Economic Impact Analysis of the

Clay Ceramics Manufacturing

NESHAP

U.S. Environmental Protection Agency

Office of Air Quality Planning and Standards (OAQPS)

Air Economics Group

Research Triangle Park, NC 27711

July 2014

Docket ID No. EPA-HQ-OAR-2013-0290
CONTACT INFORMATION

This document has been prepared by staff from the Office of Air Quality Planning and 

Standards, U.S. Environmental Protection Agency. Questions related to this document should be 

addressed to Tom Walton (C445-K), U.S. Environmental Protection Agency, Office of Air 

Quality Planning and Standards, Research Triangle Park, North Carolina 27711 

(email: Walton.tom@epa.gov). 

ACKNOWLEDGEMENTS

Personnel from RTI International and Kapur Energy Environmental Economics, LLC 

contributed significant data, analysis, and writing to this document under contract number EP-W11-029. 
CONTENTS

Section Page

1. Introduction................................................................................................................... 1-1

1.1 Executive Summary............................................................................................. 1-1

2. Profile of the Affected Industry .................................................................................... 2-1

2.1 Supply .................................................................................................................. 2-3

2.1.1 What Types of Products Does the Industry Provide? .............................. 2-3

2.1.2 What Factors Influence Market Supply? ................................................. 2-3

2.1.3 What Factors Influence the Relationship Between Output Prices 

and the Quantity Supplied?...................................................................... 2-4

2.2 Demand................................................................................................................ 2-5

2.2.1 Who Uses Ceramic Products?.................................................................. 2-5

2.2.2 What Factors Influence the Market Demand? ......................................... 2-5

2.2.3 What Factors Influence the Relationship Between Prices and the 

Quantity Demanded? ............................................................................... 2-6

2.3 Firm Behavior and Organization of Industry....................................................... 2-7

2.3.1 Market Definition..................................................................................... 2-7

2.3.2 Firm Pricing Behavior.............................................................................. 2-7

2.3.3 Affected Facilities and Ultimate Parent Companies................................ 2-8

2.4 Market Data and Trends..................................................................................... 2-10

2.4.1 Market Prices......................................................................................... 2-11

3. Costs of the Affected Industry ...................................................................................... 3-1

4. Economic Impact Analysis........................................................................................... 4-1

4.1 Description of Entities Affected .......................................................................... 4-1

4.2 Economic Screening Analysis ............................................................................. 4-1
5. Conclusion .................................................................................................................... 5-1

6. References..................................................................................................................... 6-1

Appendixes

A: Historical Data for Ceramic Wall and Floor Tile Manufacturing........................... A-1
LIST OF FIGURES

Number Page

2-1. Capacity Utilization for Nonmetallic Mineral Products (NAICS 327) ........................ 2-2

2-2. Real Price Trends for Ceramic Products..................................................................... 2-12
LIST OF TABLES

Number Page

2-1. Types of Products by the Ceramics Manufacturing Industry ....................................... 2-4

2-2. Number of Establishments by Census Region.............................................................. 2-8

2-3. Affected Production Facilities by Census Region: Ceramic Tile and Sanitary 

Ware.............................................................................................................................. 2-9

2-4. Parent Company Size Information................................................................................ 2-9

3-1. Summary of Testing and Monitoring Costs.................................................................. 3-1

4-1. Summary Statistics for Economic Impact Analysis....................................................... 4-2
1-1

SECTION 1

INTRODUCTION

The Environmental Protection Agency (EPA) promulgated Maximum Achievable 

Control Technology (MACT) standards for hazardous air pollutants emitted by clay ceramics 

manufacturing companies in 2003. These standards were vacated by the D.C. Circuit Court of 

Appeals in 2007. The Agency is now aiming to sign proposed standards to replace the vacated 

rule by August 28, 2014 and a final rule for promulgation by June 30, 2015.

1.1 Executive Summary

The purpose of this report is to evaluate the economic impacts of pollution control 

requirements on ceramic wall and floor tile and sanitary ware manufacturing businesses to help 

the Agency develop updated MACT standards for these businesses. The key results of the 

Economic Impact Analysis (EIA) are as follows:

■ Engineering Costs: Dal-Tile, a wall tile company, and Kohler Co., a Sanitary Ware 

company, are major sources and will incur costs as a result of the rule. EPA estimates 

that the total annualized costs as a result of this rule for Dal-Tile will be $8,264 and 

for Kohler Co. will be $45,770 for a total annualized cost of $54,034 (2011$).

■ Economic Impacts: The economic impact of compliance costs is less than 0.001% of 

sales for both companies affected. Hence, the economic impact for compliance is 

minimal.

