare and productivity, MITI considers the ultimate use of machinery or equip- ment in which imported parts are to be utilized, as well as the tjq^e of part concerned, in any given application for foreign exchange. Import approval might be granted for parts of large refrigerators designed for factory use, but would probably be denied for office air conditioners or eciuipment for nonindustrial use. This would not be of direct benefit to a particular industrial operation. According to a MITI official, parts are imported because of lower cost rather than domestic manufacturing inability. As technological improve- ments result in lowered production costs, the neces- sity of importing parts will decrease. Further introduction of foreign technical assistance agree- ments in parts manufacturing is not likely. The possibilities of increasing United States ex- ports are slight. As a result of overseas up-to-date technology introduced into Japan, Japanese manu- facturers claim that their industry has attained a technical level comparable to that of foreign manu- facturers. A gulf still exists between sales prices of foreign and domestic products in some types. For example, the cost-insurance-freight (c.i.f.) Japan price of the larger American made window-t3^pe air conditioners is approximately one half the market price of the corresponding domestic product. Im- ports of these air conditioners are still limited by the foreign exchange budget. Prices of other types of domestic air conditioners and some types of refrigeration ecjuipment do not differ greatly from the imported products. There- fore, the interest of importing wholesalers is concen- trated in those machines which are not now produced in Japan at reasonable prices. However, the steady growth of the domestic industry renders extremely doubtful large scale imports of such equipment in the future. Investment and Licensing Opportunities The lack of new technological assistance or licens- ing agreements within the past 3 years and the growth of the domestic industry may indicate that Government officials feel little need for further introduction of foreign technology. Moreover, the Finance Ministrj^ as a general policy apparently de- sires to limit the approval of foreign investments to cases of public utilities, key industries, or major ex- port industries. However, the Government con- siders each investment request on the basis of the level of technical development in the field concerned, and the domestic balance of payments position. United States manufacturers have little oppor- tunity for additional licensing or other arrangements \\hereby the domestic market might be made more accessible to United States products. Both industry and Government favor arrangements for the outright purchase of new techniciues, rather than licensing agreements invoh'ing high rates or long term rovalty payments. Japan: Value of Shipments of Air-conditioning and Refrigeration Equipment, by Prefecture, for Calendar Year 19.55 Type Total Tokyo Osaka Tochigi Kanagawa Others S2, 858, 332 15,977,767 3,374,999 $1,272,222 5,094,444 2,388,889 $730,555 3,583,333 436,111 $347,222 1,380,556 69,444 533,333 161,111 36,111 $475 000 5,758,323 Parts of air-conditioning and refrigeration equipment -_ 444 444 Total --- 22,211,098 (100%) 8,755,555 (39.4%) 4,749,999 (21.4%) 1,797,222 (8.1%) 230,555 (1.0%) 6,677,767 (30.1%) Note: Discrepancies in totals are due to currency conversion. Source: Ministry of International Trade and Industry, Tokyo. 30 Japan: Manufacturers' Shipments of Air Conditioning and Refrigeration Equipment, 1957 Commodity Units Metric tons Dollars Air conditioning equipment; Package type 5,790 1,696 7,814 N.A. N.A. N.A. 11,126,059 Window type 1,168,406 2,470,456 Total. 15,, TOO 17,292 235 534 N.A. 7.457 1,732 150 14,764,921 Refrigerating equipment; Reciprocating system 11,068,189 Centrifugal system . 3,465,853 Absorption system.-. 217,339 Total Other refrigerators: Ice cream freezers __ ___ Ice cream stockers 18,061 1,761 12,165 3,870 9,339 N.A. N.A. N.A. 14,751,381 1,137,201 2,340,487 1,116,801 Total 17,796 N.A. 4,594,489 N.A. — Not available. Source; Ministry of International Trade and Industry, Tokyo. Japan: Value of Manufacturers' Shipments of Air Conditioning and Refrigerating Equipment, 1957 and January-June, 1958 Commodity Air conditioning equipment; Package type.- ._ Window type Other types Total Refrigerating equipment: Reciprocal types Centrifugal types Absorption types Total Others; Ice cream freeaers Ice cream stockers Water coalers Total ___ January- June 1957 ?5, 863, 889 697,222 930,556 7,491,667 6,344,444 1,280.556 133,3,33 7,758,333 1,125.000 2,283,-333 330,556 3,738,88! July- December 1957 $5,261,110 469,444 1,. 538, 889 7,269,443 4,725,000 2,186,111 83,333 6,994,444 11,111 55,556 786,111 852,778 January June 1958 $7,658,333 1,116,667 533,333 9,308,333 4,744,444 1,733,333 58,3.33 ,536,110 477,778 2,902,777 288,889 ,444 Japan: Production of Air Conditioning and Refrigerating Equipment, 1955-57 Commodity i 1955 Air-conditioning equipment, total Industrial and commercial refrigerati ng equipment, total 196G Air-conditioning equipment, total Industrial and commercial refrigerating equipment, total 1957 Air-conditioning equipment, total Package type Window type Other types Industrial and commercial refrigerating equipment, totaL. Reciprocating system Centrifugal system Absorption system Other refrigerators, total_-_ __ Ice cream freezers, total Ice cream stockers, total Water coolers, total Units N.A. 20,216. 3,603 38,460 17,672 7,437 2,385 7,850 20,386 19,601 251 534 252,492 1,599 15,189 4,463 Metric tons N.A. 14,525 N.A. 16.490 N.A. N.A. N.A. N.A. 10,874 8,995 1,729 150 N.A. N.A. N.A. N.A. N.A. — Not available. 1 Arranged according to MITI'S statistical classification. Source; Ministry of International Trade and Industry, Tokyo. Dollars N.A. 13,218,072 4,. 347, 886 17,844,708 18,153,483 14,062,272 1,481,325 2,609,886 15,840,569 12,162,522 3,460,708 217,339 5,029,200 1,046,567 2,719,236 1,263,. 397 Source: Ministry of International Trade and Industry, Tokyo. Japan: Imports of Air-conditioning and Refrigerating Equipment, 1955-57 1955 1956 1957 Commodity and country of origin ' Units Kilograms Dollars Units Kilograms Dollars Unit« Kilograms Dollars Air-conditioning equipment: Ryukvu Islands 199 9,883 75 61,525 750 19,359 178 203,051 United Kingdom United States Total 71,682 223,338 Air-conditioning equipment self-contained, 5 horsepower or more, not elsewhere specified: United States 612 165 123,442 52,385 .306,433 259,755 714 78 66 12 212,111 36,. 328 216 4,389 684,703 53,219 United Kingdom 917 Belgium 6 2,514 6,275 1,406 Total 789 178,753 4,525 17,768 3,524 573,9.33 28,741 35,883 9,152 885 284,307 16,020 17,426 2,891 818,722 Air-conditioning parts: United States 74,119 United Kingdom 71,892 Denmark 7,. 350 Total 25,817 73,778 37,273 161,031 31 Japan: Imports of Air-conditioning and Refrigerating Equipment, 1955-57 — Continued 1955 1956 1957 Commodity and country of origin ' Units Kilograms Dollars Units Kilograms Dollars Units Kilograms Dollars Electric refrigerator, excluding compressor-type, capacity exceeding 0.416 cubic meters (5 cubic feet): 121 119 54 19,600 16,088 6,289 35 249 United Kingdom. 24,719 United States _. 9 044 Total. 297 21 26 40 42,167 2,413 1,486 5,182 69 286 Electric refrigerators, not elsewhere specified: Sweden . . . . 