PIPING & EQUIPMENT- A Member of AD             January * February * March 1999

VALVE   COUNTERFEITING

The Valve Manufacturer’s Association in their fall 1998 issue of the Valve Magazine has an excellent article on valve counterfeiting. As you would expect this article covers this problem from the manufacturer’s viewpoint; however, there are a number of points made that concern all of us— customer, distributor, and manufacturer.

"The counterfeiting problem exists in virtually every industry, particularly among companies with high brand awareness. Counterfeiting is particularly prevalent where pricing strategies create multiple pricing levels or points, creating opportunities for unauthorized market entries. The reconditioner must permanently and conspicuously affix markings or notices (such as the words ‘reconditioned,’ ‘repaired,’ or ‘used’) to the goods to accurately apprise the public of the changed nature or origin. The reconditioning and sale of another’s valve products without the required conspicuous ‘markings’ is merely a species of counterfeiting."

"Typical counterfeiting/reconditioning cases involve products bearing the original manufacturer’s trademark that are reconditioned and resold without any markings indicating their true reconditioned nature."

"The repair or reconditioning of products (such as valves, aircraft parts, auto parts, computer hardware, oil and gas equipment, and other products) without any identifying marks indicating the true nature and origin of such products often causes confusion among consumers in the market place. Such reconditioned products are thus ‘counterfeit’ products, and the failure to describe the true nature of such products to the general public becomes actionable false advertising. It is important to note that ‘good faith’ or lack of wrongful intent is no defense to a trademark infringement action under the Lanham Act." Lanham Act, 15 U.S.C. §1114(1)(a).

"A reconditioner may be engaging in unfair competition where there is likelihood of confusion, mistake or deception as to the affiliation, connection, or association of the defendant with the trademark’s owner, or as to the origin, sponsorship, or approval of the trademark holder’s products. Often, the counterfeiter operates a superficially legitimate manufacturing or repair factory. The factory then distributes the Counterfeit products to exporters or brokers who, in turn, distributes the counterfeit goods to importers or primary domestic distributors. The counterfeit goods are then delivered by the importers and distributors to sub-distributors and retailers who sell the goods to the public."

"Counterfeiters are becoming more sophisticated, and the counterfeiting problem is becoming more international in scope."

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Pricing-- Manufacturers are reporting mixed signals on price trends from a decrease of 1 - 2 1 /2 % to an increase of 3 - 5%. The decrease is being pushed by demand and low price import availability. Several manufacturers indicate increases from 1% to 5%. One notes lack of profit and an industry struggling to stabilize base prices and impose small increases, while another reports increases due to raw material costs. The prior quarter reports were also mixed.

Lead Times - Forecasted lead times on commodity items are reported to be from 3-4 weeks with one manufacturer to as long as 8-12 weeks from another. Because of the holidays and lower levels of production, mill inventories of pipe have been moderately reduced reports one mill. Another indicates they are not building inventories at this time. Mills still report commodity items shipping from stock 50% to 90% of the time. Non commodity items are reportedly shipping in 10 - 18 weeks, depending on the manufacturer.

Comments - The industry is still awaiting final review on the dumping case versus TaChen (Taiwan). One manufacturer indicates the industry is currently evaluating the possibility of initiating a case for dumping against several countries simultaneously. It is interesting to note that pipe imports for the first nine (9) months of 1998 were up 31% over the same period in 1997. Manufacturers indicate the market pricing for Moly, Ni, and Chrome have settled beneath the benchmark levels for surcharges. Stainless strip producers are trying to raise prices, but there is no unanimity. The demand for scrap remains low.

Pricing-- One manufacturer indicates that the pricing forecast will change down 1 - 2 1 /2 % this quarter due to the increased amount of domestic import fittings available. Another manufacturer indicates that the forecast is for no change on everyday business this quarter; however, pricing for major project buys will be down from 3 - 5%. All fitting manufacturers indicate that they are basically close to "the edge" or have hit bottom with today’s pricing levels. Last quarter closed with decreases ranging from 3 to 5%, which was uniform throughout the market.

Lead Times - Commodity items are shipping from stock 80 - 90% of the time, with lead times of 2 - 3 weeks and some at 3 - 4 weeks.  Manufacturers report that they are experiencing longer lead times and out of stock situations from pipe mills. Lead times for exotic items remain the same at 2 - 4 week levels.

Comments - One manufacturer indicated that flat roll duties were announced the end of December ’98, reaching as high as 48.4%. They expect pipe and tubing to gradually go up after the first quarter. Foreign products continue to be a factor with more end users accepting their material. Flat roll has gone up or will be in the next 60 - 90 days, which the manufacturer indicates will have an affect on them later this year.

Pricing -- Manufacturers report a forecasted pricing to be down 1 - 2 1 /2 % this quarter, following a previous quarter with no change.

Lead Times - The deliveries for commodity items is 1 - 2 weeks, with 90 to 100% of deliveries from stock. Material is readily available with backorders pertaining mainly to specials. Non-stock specials are shipping in 2 - 4 weeks, unless special forgings are needed which can run out the time to 8 to 12 weeks.

Comments - Imports are increasing from the Pacific Rim, which continues to flood this country. The quality of many of these fittings continues to be suspect.

Pricing-- Manufacturers indicate that the forecast for the quarter is for pricing to be down this quarter 1 - 2 1 /2 %; however, one manufacturer indicates that the decrease might not happen if the market has a slight rebound. The decrease is being pushed by foreign pressure, supply and demand.

Lead Times - Forecasted lead times on commodity items is 1 - 4 weeks with 70 - 90% deliveries from stock. Non-stock exotic items are shipping in 6 - 8 weeks.

Comments - Foreign competition remains strong with increases from Korea, the Philippines, and Mexico.

Pricing-- One manufacturer reports no change in pricing this quarter, and another indicates a 1% decrease that is only sporadic and not industry wide.

Lead Times - This commodity is shipping in 1 - 2 weeks and is generally 100% stock shipments.

Comments - Various dumping suits are reportedly in effect now with South Africa, Indonesia, China, and Korea. Foreign competition, especially with the "Asian Flu" definitely hurts the U.S. Increasing competition is also being seen from Brazil and Mexico. Scrap and coil prices are down.

CARBON STEEL PIPE (ERW & SEAMLESS)