1.2 Organization of the Report

The report is organized as follows: Section 2 provides a profile of the industry which 

includes a description of the supply and demand of clay ceramic products. This section also 

presents information on industry organization and available market data and trends in the 

industry. Market data on manufacturers’ shipments, foreign trade, and apparent consumption for 

ceramic wall and floor tiles is included in Appendix A. Section 3 describes the company-level 

costs that businesses will face to comply with the updated rule. Section 4 explains the economic 

impacts of complying with this rule and Section 5 provides conclusions. 
2-1

SECTION 2

PROFILE OF THE AFFECTED INDUSTRY

Ceramic wall and floor tiles and sanitary wares are inputs to build different types of 

structures, including homes, buildings, and office facilities (U.S. EPA, 2003). Floor and wall tile 

serve a decorative purpose and are used to add character to homes and buildings; sanitary ware 

and bathroom accessories are products installed in bathrooms (or kitchens, when it comes to 

sinks) and are primarily used for cleansing (U.S. EPA, 2003). Ceramic Tile's end use break down 

in 2010 was 56.4% in residential sales dollars and 43.6% in commercial sales dollars (Ceramic 

Tile and Stone Consultants, 2013).

To provide a general overview of current conditions in the affected industry, we used the 

U.S. government’s official measures reported in the Annual Survey of Manufacturers (ASM), 

County Business Patterns, and Current Industrial Reports. Because the latest year of data (2010) 

differs from historical industry trends, it is unclear whether the industry without the proposed 

rule would be similar to the industry today. As a result, the profile provides information on a 

range of factors that may influence how the ceramic floor and wall tile and sanitary ware markets 

may evolve.

Federal statistical agencies classify business establishments in this industry using two 

North American Industry Classification System (NAICS) codes:1

■ 327111 Vitreous china plumbing fixture and china and earthenware bathroom 

accessories manufacturing

■ 327122 Ceramic wall and floor tile manufacturing

In the rest of the industry profile section, we use the term “sanitary ware” to refer to 

products produced by the NAICS 327111 industry, and the term “ceramic wall and floor tile” to 

refer to products produced by the NAICS 327122 industry. We also use the term “ceramic 

products” to refer to both ceramic floor and wall tile and sanitary ware products.

 

1 In 2012, the sanitary ware industry (327111) was classified under NAICS 327110 Pottery, Ceramics, and 

Plumbing Fixture Manufacturing. See http://www.census.gov/cgibin/sssd/naics/naicsrch?code=327110&search=2012. In 2012, the ceramic tile industry (327122) was classified 

under NAICS 327120 Clay Building Material and Refractories Manufacturing. See http://www.census.gov/cgibin/sssd/naics/naicsrch?code=327120&search=2012.
2-2

In 2011, the value of products shipped in the two industries was approximately $1.1 

billion (U.S. Census Bureau, 2013f). The value from NAICS 327122 was about twice of that 

from NAICS 327111. The ASM and the County Business Patterns reported that 151 

establishments (24 in 327111 and 127 in NAICS 327122) employed 5,980 people with a total 

annual payroll of about $243 million in 2011. (U.S. Census Bureau, 2013a, b).

During 2010, approximately 700 million square feet of tiles were produced by the 

ceramic wall and floor tile industry (U.S. Department of Commerce, Census Bureau, 2011). 

Federal Reserve data suggest the capacity utilization rate for the industries under the broad 327 

NAICS is close to 56% (Board of Governors of the Federal Reserve System, 2013) (see Figure 

2-1).

Figure 2-1. Capacity Utilization for Nonmetallic Mineral Products (NAICS 327)

Source: Federal Reserve Board. 2013. Industrial Production and Capacity Utilization—G.17. 

http://www.federalreserve.gov/datadownload/Chart.aspx?rel=G17&series=a0ccc54490f3f114f44928eb9cb9ec98

&lastObs=20&from=&to=&filetype=spreadsheetml&label=include&layout=seriescolumn&pp=Download 

(December 20, 2013).

The current observed conditions are influenced by the recent steep declines in the 

residential construction market. For example, 2011 new privately owned housing starts (608,800) 

units are well below levels observed in 2000 (1.6 million) and 1990 (1.2 million) (U.S. Census 

Bureau, 2013c). Since 2010, new residential housing starts have begun to grow again, but levels 
2-3

are still much lower than the previous two decades. New privately owned housing starts in July 

2013 were at a seasonally adjusted annual rate of 852,000 (U.S. Census Bureau, 2013d).

2.1 Supply

To better understand the markets for affected products, we consider the group of sellers 

that provide goods to the market and common factors that influence supply (e.g., input prices) 

and quantity of goods supplied (e.g., output prices).

2.1.1 What Types of Products Does the Industry Provide?

Table 2-1 lists categories of sanitary ware (NAICS 327111) and ceramic wall and floor 

tile (NAICS 327122) products.

2.1.2 What Factors Influence Market Supply?

The general process steps used in the production of ceramics include raw material 

processing, mixing, forming, shape drying, glazing, firing, and finishing (U.S. EPA, 2003; U.S. 

EPA, 1996). Census data for NAICS 327122 ceramic wall and floor tile manufacturing and for 

NAICS 327111 sanitary ware manufacturing suggest that in both industries around 70% of the 

product’s value is associated with value-added activities (i.e., labor and capital earnings and 

energy costs) (U.S. Census Bureau 2013 (a)). During the last 5 years, labor costs have remained 

flat in the nonmetallic mineral products sector. The U.S. Bureau of Labor Statistics reports that 

average annual hourly earnings (adjusted for inflation) of all employees was about $20 per hour 

(U.S. Bureau of Labor Statistics, 2013a, b).