89 306 349 14,053 27,905 70,624 25,108 35,492 34,031 4,492 2 533 United Kingdom __ . United States 4 656 Total 768 114,669 98,561 98 10,149 68 972 117,345 13 625 Parts of refrigerators, not elsewhere specified: 8 Sweden ^ . 769 United States 9,272 Total. 118,441 10 428 Refrigerators, over 100 kilograms: Sweden _ . 13,170 10,112 409 122,657 26,798 32,981 128 144,923 6 10 966 29,940 1,739 180,030 2,891 17,426 16,020 7,350 71 892 United States 321 173,658 224,272 74,119 Total. 146,348 206.034 347 244,363 2,826 9,204 2 491,700 7,047 18,322 11 37,273 268 38 841 3,628 125,711 161 031 Refrigerator parts: Denmark 583 16,583 556 Norway... 7,411 23,077 40,419 117,247 Total. 35,455 13,694 10,344 66,347 90,281 19,736 130,497 38,287 42,841 142,500 Ice-cream freezers: 3 32 10 75 321,064 United States __ _ _ _ 28,369 Total. ... __ _ 37 24,413 110,322 85 81,128 349.433 Electric refrigerator self-contained units: 1,608 12,975 226,967 2,831 23,259 62,758 Sweden United States . Total 242,932 280 4,114 2,016 90,678 481 181 2,217 Mechanical refrigerator, self-contained, not elsewhere specified: United States Total 0,670 3,539 Electric refrigerator capacity exceeding 0. 19824 cubic meters (7 cubic feet): 50 60 1,419 7,849 41,447 331,882 14,156 7,028 191,706 United Kingdom United States. . Total 1,537 382,. 395 215,261 Electric refrigerator, compression type, capacity exceeding 0.1416 cubic meters (5 cubic feet): 19 177 1,802 3,202 15,038 456,843 5,261 United Kingdom. 30,392 U- -ted States.. , _ 204,947 Total 2,007 5 120 146 476,506 635 8,590 62,241 243,828 Electric refrigerator, compression- type, not elsewhere specified: 942 United Kingdom 18,681 United States... 16,737 Total. 280 72,045 .37,672 • Totals include small amounts from countries other than those listed. ' Probably equipment sold by U.S. military personnel. Source: Japanese Ministry of Finance; Annual Returns of the Foreign Trade of Japan, Japan Tariff Association, Tokyo. 32 Japan: Exports of Air-conditioning and Refrigerating Equipment, 1955-57 1955 1956 1957 Commodity and country of destination * Units Kilograms Dollars Units Kilograms Dollars Units Kilograms Dollars Air-conditioning equipment: 4,040 1,732 6,031 2,094 4,831 5,639 Total 12,368 14,4.53 Air-conditioning equipment, including self-contained air-condition- ing: 4 24 7,262 4,120 8,811 7,197 3 5,423 21,553 15 92 1,322 9,556 4,463 25,475 Total --- - 31 25 8 13,881 13,550 212 22,781 20,625 556 115 / 19,482 58,775 Air-conditioning equipment, n.e.s.: Formosa - -- - 21 44 69 31,716 525 22 Total - 35 14,498 718 4,748 831 23,667 800 10,986 4,969 70 31,798 1,.870 987 581 Air-conditioning equipment parts, n.e.s.: 3,764 2,166 358 200 Total 7,393 2,300 241,485 3,520 15,785 9,640 1,230 3,273 17,539 400 150,619 2,422 18,767 6,497 2,178 3,992 3,468 8,250 Refrigeration , over 100 kilograms: 10,9.36 165,038 156,565 5,544 175,703 117,103 1 17 3 14 14 3 3 6 12 19 1 17 4 2 16,116 13,995 27,168 1,500 44,0.57 201,464 261,724 27,983 Thailand _ - 14,080 31,080 Indonesia - ~~ 1,417 66,906 300 694 120,106 146,594 Total - --- --- 336,046 839 444 3,460 303,472 1,811 1,022 2,944 59 289,895 210,177 68 574,589 478,878 Philippines Total - 5,781 235 2,005 3,012 8,025 150 681 867 Mechanical refrigerators, self-contained, n.e.s.: Philippines - - Total -- 5,299 1,928 Refrigerator parts, n.e.s.: 5,160 79,393 6,880 355 2,319 25,947 7,200 278 _ 21,269 31,246 723 33,100 98,696 11 542 17,983 South Viet-Nam 1,328 20 819 New Hebrides - - Total 97,424 8,597 1,415 38 65 7 42 41,431 29,561 4,764 186 336 31 169 198,164 2,084 77,761 Ice cream freezers, powered: 109 27 16 30 3 8 26 9,467 Venezuela Peru - 30 33 45 145 306 Thailand 1,233 Total -- 206 7 20 12,427 6.50 1,400 40,228 1,072 2,428 209 16,076 53,986 Electric refrigerators, capacity exceeding .19824 cubic meters (7 cubic feet): Thailand Total 30 2,450 1,250 760 4,3.36 508 2,314 Parts of mechanical refrigerators, n.e.s.: Rvukyu Islands 2,411 2,500 2,083 3,036 Total — 2,078 3,453 4,913 5,356 33 Japan : Exports of Air-conditioning and Refrigerating Equipment, 1955-57 — Continued 1955 1956 1957 -. _ Commodity and country of destination ' Units Kilograms Dollars Units Kilograms Dollars Units Kilograms Dollars Electric refrigerator, compressor type, capacity .1416 cubic meters (5 cubic feet): Korea 6 27 270 844 2,215 38,660 1,572 Ryukyu Islands 3,694 89,381 TotaL 317 111 25 180 43,043 7,914 2,050 14,420 96,806 Electric refrigerator, compressor type, n.e.s.: 12,536 Thailand..- 2,119 Burma... _ . 28,969 TotaL 354 5 2 27,094 301 380 47,086 Electric refrigerator, including compressor type, capacity exceeding .1416 cubic meters (5 cubic feet): Korea 822 1,326 Total 7 34 200 681 2,338 18,400 2,178 Electric refrigerator, including compressor type, n.e.s.: 4,100 Burma , 45,583 Total 236 20,873 49,947 n.e.s. — not elsewhere specified. 1 Totals include small amounts to countries other than those listed. Source: Japanese Ministry of Finance, Annual Return of the Foreion Trade of Japan, 34 Mexico Production No firms in Mexico manufacture all parts of air conditioning and refrigeration equipment. The term "manufacturer" is applied to a firm which manufactures some parts and imports other parts and component eciuipment for local assembly. For example, ventilation grills are produced locally, and air conditioning grills are imported. Other firms specializing in design and installation work justify the title "manufacturer" by pointing out that in- stallation of central plant conditioning systems requires some degree of design and fabrication. There are 24 major refrigeration eciuipment plants in operation. However, unit production varies greatly. Some plants produce only 25 imits per year; others produce a thousand or more. In addi- tion to these major producers, at least f 5 or 20 small firms tiu'n out a few units each year, ordinarily manufacturing only cabinets. The industry struc- ture is such that no contractor-installer-factory representative purchases equipment from other local installer-assemblers . Major areas of production of refrigeration equip- ment are: Mexico, D. F.; Monterrey, Nuevo Leon; Guadalajara, Jalisco; and Celaya, Guanajuato. Of the 24 large firms in the industry, 15 are in the Mexico, D. F., 4 in Monterrey, 2 in Guadalajara, 1 in Celaya, and 2 in Torreon (Coahuila). Manufacturing assembly plants of air conditioners are located only in Monterrey and Mexico, D. F. Of a total of 1 1 producing facilities, 7 are located in Monterrey. Except for imported basic mechanisms, all raw materials and parts are freely available in Mexico. An aluminum rolling mill manufactures stamped coils for air conditioning units under contract to a plant in the Mexico City area. In the future, the firm may produce coils for all companies not having their own stamping facilities. Labor, largely semiskilled, is freely available. However, training on the job is required. Salaries vary significantly between areas, but the average semiskilled laborer receives 25-30 pesos (12.5 pesos eciuals U.S. $1.00) for an 8-liour workday except in Mexico, D. F., where he is paid 50 pesos. Social services such as medical care, recreational facilities, food, housing, and education represent a 10 percent addition to salary. However, suph fringe benefits are more common in plants manufacturing domestic refrigerators and other metal products. The air conditioning industry is divided between foreign and domestic ownership, but the Govern- ment is now employing domestic investment. The largest firm in the industry, which does not produce lun-elated products, is entirely Mexican. Most air conditioning units are made by Mexican or pri- marily Mexican-owned firms utilizing United States patents and designs. These firms either pay royal- ties or offer percentage participation as minority share holders for the patents and designs. The mdustry is not directly subsidized by the Government. However, firms which have been conceded benefits under the "Law for New and Necessary Industries" are in effect subsidized. They receive reductions in import duties, income taxes, and mercantile taxes for a period of 5-10 years. For a company to qualify under the law, domestic labor and materials must represent no less than 60 percent of the product's cost, and 10 percent of the finished product must be produced in the firm's plant. Because of these stipulations in the law, all producers have not yet qualified. Most refrigeration firms are completely owned by nationals or residents, although some producers utilize foreign trademarks and patents. Unitary Air Conditioners. — The closest approxima- tion to "manufacture" of air conditioning equipment is the production of package air conditioning units. Local firms manufacture the sheet metal component parts of the blower assembly, the blower motor, the internal shroud, the cabinet, the front or facade (both metal and plastic), and metal parts such as coils, tubing, nuts, and bolts. All firms import compressor-condenser units or parts for local as- sembly. Other items imported are sealed units, blower assemblies, motors, controls, and rotors. The assembled units contain varying proportions of 35 imported and domestically produced parts, depend- ing upon the producer. No governmental or trade organizations compile data on the quantity of production of air condition- ing systems. The following estimates of production are based on information provided by individual firms : 1957 1958 Number Value Number Value Monterrey 2,480 .$744,000 4,695 $1,408,500 Mexico, D. F 500 150,000 1,065 319,500 Totals! 2,980 .$894,000 5,760 $1,728,000 1 Between 200-300 units are judged to have over 2-ton capacity; values are average cost to dealers. Central Plant Air Conditioning Equipment. — A number of "manufacturers" of central plant air conditioning, which undertake design and installa- tion work, produce or purchase from small manufac- turers accessory equipment such as coils, evaporators, air handling equipment, blowers, sheet metal ducts, diffusors, dryers, humidifiers, and a variety of copper and steel pipe and tubing. The majority of these articles are produced by small shops on a custom basis, or in shops maintained by the installer. The items are for specific projects and usually are not for sale on the open market. All balanced blower shafts and bearings are im- ported. Other imported parts are compressors, condensers, diffusors, converters, controls, thermal valves, special connections, filters, ammonia tubing, and purgers. Estimates on installations of air conditioning units, other than package type, in 1956-1958 are shown below. The majority utilized substantial quantities of domestic parts and design. Number of Size of system installations (tons) annually 3-20 400 20-100 100 100 ton and over 10 Refrigeration Equipment. — No commercial or industrial refrigeration equipment is manufactured entirely in the country, and basic mechanisms are imported. However, some accessory parts are pro- duced by domestic firms for their own installation or are farmed out to custom metalworking shops for fabrication. Commercial Refrigerators and Freezers. — In 1957, 6,000 commercial refrigerators were produced, and in 1958, 8,000. Display cases, reach-in refrigerators, beverage coolers, and soda fountain dispensers ac- counted for 75 percent of the units produced. Walk-in freezers are not a leading product in the industry. Many commercial establishments such as small restaurants, bars, and grocery stores use only ordinary household refrigerators. Channels of Distribution The major centers of distribution for air condi- tioning are Monterrey, San Luis Potosi, Durango, and Mexico City. Monterrey is the most important center, and Mexico City is the distribution center south of the 23rd parallel. For refrigeration and commercial refrigerators, the distribution centers are Mexico D. F. and Monterrey. Package air conditioning (under 2 tons) and com- mercial (self-contained) refrigeration systems are sold primarily on a retail basis. Depending on the size of the unit, manufacturers of commercial re- frigerators either appoint distributors or sell di- rectly to retail outlets or from their own stocks to consumers. The word "distributor" is badly mis- used in Mexico. A "distributor" in many cases is actually a firm selling over as wide an area as pos- sible, not to retail outlets, necessarily, but to con- sumers on a retail basis. In the commercial re- frigeration field, this is not uncommon. However, the large manufacturers also work through dealers or sell directly to retail outlets, but not to end-users as such. Package air conditioners are often handled by the same retailers, who may buy either from a "distributor" or directly from the factory. A re- tailer may even classify himself as a distributor, meaning that he looks for sales to consumers over his territory, but sells strictly on a retail basis. Central air conditioning and refrigeration is in- stalled rather than "distributed," although some companies deal in units and parts. Except those firms which are exclusively contractors, virtually all dealers are also importers and many are manufac- turers of some item. Whether they can be con- sidered as distributors depends largely upon whether they classify their sales as "wholesale" and if they actually stock sufficient units and parts to be able to deliver to a client who has been contacted by a salesman. In no case does a central air condi- tioning, heavy refrigeration importer-factory repre- sentative-installer, although classified as a distributor, actually market products to retail dealers rather than to end-users or contractors. Consumption The air conditioning industry has just passed through its pioneering stage, and sales and installa- tions should increase in the future. Although pack- ^ age units find a ready market in the northern states and coastal areas, the sale of central plant installa- tions still involves an educational and promotional task. The large central plateau of the country, having altitudes of about 5,000 feet and extremes of up to 8,000 feet, does not represent a substantial market for comfort-temperature control air condi- tioning equipment. However, a large segment of industry is located in the area, and air conditioning for humidification, purification, and industrial temperature control is becoming more and more common. Textile, pharmaceutical, and chemical plants, and laboratories are the principal consumers. Theaters and hotels are not major consumers, although many have some kind of ventilation system. Office build- ings are seldom air conditioned, but a number of the newer ones in Mexico City have ventilating and heating systems, usually in combined installations. The first fully air-conditioned office building is now being built. In the hot port towns, particularly those attract- ing large numbers of tourists, hotels and motels are increasing their use of air conditioning. To date, this has usually involved the installation of window or larger package units, but new, large hotels are considering