The value of intermediate goods used in these processes (i.e., raw materials including 

clays and other minerals mined from natural deposits, and high purity powders prepared by 

chemical synthesis [U.S. EPA, 2003; U.S. EPA, 1996]) make up the remaining 30% of the 

ceramics’ total product value. Intermediate production costs can be influenced by changes in raw 

clay material prices, but the prices of these materials have not fluctuated recently. Ball clay 

prices primarily used in floor and wall tile, (consuming 38% of ball clay production in 2011) and 

sanitary ware (consuming 20% of ball clay production in 2011) were $45 per metric ton in 2010 

and $46 per metric ton in 2011; the average free alongside ship value for exported ball clay and 

the average customs value for imported ball clay were, respectively, $59 per metric ton and $318 

per metric ton (U.S. Geological Survey [USGS], 2013).
2-4

Table 2-1. Types of Products by the Ceramics Manufacturing Industry

2007 NAICS 2012 NAICS Product

327111 327110 Bathroom accessories, vitreous china and earthenware, manufacturing

327111 327110 Bidets, vitreous china, manufacturing

327111 327110 Drinking fountains, vitreous china, non-refrigerated, manufacturing

327111 327110 Faucet handles, vitreous china and earthenware, manufacturing

327111 327110 Handles, faucet, vitreous china and earthenware, manufacturing

327111 327110 Lavatories, vitreous china, manufacturing

327111 327110 Plumbing fixtures, vitreous china, manufacturing

327111 327110 Sinks, vitreous china, manufacturing

327111 327110 Soap dishes, vitreous china and earthenware, manufacturing

327111 327110 Tanks, flush, vitreous china, manufacturing

327111 327110 Toilet fixtures, vitreous china, manufacturing

327111 327110 Towel bar holders, vitreous china and earthenware, manufacturing

327111 327110 Urinals, vitreous china, manufacturing

327111 327110 Water closet bowls, vitreous china, manufacturing

327122 327120 Ceramic tiles, floor and wall, manufacturing

327122 327120 Floor tile, ceramic, manufacturing

327122 327120 Mosaic tile, ceramic, manufacturing

327122 327120 Quarry tiles, clay, manufacturing

327122 327120 Tile, ceramic wall and floor, manufacturing

327122 327120 Wall tile, ceramic, manufacturing

Source: U.S. Census Bureau 2013. 2012 NAICS definition, 327110 Pottery, Ceramics, and Plumbing Fixture 

Manufacturing. http://www.census.gov/cgibin/sssd/naics/naicsrch?code=327110&search=2012%20NAICS%20Search

2.1.3 What Factors Influence the Relationship Between Output Prices and the Quantity 

Supplied?

All other things equal, wall and floor tile and sanitary ware manufacturers are likely to 

offer to sell more when the prices of wall and floor tile and sanitary ware rise. The price 

elasticity of supply measures how much the quantity of wall and floor tile/sanitary ware supplied 

responds to changes in its price.2 If manufacturers have a significant amount of flexibility to 

change the amount they produce when the price rises, the supply is elastic. In contrast, if the 

 

2 The measure is computed as the percentage change in quantity supplied divided by the percentage change in 

price.
2-5

quantity produced and supplied only changes by small amounts when the price rises, the supply 

is inelastic. A key determinant of the price elasticity of supply is the length of the time period 

over which the product choices can be made. During shorter periods, it is more difficult for the 

firm to adjust inputs and increase production, because quantities of some factors are fixed in the 

short run.

2.2 Demand

Ceramic wall and floor tiles and sanitary wares are inputs to build different types of 

structures, including homes, buildings, and office facilities, and are influenced by overall 

macroeconomic trends and conditions in the residential housing industry.

2.2.1 Who Uses Ceramic Products?

Sanitary ware and ceramic floor and wall tile are used in the construction of homes, 

buildings, and structures: floor and wall tile serve a decorative purpose and are used to add 

character to homes and buildings. Sanitary wares (and bathroom accessories) are products 

installed in bathrooms and are primarily used for cleansing (U.S. EPA, 2003). In the case of 

sinks, sanitary wares are also installed in kitchens (U.S. EPA, 2003). These products are 

purchased by construction companies to be used as inputs for the production of homes, buildings, 

and office facilities. Once these structures are built, consumers then purchase these structures 

from the construction companies. However, if consumers build homes or make improvements to 

existing structures themselves, they may directly purchase and install sanitary ware (bathroom 

accessories,) and ceramic tiles (U.S. EPA, 2003).

2.2.2 What Factors Influence the Market Demand?

Ceramics are designed for specific commercial or industrial applications to withstand 

high temperatures and electrical voltage, or to resist chemical attack, fatigue failure, or rapid 

wear (Midwest Research Institute, 1999).

2.2.2.1 Price of Related Goods

There are similar-use products made from materials other than clay. Below we discuss 

sanitary ware and ceramic wall and floor tile separately.

2.2.2.1.1 Sanitary Ware

As EPA (2003) mentions:

“Bathroom accessories such as soap dishes, towel racks, toothbrush holders, and faucet 

fixtures come in an array of materials, including plastic, brushed or polished metal, and glass. 
2-6

Consumers usually base their choice of bathroom accessories on their specific tastes and the type 

of look they want to create as they decorate the bathroom. Generally plastic accessories are 

relatively inexpensive, though when higher quality plastics are used, producers can charge prices 

in the same range as those for bathroom accessories made from glass, ceramics, or metal.”

“Clay is the most common material used for the manufacture of sanitary ware, but sinks 

and toilets can also be made out of stainless or enameled steel, fiberglass, or enameled cast iron. 

These materials all possess similar characteristics to ceramic sanitary ware, but to differing 

degrees. For example, steel may be less subject to cracking than ceramic material; however it is 

not as heat resistant. Another material used to produce sanitary ware is marble, which is one of 

the most expensive materials available for sanitary ware production.”

2.2.2.1.2 Ceramic Wall and Floor Tile

The substitutes for ceramic floor tile are other floor covering materials including 

laminate, hardwood, stone, vinyl sheet & floor tile, carpet & area rug, and other resilient flooring 

(Floor Covering Weekly, 2013). In 2012, Ceramic wall and floor tile accounted for 12.5% of 

U.S. Floor Covering Sales, on the same level with hardwood (10.4%) and vinyl sheet & floor tile 

(12.6%) but far less than carpet & area rug (52.1%) (Floor Covering Weekly, 2013). Among 

these different types of materials, natural stone is the most expensive, having an average value of 

around $4 per square foot during the years between 2008 and 2012. Hardwood has an average 

price of around $2. All other types, including ceramic tile, have a price of around $1 per square 

foot, except vinyl sheet & floor tile that has a price of around $0.7 per square foot (Floor 

Covering Weekly, 2013).

2.2.3 What Factors Influence the Relationship Between Prices and the Quantity Demanded?

All other things equal, consumers will likely buy fewer ceramic products when the price 

of the product rises. The price elasticity of demand measures the size of the price response.3

Several factors influence how sensitive consumers are to price changes. If consumers can easily 

switch from one product to another because there are many close substitutes, demand tends to be 

more elastic. This is particularly true for more narrow market definitions (mosaic versus quarry 

tile) and over longer time horizons for the consumption decision (months versus years).

 

3 The measure is computed as the percentage change in quantity demanded divided by the percentage change in 

price.
2-7

2.3 Firm Behavior and Organization of Industry

2.3.1 Market Definition

Market definition boundaries are commonly defined in two dimensions: product 

substitution and geography. Based on product substitution characteristics and available data, we 

rely on the Census definitions to define two groups of markets in which buyers are more likely to 

view products as substitutes:

■ Sanitary ware

■ Ceramic wall and floor tile

We found that international trade represented a large fraction of economic activity for 

ceramic wall and floor tile (see Section 2.4).

2.3.2 Firm Pricing Behavior

Economists have developed a system for grouping markets that helps describe the pricing 

behavior of firms. At one end of the spectrum, firms have little control over pricing for their 

products. Put another way, firms are price takers, and price is determined by supply and demand 

conditions. This basic model is more likely to hold when the industry has a large number of 

sellers, goods are identical, and barriers for entry and exit (laws, high capital requirements, or 

patents) are low. At the other end of the spectrum, there is a single firm that searches for the 

price-output combination that maximizes its profit. This basic model is more likely to hold when 

there are significant barriers to entry (industries with economies of scale or ownership of a 

patent).

When markets have a small number of firms selling identical products, firms may not 

necessarily be price takers; instead, they may be able to determine their price while considering 

how competitors respond to their own decisions. To assess the extent to which affected markets 

may be concentrated among a small number of sellers we compiled and estimated Table 2-2.

The latest 5-year Census statistics describing U.S. concentration at the 6-digit NAICS 

code level, found that the ceramic wall and floor tile manufacturing industry has a Herfindahl 

index level (a measurement of concentration) that government agencies consider moderately 

concentrated (U.S. Census Bureau, 2013e; U.S. Department of Justice and the Federal Trade 

Commission, 1997). This index is not available for the sanitary ware industry. However, the data 

suggest that the sanitary ware industry is even more concentrated. The 4 largest ceramic wall and 

floor tile manufacturing companies account for 59.8% of the industry’s total shipment value, 
2-8

while the 4 largest sanitary ware manufacturing companies account for 87.2% of the industry’s 

shipment (U.S. Census Bureau, 2013e).

Table 2-2. Number of Establishments by Census Region

Census Region Number of Establishments, NAICS 

327111

Number of Establishments, NAICS 

327122

East North Central 6 18

East South Central 1 15

Mid-Atlantic 4 11

Mountain 1 13

New England 0 5

Pacific 5 33

South Atlantic 3 16

West North Central 1 9

West South Central 3 7

Note: In County Business Pattern, an “establishment” is defined as follows –

“An establishment is a single physical location at which business is conducted or services or industrial operations 

are performed. It is not necessarily identical with a company or enterprise, which may consist of one or more 

establishments. When two or more activities are carried on at a single location under a single ownership, all 

activities generally are grouped together as a single establishment. The entire establishment is classified on the 

basis of its major activity and all data are included in that classification.”