central installations. Dealers point out that knowledge of air conditioning has reached the point where a builder will now ask for cjuotations on an installation, even though, after examining the price, he will usually decide against the added ex- pense. This represents a degree of progress over the past 10 years. Installation and service of air conditioning and refrigeration equipment is inadequate. In part, this is a manifestation of a price-conscious market, in which both builders and architects attempt to keep costs to a bare minimum. Few architects consult specialists prior to drawing the plans for large buildings. The country has competent con- tractors fully capable of providing excellent design, installation, and maintenance service, but they find that price quotations based on a well-planned tech- nical survey of the needs of a given installation are considered to be too high and result in the loss of a considerable number of contracts. As the use and consciousness of air conditioning and refrigeration increases, the demand for well designed and installed systems can be expected to grow. A U.S. firm, whether exporting or manu- facturing in the country, should satisfy itself with the technical competence of its distributors, aiding where necessary in the training of properly qualified personnel. Unitary Air Conditioners. — The following es- timates on consumption of package air conditioners were developed by the United States Embassy in Mexico, utilizing U.S. import figures and drawing on industry sources: 1957 19.58 Number of Families 4,543,000 4,681,000 Dwellings Wired 1,281,900 1,578,500 Percent Dwellings Wired ' 32 34 1957 195S Number Value Nuriiber Value Imports 2,917 $967,969 5,''l41 $860,553 Produced 2,980 899,000 5,760 1,728,000 Total 5,897 1,866,969 10,901 2,588,553 Sales'^ 5,100 1,619,000 9,500 2, 200, .500 ' There are fewer dwelling units tiian families in Me.xico. ' Values for domestic production are based on import values and cost to dealers. The United States is virtually the exclusive sup- plier of assemliled package air conditioning units. Mexican import statistics do not show such ciuanti- ties of imports. Therefore, almost all assembled package units must enter Mexico by way of and for use in the free zones and perimeters of the northern part of Mexico and the hot Yucatan Peninsula. Residents in these areas purchase imported units without paying import duties or being subject to licensing requirements. These areas are not at present stable markets for domestically produced units because the prices to the consumer are at least 30 percent higher than for imported counterparts. However, these areas are potential markets for domestic producers because the free zones are expected to be clo.sed to imported units. Package units of -^4- and 1-toii capacity are the most popular sizes. Units over 2-ton capacity ac- counted for no more than 5 percent of total sales in the last two years. Most units sold are used in homes, offices, and small commercial establishments. The North, the Coastal Regions, and the Tehuan- tepec Isthmus area in the south are the present and potential market areas and can be expected to remain so. The Central Plateau area, which includes the Federal District, has a population in excess of 4 million but is a poor market area because extreme temperatures are seldom encountered. For example, in 1958 sales totaled $3,200 in Guadalajara, Jalisco, a city of 500,000 persons, located at an altitude of 5,000 feet. Sales in nearby Puerto Vallarta, a city 37 ■of 70,000 inhabitants on the West Coast, were approximately $320,000 during the same year. Total consumption of package units is increasing and should continue for the next few years. Market saturation is not yet approached, and prospects now are better than ever. However, a stiff selling job is necessary. Based on imports, production, and a rate of obsolescence of about 10 percent during the last 10 years, between 35,000-37,000 units are presently in use. Concentration is heaviest along the United States-Mexican border and in and near the larger coastal cities. Central Plant Air Conditioning Equipment. — In view of the lack of data on maiuifacture, assembly, and installation of job-assembled units, only a rough estimate of average annual consumption can be made fsee Production). Refrigeration Equipment. — No statistics on gross refrigerated space are available. However, the number of private and semiprivate warehouses, meat packing plants, and frozen food lockers is small com- pared to the total population. In contrast to the United States, where the construction and operation of frozen food locker plants is a vital factor in the industrj^ comparable activity is virtually nonexistent in Mexico except along the United States border. The largest industrial consumer is the brewing industry, but this industry does not show a growth factor sufficient to justify expectations that it will continue to be a major consumer of new installa- tions. Industrial refrigeration is quite important, and fish-and shrimp-freezing facilities have probably represented the largest rate of growth in recent years. New slaughterhouses, which have a packing- house function, have cold storage facilities, but much of the equipment is not utilized because the slaughter rate barely keeps up with daily demand. Smaller meat packers utilize storage facilities to some degree. The refrigeration of meat, fish, and fruits and vegetables accounted for 75-80 percent of all in- stallations in recent years. The use of commercial and industrial refrigeration should increase at a pace comparable to that of the electrification of the country. Electrical consump- tion has increased about 12 percent per year since 1955, and a good portion represents service to areas not previously electrified. Small commercial estab- lishments in these areas either generated their own power for refrigeration units, used ice, or did without. Only a small proportion of refrigerator sales to these establishments will be of the "commercial" type, as proven by past consumption patterns. Commercial Refrigerators and Freezers. — Con- sumption of commercial refrigerators and freezers closely approximates production, primarily because the large number of small shops manufacturing them do so on an order basis. Imports are negligible and have little effect on the total production and consumption. Use of commercial refrigerators and freezers in 1958 was broken down approximately as follows (in percent) : Meat markets 20 Grocery stores 15 Restaurants and hotels 12 Soda fountains 20 Hospitals 6 Beverage cooling 12 Milk and dairy products 6 Industrial 2 Water cooling 5 Other types 2 100 Imports Because United States exports of air conditioning and commercial and industrial refrigeration equip- ment represent at least 90 percent of total imports, the United States export figures best approximate actual Mexican imports and will define the existing pattern more accurately than domestic import statistics. Import duty rates on air conditioning and re- frigeration equipment are as follows: Tarilf Number 718.01.071 718.06.01 I 718.06.03 735.07.01' Description Refrigerators of base metal, which burn liquid or gas fuel, weighing more than 200 kilograms. Per Legal Kil< Apparatus which forms a complete air conditioning unit comprising the cabinet, compressor, coil, fan, and air filter, weigh- ing up to 1..500 kilograms. Per Gross Kilogram Apparatus which forms a complete air conditioning unit comprising the cabinet, compressor, coil, fan, and air filter, weigh- ing more than 1,500 kilograms, not including the ventilation shafts. Per Gross Kilogram Electric refrigerators of base metal, weighing more than 200 kilograms. Per Legal Kilogram. Specific duty Ad valorem duty pesos percent 0.60 60 0.40 40 0.10 8 0.60 70 Official value 28.00 23.00 19.50 ' Goods in these classifications are subject to import control; the importer must obtain a permit from the Mexican Ministry of Commerce and Industry before placing firm order? for these goods. 