Sources: U.S. Census Bureau. 2013; Geography Area Series: County Business Patterns: 2011; 

http://censtats.census.gov/cgi-bin/cbpnaic/cbpcomp.pl (17 Dec 2013); 

U.S. Census Bureau. 2013; Geography Area Series: County Business Patterns: 2011:

Definitions; http://www.census.gov/econ/cbp/definitions.htm

U.S. Census Bureau (undated), Census Regions and Divisions of the United States, 

http://www.census.gov/geo/maps-data/maps/pdfs/reference/us_regdiv.pdf

2.3.3 Affected Facilities and Ultimate Parent Companies

RTI has identified the major source facilities that are expected to be covered by the rule 

in Table 2-3. Two companies own four facilities; two of the four affected facilities are located in 

the south central region.
2-9

Table 2-3. Affected Production Facilities by Census Region: Ceramic Tile and Sanitary 

Ware

Facility/Company - Ceramic Tile Facility Location Tile Type Region

Dal-Tile/Mohawk Industries El Paso, TX Wall tile West South Central

Company - Sanitary Ware Facility Location Region

Kohler Co. Kohler, WI East North Central

Kohler Co. Spartanburg, SC South Atlantic

Kohler Co. Brownwood, TX West South Central

2.3.3.1 Small Businesses

The Regulatory Flexibility Act (RFA) as amended by the Small Business Regulatory 

Enforcement Fairness Act (SBREFA) requires federal departments and agencies to evaluate if 

and/or how their regulations affect small business entities. Specifically, the Agency must 

determine if a regulation is expected to have a significant economic impact on a substantial 

number of small entities. Small entities include small businesses, small organizations, and small 

governmental jurisdictions. The business is defined as the owner company, rather than the 

facility; the size of the owner company determines the resources it has available to comply with 

the rule. The Small Business Administration website specifies the criteria for a company to be 

considered a small business. The size standards for NAICS 327111 (which in 2012 was changed 

to NAICS 327110) and NAICS 327122 (which in 2012 was changed to NAICS 327120) is any 

company with 750 or fewer employees. Thus, as shown in Table 2-4, neither of the affected 

owner-companies is a small entity. 

Table 2-4. Parent Company Size Information

Parent Company Sales (million $) Employment* Small

Mohawk Industries, Inc. 5,642.3* 25,100 No

Kohler Co. 4,680* 30,000 No

*2011 data

Sources: Mohawk Industries, Inc. 2012 Form 10-

K http://www.sec.gov/Archives/edgar/data/851968/000085196813000027/a201210k.htm#s83B6709C35E312765

F11526DA34F90DA

Kohler: Forbes.com 

http://www.forbes.com/companies/kohler
2-10

2.4 Market Data and Trends

This section presents historical market data for Ceramic wall and floor tiles and sanitary 

ware. Historical market data include U.S. volumes for manufacturers’ shipments,4 foreign trade, 

and apparent consumption. Data for ceramic wall and floor tile, obtained from various years of 

Current Industrial Reports published by the U.S. Census Bureau, are shown in Appendix A. 

These data reveal that the clay floor and wall tile market has two characteristics. First, the 

historical shipment levels have been stable with mild fluctuations. Second, imports account for 

much larger proportion of the apparent consumption than do shipments. Imports of wall and 

floor tiles experienced declines starting in 2007, the year the recent economic crisis set in, and 

continued to decline post-crisis. The shipments also experienced a decline in 2007, although it 

was mild compared to the drastic drop of imports. The level of shipments has come back to its 

pre-2007 levels as of 2010. The decline in imports since 2007 is due to the decreased demand 

resulting from the 2007–2008 recession rather than to structural changes within the industry. We 

expect both overall demand and imports to come back to prerecession levels in the future. This 

projection is also supported by the recent annual report of a large company producing these 

products. The annual report of Mohawk Industries shows the company recovering after 

exhibiting declines during the recession.

Kohler Co. manufactures sanitary ware, in addition to other products. There is evidence 

that the sanitary ware industry will see rising domestic production in the coming years. Toilets 

are one of the major sanitary ware products. According to an article from the Wall Street Journal 

by James R. Hagerty, Kohler Co. is the biggest toilet supplier in the U.S., with an estimated 24% 

of the U.S. market. The article mentions that making toilets requires lots of manual labor and for 

this reason most production moved over the past two decades to lower-cost countries, mostly 

China and Mexico. It was estimated that three quarters of the 10.6 million residential and 

commercial toilets sold in the U.S. in the year 2012 were imports; there are just 7 toilet plants in 

the U.S. now, compared with 48 in the late 1970s. However, because of high shipping costs and 

increasing wages in China and Mexico, U.S. manufacturing of toilets is making a comeback 

(Hagerty, 2013).

 

4 The source reports list both shipment and production quantities. Here we have chosen shipment quantities over 

production quantities, even though these do not differ by much in each year nor show different trends over time. 

The reason to choose shipment numbers over production numbers is that shipment quantity is the number that is 

relevant for final consumption. In fact, when the data source reports calculate “apparent consumption,” they use 

shipment numbers, not production numbers.
2-11

Kohler Co. has four toilet plants, three in the U.S. and one in Mexico. Its revenues rose 

from $4.68 billion in 2011 (Forbes, 2011) to $5 billion in 2012 (Forbes, 2013). David Kohler, the 

president of Kohler Co., says in an interview that “the economy definitely is on stronger footing 

and national and regional businesses are doing better” (Kirchen, 2013). The likely increase in 

residential building during the economy’s recovery should lead to an increased demand for 

sanitary ware. 