38 The import duty is compound, i.e., a specific duty and an ad valorem duty are imposed. The ad valorem duty is levied on the invoice value or the official value, whichever is higher. An additional surtax of 3 percent of the total import duties is levied on all imports other than by mail; a 10 percent tax is levied on mail imports. Exports Exports of air conditioning and refrigeration equipment are negligible and are seldom reported in published export statistics. Market Potential United States exports of finished goods, particu- larly package air conditioners and commercial refrigerators, are virtually excluded now and for the future. The one pi-esent exception is the export of package air c and 6 percent of 2 hp. or over. Approximately 90 percent of all self-contained units are installed in offices and other commercial establishments. The low percentage of installa- tions in homes is expected to continue because less than 500,000 persons in the country have adequate pvu'chasing power to even consider buying air conditioners. Sales records indicate that the consumption trend is rising rapidly and is expected to continue by more than 10 percent per year, peaking in the next two years, after which replacement will probably become the primary factor. Other sources predict a con- tinuing rise in sales for an indefinite period. The peak has already been hit in Maracaibo, which formerly accounted for 60 percent of all sales. Many in the trade say that the Maracaibo area has been saturated. A similar situation is expected by some trade sources in the Caracas area in two or three years. No other areas approach Caracas or Mara- caibo as significant markets. Central Plant Air Conditioning Equipment. — Central plant air conditioners installed in the Caracas area totaled slightly over 3,500 tons in 1957. No statistics are available for estimating the quantity of installations in the interior of the country. Informed dealers estimated a total 1958 consumption of 10,000-12,000 tons, of which 5,000 tons were expected to be installed in Caracas and vicinity. Installations should increase significantly in the future. Historically, the people, particularly in Caracas, have not seen the need for air conditioning. However, representatives of light and power com- panies are now urging architects and contractors to include central air conditioning in building plans because of the higher income potential providing better utilization of high cost land. They also stress cooling, filtering, and noise reduction qualities. This campaign should pay off because Venezuelans are beginning to feel that air conditioning for office and apartment buildings is something to be expected rather than a luxury. Refrigeration Equipment. — No reliable informa- tion is available concerning ice plants, but a leading dealer, the only source in the field, indicates that 1,200 to 1,400 tons of industrial refrigeration units were installed in slaughtering, fish, and ice plants in 1958, and he predicts a rise to nearly 5,000 tons in 1959. The only statistics on the number of cold storage plants are those compiled in 1957 by the Direccion de Planificacion, Ministerio de Agricultura y Cria. 56 These figures indicate a total of 83,120 cubic meters of cold storage space in the country, including 30,474 cubic meters of Government-owned space and 52,646 cubic meters of privately-owned space. The future consumption trend is impossible to predict. Many of the present plants are standing idle, and yet the press indicates that the Govern- ment-owned marketing organization in Cai-acas (Mercados, Silos y Frigorificos del Disirito Federal, SA) will soon spend $600,000 to add 30,000 square meters of cold storage space. The only food-processing refrigeration equipment on which information is obtainable is installed in milk pasteurization plants. Venezuela has 19 such plants, capable of processing about 320,000 liters per day. The equipment in the plants is virtually all American; one or two plants have British equip- ment, but even these plants are equipped with American refrigeration units. Informed sources predict that two new plants will be built and some expansion of existing plants will occur within the next two years. Petroleum refiners (excepting one large company) report that 264 small petroleum condensing units are in operation. Purchases are irregular and equipment is imported directly from the United States. No intelligent estimate of the number of commer- cial refrigeration units in the country is possible on the basis of locally available statistics. However, over 95 percent of the commercial refrigerators sold are of American origin. Local dealers agree that sales of this equipment will continue to increase about 10 percent annually. Service Facilities Excellent service facilities for air conditioning equipment are available in Caracas and Maracaibo. Small parts inventories are maintained by dis- tributors outside Caracas, but business firms prefer having the equipment brought to the city for major repairs. However, many consumers in the interior of the country ordinarily go to small, inadequate repair shops for maintenance of their units. Commercial refrigeration repair facilities are excel- lent in Caracas, Maracaibo, and Barquisimeto, and poor in most other areas. Several distributors service through a mechanic traveling with each salesman. Because of service difficulties, sealed units are preferred in most areas. Units used in pasteurization plants need little servicing. Pa.s- teurizers in the interior carry a small inventory of parts most likely to need replacing. The plants follow the practice of using identical American equipment so they can borrow needed parts from one another when a breakdown occurs and then order replacement parts from the Caracas distributor. Imports No breakdown of imports is available. However, from 90-100 percent of all air conditioning and re- frigeration equipment sold is of American origin. Using United States export figures and a knowledge of the life of the ecjuipment, it should be relatively easy to estimate not only imports but also the number of units in use. Import duties on air conditioning and refrigeration equipment are as follows: Air conditioning: 0-15 kilos 0.50 bolivares per kilo Over 15 kilos 0.01 bolivares per kilo Refrigeration equipment: 0-100 kilos 0.40 bolivares 100-250 kilos 0.50 bolivares/kilo 250-500 kilos 0.60 bolivares/kilo 500-iip kilos 0.40 bolivares/kilo Trade agreement rate: 0-100 kilos 0.20 bolivares per kilo 100-250 kilos . .30 bolivares per kilo 250-500 kilos 0.50 bolivares per kilo 500-up kilos 0.40 bolivares per kilo Market Potential In view of the existing overwhelming preference for American goods, the United States will probably not expand its export position in this market other than by gradually increasing sales. Direct United States investment is possible but not necessary unless market conditions change. If American domination of the market were lost and local pro- duction were economically feasible, local capital participation, although not essential, would be desirable for public relations and contact purposes. 