The above company-specific information supports the recovery since 2007 we see in the 

Current Industrial Reports’ information for the ceramic tile industry. The Current Industrial 

Reports do not provide data for the sanitary ware industry. However, based on the above 

company-specific information and the fact that sanitary ware is demanded by residential and 

commercial building, we believe that the sanitary ware industry, similar to the ceramic tile 

industry, will recover as the building and construction industry revives. In addition, our 

prediction that the ceramic tile industry is only experiencing a temporary setback and will come 

back to prerecession levels also is supported by recent reports for the clay and shale industry, 

which is upstream of the ceramic products industry. One of the most common types of clays used 

to produce ceramic products is common clay and shale (U.S. EPA, 2003). A recent advance 

report published in 2013 by U.S. Department of the Interior, U.S. Geological Service, suggests 

that once statistical data become available, the country may see a moderate growth in common 

clay sales in 2012 (U.S. Department of the Interior, 2013). In their analysis, the factors 

supporting the growth are increases in housing starts and construction spending for commercial 

buildings, which are the sources of demand for ceramic tile and sanitary ware.

2.4.1 Market Prices

In 2010, the average price of clay floor and wall tile was approximately $1.30 per square 

foot (U.S. Department of Commerce, Census Bureau, 2011). Since 2005, the average nominal 

price for clay floor and wall tile has remained flat, while the price for sanitary ware has risen 

moderately (Figure 2-2).
2-12

Figure 2-2. Real Price Trends for Ceramic Products

Sources:

U.S. Bureau of Labor Statistics. 2013. Employment, Hours, and Earnings from the Current Employment Statistics 

survey (National) Series ID: CEU3132700003.

U.S. Bureau of Labor Statistics. 2013. Producer Price Index—Clay building material and refractories manufacturing 

Clay floor and wall tile, glazed and unglazed Series ID: PCU3271203271202.

U.S. Bureau of Labor Statistics. 2013. Producer Price Index—Pottery, ceramics, and plumbing fixture 

manufacturing Vitreous china plumbing fixture and china and earthenware bathroom accessories Series ID: 

PCU3271103271101.

0

20

40

60

80

100

120

140

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Price 

Index

Year

Vitreous china plumbing fixture and china and earthenware bathroom accessories

Clay floor and wall tile, glazed and unglazed
3-1

SECTION 3

COSTS OF THE AFFECTED INDUSTRY

RTI has identified the major source facilities that are expected to be covered by the rule 

in Section 2, Table 2-3. There are two companies that own four facilities. Dal-Tile, a wall tile 

company, and Kohler Co., a sanitary ware company, are major sources and will incur costs as a 

result of the rule. However, they will not incur any control costs, only emissions testing costs and 

monitoring, record keeping and reporting costs. Table 3-1 shows the costs for these two 

companies. As shown in Table 3-1 the costs for these two companies are extremely low, so 

economic impacts are expected to be small.

Table 3-1. Summary of Testing and Monitoring Costs

Company

Annualized 

Testing Cost 

(thousand 2011 $)

Annual Monitoring 

Cost 

(thousand 2011 $)

Total Annualized 

Compliance Costs 

(thousand 2011 $)

Company - Ceramic Tile - Wall Tile

Dal-Tile-El Paso 5.3 3.0 8.3

Sanitary Ware Company

Kohler-Spartanburg Plant 12.8 11.9 24.7

Kohler-Brownwood Plant 4.7 3.0 7.7

Kohler-Wisconsin Plant 7.4 6.0 13.4

Kohler - All Plants Combined 24.9 20.9 45.8

Total, All Companies 30.2 23.9 54.0

Source: CC Testing and Monitoring Costs_5-2-14-1.
4-1

SECTION 4

ECONOMIC IMPACT ANALYSIS

4.1 Description of Entities Affected

As stated in Section 3, there are only two major sources. These are the two companies 

that have not installed controls, thus incurring compliance costs: Dal-Tile, a wall tile company,

and Kohler Co., a sanitary ware company.

4.2 Economic Screening Analysis

In order to determine the effects of the regulatory program on each company, we 

compared pollution control costs to total sales for the ultimate parent companies of these 

businesses. We calculated the cost-to-sales ratio, by dividing an ultimate parent company’s total 

annual compliance cost by its reported revenue: 

CSR = � TTTTTi/TTj

n

i

where

CSR = cost-to-sales ratio,

TACCi = total annualized compliance costs, 

i = index of the number of affected plants owned by company j, 

n = number of affected plants, and 

TRj = total revenue from all operations of ultimate parent company j.
4-2

Table 4-1. Summary Statistics for Economic Impact Analysis

Company Parent Company CSR (Cost-to-Sales Ratio, %)

Company - Ceramic Tile - Wall Tile

Dal-Tile-El Paso Mohawk Industries, Inc. < 0.001%

Company - Sanitary Ware

Kohler - All Plants Combined Kohler Co. <0.001%

Sources: Mohawk Industries, Inc. 2012 Form 10-K 

http://www.sec.gov/Archives/edgar/data/851968/000085196813000027/a201210k.htm#s83B6709C35E312765F1