57 Venezuela: Imports of Air-conditioning and Refrigerating Equipment, 1954-57 [Quantity in metric tons; value in dollars] 1954 1955 1956 1957 Commodity and country of origin Quantity Value Quantity Value Quantity Value Quantity Value No. 333-334 ': United States 6,136 957 6,944,871 723,187 Total-- -- — 7,093 7,668,058 No. 333 C— Refrigerating equipment of all types, 250-500 kilograms: United States _ . - 902 9 1,196,496 12,995 921 8 1,137,439 13,202 905 5 1,241.421 10,366 Total— -. 911 546 29 1,209,491 582,090 29,315 929 507 6 1,150,641 578,475 7,391 910 490 10 1,251,787 No. 333 D— Refrigerating equipment of all types greater than 500 kilograms: United States _ - _ 588,585 Other countries 12,617 Total. 575 611,405 513 585,866 500 601,202 ' For the year 1955 Venezuela basketed all forms of refrigeration of all sizes in one category. This group includes domestic and commercial refrigerating equipment, air-condi- tioning apparatus, ice-boxes, freezer chests, and parts. Source: BoUtin Mensual de Estadistico^ 58 I West Germany Production and equipment, together with lightning con- Essential raw materials— nonferrous metals, glass ductor equipment; electric fishing equipment; and insulating materials of all kinds, and power— electro-osmosic equipment; disinfecting equip- required by West German manufacturers of air nient; wood-worm detection equipment; air conditioning and refrigeration equipment, are readily conditioning equipment (electric)_; electric water available. fountains for mterior decoration (illuminated According to reliable trade sources, one firm and nonilluminated). manufacturing air conditioning equipment is a The estimated production values for all items subsidiary company of a Swiss enterprise, utilizing lifted in the two categories during the period 1951-54 the capital of its parent company. One manufac- were as follows (1 DM equals U.S. $0,238): turer of refrigeration equipment is a wholly-owned ,.,, ,„,, subsidiary of a United States enterprise. Other Hants and apparatus .11,618,400 $3,284,400 United States firms have licensed several domestic Miscellaneous apparatus and manufacturing firms. equipment 147,560 211,820 Direct Government subsidies are not available. Air Conditioning Equipment. — The air condition- , • 1 , • i. wT ^ -y -nr tt Plants and apparatus 3,7.36,600 5,926,000 mg equipment nidustry is a post-World War 11 ,^. ,, ^ , . -1 • Miscellaneous apparatus and outgrowth of the central heating, ventilating, and equipment 311,780 261,800 refrigeration industries. About 50 firms produce package and room-type air conditioning systems in A rough percentage production breakdown (by plants scattered throughout the country. Of these value) for air conditioning equipment for the period firms, only 5 employ a labor force of more than 500 1951-54 is: Plants and apparatus, approximately 30 each. Nearly all the 50 firms manufacture in addi- percent; and miscellaneous apparatus and equip- tion various other types of equipment— air heating ment, approximately 10 percent. and cooling, fume dispersion, and humidifying equip- The total estimated production figures for air ment— and make installations. conditioning equipment during the period 1955-57 The majority of the manufacturers of air condi- is shown in parentheses below: tioning and refrigeration equipment are members of ^955 1956 1957 the Association of West German Machinery Manu- Plants and apparatus $7,425,600 $9,424,800 $10,519,600 facturers (Air Cooling and Ventilating Division or (2,227,680) (2,827,440) (3,155,880) Refrigeration Division), Frankfurt-am-Main. Four Miscellaneous of the smaller air conditioning firms and 20 refriger- appara us an r xi ITT J. /-I equipment 61,035 92,930 152,449 ation firms are members of the West German /g ^q^s /g 293) (15 245) Association of Electrical Equipment Manufacturers, Frankfurt-am-Main. The estimated total value of production for Under the West German statistical reporting code package air conditioners, including room types and on industrial production, figures on the production other types of air conditioning systems such as of all types of air conditioning equipment are ar- central plant systems, was $2,233,784 in 1955; ranged as follows: $2,886,733 in 1956; and $3,171,125 in 1957. Pro- (1) Air conditioning plants and apparatus, to- duction of all types of air conditioning units and gether Avith fume dispersion and humidifying equipment in 1958 may total an estimated $3,445,050. installations, and air heating equipment (non- The rate of growth in 1959 and 1960 should not electrical). show any substantial increase, and will probably (2) Miscellaneous electro-physical apparatus follow the same pattern as in 1956, 1957, and 1958. 59 A comparison of the total production value of air conditioning equipment with the total production value for the entire West German machinery industry in 1957 of $4,212,600,000 and in 1958 of $4,331,600,000 indicates that its share is well below 1 percent. The number of manual and white collar workers employed by the 50 firms producing air conditioning and other equipment totaled about 20,500 in 1957. This was only 2.5 percent of the total 830,000 in the entire machinery industry. The air conditioning industry is a small section of the metals fabricating industry branch, and has much the same wage scale In 1957, the average hourly wage in the metals fabricating industry amounted to $0.46; an average work week was 45.2 hours. Refrigeration Equipment. — Production figures on refrigeration equipment cannot readiljr be com- pared with the classifications normally used in the United States. Production figures of several of the available commodity subgroups are consolidated to correspond as closely as possible with the desired commodity breakdowns. Statistics for the following four subgroups were extracted and assembled to- gether under the general heading: Refrigeration Equipment for Industrial and Commercial Uses (section I) : (1) Small refrigerator and ice plants, up to 20,000 kiiocalorie hour (2) Large refrigerator and ice plants, and machinery, together with marine refrigerator machinerjf over 20,000 kiiocalorie hour (3) Air and gas liquefying and dispersion plants, together with carbon dioxide and dry ice plants (4) Spares and elementary parts for the above three items. Commercial Refrigerators (section II) includes reach-in, walk-in, display cases, etc. This section comprises the following commodity subgroups: Commercial refrigerators and cases over 250 liters, including those equipped with compressor aggregates. Production values during the period 1954-57 for section I subgroups were as follows (in thousands of dollars) : 1051f 1955 1956 1957 Small refrigerator and ice plants 9,639 12,044 17,455 12,895 Large refrigerator and ice plants 10,972 12,396 9,718 10,286 Air and gas liquefying and dispersion plants 10,948 9,226 9,670 15,791 Spares and elementary parts 3,737 4,099 14,758 16,118 35,296 37,765 51,601 55,090 Production values for section II during the same period were as follows (in thousands of dollars) : 195i 1955 1956 1957 Commercial refrigerators and display cases (Section II) _ 16,683 16,094 14,366 19,120 A comparison of the total value of production of the entire