1526DA34F90DA

http://www.forbes.com/companies/kohler

 CC Testing and Monitoring Costs_5-2-14-1

To identify the total revenue for Mohawk Industries, Inc. the ultimate parent company of 

Dal-Tile El Paso, we accessed the Securities and Exchange Commission (SEC) EDGAR

Database. The SEC website describes this database as follows:

“EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system, performs 

automated collection, validation, indexing, acceptance, and forwarding of submissions by 

companies and others who are required by law to file forms with the U.S. Securities and 

Exchange Commission (SEC). Its primary purpose is to increase the efficiency and fairness of 

the securities market for the benefit of investors, corporations, and the economy by accelerating 

the receipt, acceptance, dissemination, and analysis of time-sensitive corporate information filed 

with the agency.”

Forbes database was used to obtain the total revenue for Kohler Company, which is 

privately held. Forbes.com was founded in 1996 and is part of Forbes Digital, a division of 

Forbes Media LLC. Forbes is a leading source for reliable business news and financial 

information. 

The results of the screening analysis in Table 4-1 show that the economic impact of 

compliance costs is less than 0.001% of sales for both companies affected. Hence, the economic 

impact for compliance is minimal. Also, as noted in Section 2, neither affected firm is a small 

business. Because no small firms face significant control costs, there is no significant impact on 

small entities. Thus this regulation is not expected to have significant impact on a substantial 

number of small entities.
5-1

SECTION 5

CONCLUSION

The Agency has considered the economic impacts of this rule on companies and found 

that this rule will have minimal economic impact on the entities affected by the rule. The rule 

will impact two ultimate parent companies. One of these is the parent company of a wall tile 

manufacturing company and the other is the parent company of a sanitary ware manufacturing 

company. Both of these businesses would have annualized cost of less than .001% of sales 

associated with meeting the requirements. Hence, the burden of this rule on these businesses is 

very small.
6-1

SECTION 6

REFERENCES

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http://www.ctasc.com/.docs/pg/332

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f114f44928eb9cb9ec98&lastObs=20&from=&to=&filetype=spreadsheetml&label=inclu

de&layout=seriescolumn&pp=Download (December 20, 2013).

Floor Covering Weekly (July 22, 2013). Statistical Report 2012. 

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Hagerty, James R. (Sep 24, 2013). America’s Toilet Turnaround. The Wall Street Journal. 

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Ho, M., R. Morgenstern, J. Shih. 2008. Impact of Carbon Price Policies on U.S. Industry. 

Resources for the Future Discussion Paper DP 08-37. 

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Kirchen, Rich (Oct 15, 2013). PGA at Whistling Straits to offer 'on-course' suites. The Business 

Journal Serving Greater Milwaukee. 

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Kohler Co. http://www.forbes.com/companies/kohler and 

http://www.forbes.com/lists/2011/21/private-companies-11_Kohler_O87B.html

Midwest Research Institute. 1999. Characterization of the Ceramic Manufacturing Industry. Page 

2

Mohawk Industries, Inc. 2012. 2011 Annual Report. http://phx.corporateir.net/External.File?item=UGFyZW50SUQ9MTMzMjE1fENoaWxkSUQ9LTF8VHlwZ

T0z&t=1

Mohawk Industries, Inc. 2012 Form 10-K 

http://www.sec.gov/Archives/edgar/data/851968/000085196813000027/a201210k.htm#s

83B6709C35E312765F11526DA34F90DA

Mohawk Industries, Inc. 2012 Annual Report. http://www.annualreports.com/Company/3634

Monarch Ceramic Tile, Inc. http://www.manta.com/c/mm75yp9/monarch-ceramic-tile-inc
6-2

Rutherford, T.F. 2002. Lecture Notes on Constant Elasticity Functions. 

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Employment Statistics survey (National) Series ID: CEU3132700003.

U.S. Bureau of Labor Statistics. 2013b. Consumer Price Index—All Urban Consumers Series ID: 

CUUR0000SA0.

U.S. Bureau of Labor Statistics. 2013c. Producer Price Index—Clay building material and 

refractories manufacturing Clay floor and wall tile, glazed and unglazed Series ID: 

PCU3271203271202.

U.S. Bureau of Labor Statistics. 2013d. Producer Price Index—Pottery, ceramics, and plumbing 

fixture manufacturing Vitreous china plumbing fixture and china and earthenware 

bathroom accessories Series ID: PCU3271103271101.U.S. Census Bureau 2013 (a); 

Annual Survey of Manufactures: General Statistics: Statistics for Industry Groups and 

Industries: 2011 and 2010; 

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2011_31GS101&prodType=table (19 December 2013).

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2007_US_31SR12&prodType=table (19 December 2013).

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2011_31VS101&prodType=table; (09 December 2013).

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Fixture Manufacturing. http://www.census.gov/cgibin/sssd/naics/naicsrch?code=327110&search=2012%20NAICS%20Search
6-3

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Construction Products—Summary 2008.

U.S. Department of Commerce, Census Bureau, 2007: Current Industrial Reports for Clay 

Construction Products—Summary 2006.