machinery industry with that of the re- frigeration equipment industry (sections I and II) during the period 1955-57 is as follows (in thousands of dollars) : (B) (A) Refrigeration Machinery equipment Refrigeration industry industry percentage 1955 3,396,210 141,085 4.15 1956 3,895,496 139,409 3.57 1957 4,215,742 161,234 3,82 Association sources estimate that the total value of production of mdustrial and commercial refrigeration equipment in 1958 may be about 2 percent of the production value for the entire machinerv industry. Because of the varied manufacturing programs of the approximately 80 domestic-jDroducing firms, figures are available only for the total labor force of the refrigeration equipment industry. In 1957, the number of manual and white collar workers employed in the industry totaled approximately 30,000. This was only 3.6 percent of the total 830,000 emploj^ed in the entire machinery industry in 1957. The re- frigeration equipment industry is a section of the metals fabricating industry branch. Therefore, the wage scales of the latter are generally applicable. In 1957, the average hourly wage amounted to $0.46 and an average work week was 45.2 hours. Channels of Distribution Distribution and ser-\-icing of domestically-manu- factured air conditioning ecjuipment is done ex- clusively by the appropriate sales and servicing departments, or engineering departments, of the various manufacturing companies. These are scat- tered throughout the country. Distribution and servicing of refrigeration equipment, unless required by industry, is usualh' done by appointed regional and district wholesalers or independent distributors. Manufacturers or their engineering departments undertake this work only in exceptional cases. Facilities are considered adequate. Consumption Air Conditioning Equipment. — An estimated 90 percent or more of all air conditioning equipment is sold on the domestic market. Air conditioning manufacturers produce their equipment according to individual specifications, and do not mass-produce. 60 At the present time, the principal domestic buyers are svich industries as the optical and precision instru- ments, chemical and pharmaceutical, foodstufTs, paper, and textiles. Sales are also made to large motion picture theaters, insurance companies, and banks. Demand for private household use of window or package-type air conditioners is practically non- existent now because of climatic conditions and comparative high prices for units. However, industry sources are fairly confident that the demand for air conditioning eciuipment, particu- larly for commercial and industrial purposes, Avill increase. Quality and Avorkmanship are the most important factors influencing demand. Domestic retail prices for room-type air condi- tioners range from .1333-428; for other types from $1,428^,760 or more. Imported window air con- ditioning units retail on the domestic market for .|333-$595, and package air conditioners and other systems for $1,904-$7,140, or higher. Refrigeration Equipment. — In 1957, an estimated 50 percent of the production of section I refrigera- tion ecjuipment, and 80 percent section II, was sold on the domestic market. No significaiit sales fluctuations occurred in either type of refrigeration equipment. Industry sources expect a continual increase in demand for commercial refrigerators (compressor units). Domestic retail prices for sec- tion I refrigeration equipment are not readily avail- able because of the complexity of accessory plant equipment involved. Prices of section II commodi- ties start at $357. Commercial deep freezers retail for $381-$643. Quality is the most important factor influencing demand. Imports Air Conditioning Equipment. — Precise figures on imports of air conditioning ecjuipment are not avail- able. In 1956 and 1957, trade sources estimated total imports for each year to have been about $714,000, which exceeds by far the total value of exports. The number of domestic importer/ distributors of air conditioning equipment is re- portedly small. The principal contacts are with firms in the United States and Switzerland. Refrigeration Equipment. — Figures on imports of section I refrigeration equipment are readily avail- able. In 1956, the total value of imports of section I refrigeration equipment amounted to $1,328,040; in 1957, to $2,455,446. Imports, (excluding spares), from principal foreign exporting countries in 1956 and 1957, were as fol- lows : Country 1956 1957 Great Britain .$237,762 $716,380 Denmark 155,652 178,500 Sweden 125,902 241,570 U.S.A 45,220 267,0.36 In 1957, the United States became the second largest supplier of section I refrigeration equipment for industrial and commercial uses. This was be- cause in 1957 West German import restrictions on refrigerating equipment were lifted from the Dollar Area. The import values of Section ILcommodities and household refrigerators are grouped together into one general section (see table). Accordmg to the Vereia Deutsche?- Maschinenbau-AnstaUen (Refriger- ation Division), the combined total import value of section II refrigeration equipment and household refrigerators totaled $1,393,252 in 1956 and $2,119,866 in 1957. However, the total arrived at by the addition of separate Zentralverband der Elektrotechnischen Industrie and Vereia Deutscher Maschinenbau-AnstaUen statistics amounted to $1,678,852 in 1956 and $2,518,278 in 1957. This apparent discrepancy occurs because Vereia Deut- scher Maschinenbau-AnstaUen calculations include other accessories and spares. Under the amalgamated Vci^eia Deutscher Mas- chincnhau-Anstalten (Refrigeration Division) statis- tics, no accurate measurement would be made regarding the share of the main exporting countries of refrigeration equipment (section II and household refrigerators) into West Germany. To ol)tain this information, the separate Zentralverband der Elektro- technischen Industrie and Vereia Deutscher Maschin- enbaxi-Anstalten statistics were analyzed and ap- jDropriate figures extracted. In 1957, a total of $1,031,016 worth of nonelectrical refrigeration equip- ment was exported by the following to Germany: Sweden, 49 percent; United States, 26 percent; Denmark, 12 percent; and Great Britain, 10 percent. In 1957, the following countries supplied a total of $1,487,262 in electrical refrigeration equipment: Great Britain, 80 percent; Denmark, 8 percent; United States, 3 percent; and Sweden, 2 percent. The number of domestic importer/distributors of refrigeration equipment is small. Import Duties Impoi't duties on air conditioning and refrigeration equipment are as follows: 61 Import duty in percent ad valorem Turnover tax (assessed on the duty-paid value) Tariff No. 84. 12 Air conditioning machines, self-contained, compris- ing a motor-driven fan and elements for changing the tempera- ture and humidity of air 4 6 84.15 Refrigerators and refriger- ating equipment, elec- trical and others 4 6 Refrigerating cabinets and other refrigerating furniture, incorporating a refrigerator unit, of an eflfective capacity of more than 250 liters 2 6 These duty rates and taxes apply to imports from both the United States and the member countries of the European Economic Community (Common Market). Exports Air Conditioning Equipment. — Annual exports of air conditioning equipment total about 3-5 percent of the estimated annual value of production. Based on 1958 production of about $3,445,050, total ex- ports (using 5 percent) were expected to amount to only $172,253 in 1958. Principal export markets are Lebanon and other countries in the Near and Middle East. Refrigerating Equipment. — Under the West Ger- man foreign trade commodity classification, statistics on the value of exports of refrigerating equipment are available only for the commodities under section I. Export figures for commodities under section II, and household refrigerators are grouped together into one general section and cannot be separated. In 1956, the value of West German exports of the commodities listed under section I amounted to $14,041,048, or about 27 percent of domestic pro- duction. The value of exports of the same com- modit.y group in 1957 increased by about 25 percent and amounted to $17,465,630 — approximately 45 percent of domestic production. The principal customers in 1956 were the Netherlands, Spain, Austria, the United States, India, and Brazil. In 1957, Italy became the chief buyer, followed by the United States, Belgium-Luxembourg, Japan, and Great Britain. West German exports, by value of section I re- frigeration equipment, were as follows in 1956-57, according to Vereia Deutscher Maschinenbau-Anstal- ten and Zentralverband der Elektrotechnischen In- dustrie : CourUry 1956 1957 Europe Netherlands $1,573,418 $767,788 Spain 1,555,092 218,722 Austria 867,034 569,534 France 547,876 104,720 Belgium-Luxembourg 500,990 1,038,156 Turkey 287,980 608,566 Sweden 255,162 462,196 Finland 228,718 23,562 Italy 195,160 3,290,826 Great Britain 148,036 946,526 Greece 51,646 797,062 Czechoslovakia Not available 624,036 Overseas United States 1,366,120 2,732,240 India 1,123,598 182,308 Brazil 1,107,652 246,568 Iran 310,114 34,034 Iraq 132,804 46,648 Japan 26,894 1,116,458 Peru 81,396 679,966 Mexico 55,930 223,958 The combined total export value of household refrigerators and section II refrigeration equipment was $16,984,156 in 1956 and $21,879,102 in 1957. According to reliable trade sources, the principal customers during these years were Belgium-Luxem- bovn-g, the Netherlands, North and South America, and Near Eastern countries. Market PotentiaF andf Licensing Oppor- tunities Air Conditioning Equipment. — The country now exports almost no air conditioning equipment to the United States. No change in this situation is likely to occur. The United States supplies by far the greatest amount of air conditioning equipment, and will probably supply even more, particularly for industrial and commercial purposes. Although quality is the major consideration, sales might pos- sibly increase at a higher rate if prices were lowered. Prices should tend to influence any future demand for units, particularly in private households. The two trade associations consider that a more intensified exchange of licenses and patents between domestic and United States manufacturers would benefit both countries in many cases — for both air conditioning and refrigeration equipment. The associations would welcome any such offers from United States companies, as well as any other kind 62 of cooperation, either on the company level or be- tween competent engineering associations and institutes. Refrigeration Equipment. — In 1957, exports of refrigeration eciuipment to the United States totaled $3,552,864, or 8 percent of total exports of $42,932,582. Reliable industry sources expect this share to be maintained in the future. In 1957, the United States' share of refrigeration eciuipment imports was $611,848 — 12 percent of total imports of $4,973,724. The United States will probably remain a chief supplier of refrigeration equipment for industrial and commercial uses, and is reportedly the principal supplier of commercial deep freezers, although reliable estimates are not available. United States exports to West Germany of self- contained commercial refrigerators and freezers in 1958 tripled 1956 and increased greatly over 1957. According to trade sources, United States sales may increase in the future. Although cjuality is the major consideration, a lowering of prices might result in a higher rate of increase. West Germany: Foreign Trade in Air-conditioning and Refrigerating Equipment, 195.5-58 [Quantity in metric tons; value in $1,000] 1955 1956 1957 19.58 Commodity and country Quantity Value Quantity Value Quantity Value Quantity Value Imports No. 8414— Ventilators; exhausters and blowing machines; air- conditioning apparatus and plant; parts and spare parts. No. 8416— Air-conditioning plant; parts and spare parts: United States... N.A. 79 140 N.A. 282 425 N.A. 145 197 N.A. 558 517 N.A. 96 202 N.A. 366 634 N.A. N A. Other countries Total 2)9 245 1,495 707 517 2,424 342 256 1,710 1,075 441 3,122 298 243 2,7.30 1,000 632 4,992 No. 8420— Cooling towers and cooling plant for energy produc- tion; industrial refrigerators and frigorifie and artificial ice- producing plant of which the constituent elements are not mounted on a common base plate; other machinery and plant, excluding autoclaves for the paper making industry: parts and sjiare parts for air and gas liquefying and decom- posing apparatus: United States. Other countries Total 1,740 11.3 1,096 2,941 243 1,634 1,966 1.35 1,573 3,563 305 2,340 2,973 271 1.638 5,624 461 32,504 No. 8422— Refrigerating machinery, apparatus and appliances, whether or not fitted with electrical equipment: United States Other countries ... Total 1,209 1,877 1,708 2,645 1,909 32,965 No. 8412— Air-conditioning installations for controlling tem- perature of air: United States... 131 679 422' Other countries 2 035 Total 810 397 3,361 2 457 No. 8415— Machinery, apparatus, and devices for generation of cold, driven electrically or otherwise; cooling apparatus domestic and industrial: United States. 842- Other countries 5 564 Total... 3,758 6 406- Exports No. 8414— Ventilators; exhausters and blowing machines; air- conditioning apparatus and plant; parts and spare parts, i No. 8416— Air-conditioning plant; parts and spare parts: United States... N.A. N.A. N.A. N.A. N.A. N.A. 4 2,044 N.A- N A, Other countries. 821 1,428 \,^05 2,666 1,093 821 846 74,733 1,428 1,874 71,492 1,505 1,906 80,5.37 2,666 4,428 90,106 1,093 1,668 99,341 2,048 4,308 116,416 No. 8420— Cooling towers and cooling plant for energy pro- duction; industrial refrigerators and frigorifie and artificial ice-producing plant of which the constituent elements are plant, excluding autoclaves for the paper making industry; parts and spare parts for air and gas liquefying and decom- posing apparatus: United States... Other countries Total 75,579 73,366 82,443 94,534 101,009 120,724 63 West Germany: Foreign Trade in Air-conditioning and Refrigerating Equipment, 1955-58 — Continued (Quantity in metric tons; value in $1,000] 1955 1956 1957 1958 Commodity and country Quantity Value Quantity Value Quantity Value Quantity Value Exports No. 8422— Refrigerating machinery, apparatus and appli- ances, whether or not fitted with electrical equipment: 66 12,421 94 18.065 249 14,359 .353 21,798 328 17,903 469 27,469 Other countries Total .- 12,487 18,159 14,608 22,151 18,231 27,938 No. 8412 — Air-conditioning installations for controlling tem- perature of air: 1 1,718 6 3,581 Total 1,719 457 23,272 3,587 No. 8415 — Machinery, apparatus, and devices for generators of cold, driven electrically or otherwise: cooling apparatus domestic and industrial: United States 732 38,058 Total 23,729 38,790 N. A. — not available. 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