U.S. Department of Commerce, Census Bureau, 2005: Current Industrial Reports for Clay 

Construction Products—Summary 2004.

U.S. Department of Commerce, Census Bureau, 2004: Current Industrial Reports for Clay 

Construction Products—Summary 2003.

U.S. Department of Commerce, Census Bureau, 2003: Current Industrial Reports for Clay 

Construction Products—Summary 2002.

U.S. Department of Commerce, Census Bureau, 2002: Current Industrial Reports for Clay 

Construction Products—Summary 2001.

U.S. Department of Commerce, Census Bureau, 2000: Current Industrial Reports for Clay 

Construction Products—Summary 1999.

U.S. Department of Commerce, Census Bureau, 2000. Current Industrial Reports for Clay 

Construction Products—Summary 1998.

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Construction Products—Summary 1997.

U.S. Department of Commerce, Census Bureau. 1996. Current Industrial Reports for Clay 

Construction Products; Summary, 1995.

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6-4

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A-1

APPENDIX A

HISTORICAL DATA FOR CERAMIC WALL AND FLOOR TILE MANUFACTURING 
A-2

Table A-1. Historical Data for Ceramic Wall and Floor Tile Manufacturing (thousands of 

square feet): 1993–2010

Year

Shipments of Clay 

Floor and Wall 

Tile Exportsa Importsa

Apparent 

Consumptionb

1993 558,700 43,307c 641,615 1,157,008

1994 604,408 40,107c 711,193 1,275,494

1995 568,094 42,649c 774,571 1,300,016

1996 580,392 41,789c 884,051 1,422,655

1997 618,978 42,442 1,022,852 1,599,388

1998 636,805 41,635 1,232,974 1,828,144

1999 636,242 30,731 1,494,031 2,099,542

2000 650,483 36,188 1,669,677 2,283,972

2001 591,080 33,304 1,716,360 2,274,137

2002 649,480 41,699 2,034,617 2,642,397

2003 614,850 28,933 2,231,166 2,817,082

2004 695,386 34,854 2,488,165 3,148,698

2005 658,198 37,017 2,638,332 3,259,513

2006 629,672 45,101 2,732,194 3,316,765

2007 544,988 47,469 1,191,974 1,689,494

2008 484,956 50,515 1,685,532 2,119,973

2009 571,255 42,428c 1,221,085d 1,749,911

2010 649,057 36,982c 1,293,726d 1,905,801

Average Annual Growth Rates

1993–2008e −0.64% 2.33% 9.35% 5.85%

1997–2008e −1.87% 3.32% 8.24% 4.89%

1997–2010e 0.83% 0.59% 5.31% 3.48%

1993–2010e 1.28% 0.36% 6.98% 4.66%

Note: Table 2-6 presents data for clay floor and wall tile, which, by 2007 NAICS definition, is associated with NAICS 327122, 

Ceramic Wall and Floor Tile Manufacturing. 

Calculation rules used when computing numbers from the Industrial reports for this table are 1 thousand of square feet = 

0.092903 thousand of square meters and 1 million square feet = 1,000 thousand square feet

a The export quantities for 1993–1996 are not available in the source reports (marked as (X)). The export and import quantities 

for 2009 and 2010 are not available in the source report; only the export and import values are given.

b Apparent Consumption = Shipments of Clay Floor and Wall Tile − Exports + Imports

(continued)
A-3

Table A-1. Historical Data for Clay Floor and Wall Tile (thousands of square feet): 1993–

2010 (continued)

c Because the export quantity data for clay floor and wall tile are not available for 1993–1996, and 2009 and 2010, the numbers 

for 1993–1996 and 2009 and 2010 are estimates for clay floor and wall tile exports. The export numbers for clay floor and wall 

tile seem to be significantly and negatively correlated to shipment numbers. So we have estimated the numbers for 1993–1996 

and 2009 and 2010 based on the regression exports = a + b*shipments, using 1997 to 2008 data. The estimate for b is 

significant at the 5% level.

d Because import quantity data for clay floor and wall tile are not available for 2009 and 2010, the numbers here are based on 

estimates. (Only import values are available.) The import quantities exhibit a steady increasing pattern between 1993 and 

2006, a drastic drop in 2007, and a significant increase in 2008. So estimating 2009 and 2010 levels builds on the basic 

judgment of whether the 2009 and 2010 levels remained at the 2007 and 2008 low or rose quickly toward the 2006 level after 

the increase in 2008. Numbers of import values suggest that the former case is more likely to be true. Specifically, the import 

values also experienced a similar drastic drop in 2007 and a significant increase in 2008. But the import values in 2009 and 

2010 are between 2007 and 2008 values and closer to the 2007 value. The import values suggest that the import quantities in 

2009 and 2010 remained at the 2007 and 2008 low instead of coming back. Further, the yearly average price, computed as the 

import value divided by the import quantity in a year, remained stable and at about $10 per square meter (Specifically, the 

import quantities in 2005, 2006, 2007, and 2008 are, respectively, 245109, 253829, 110738, and 156591, all in thousand sq 

meters, and the import values in 2005, 2006, 2007, and 2008 are, respectively, 2257926, 2365930, 1074328, and 1624960, all 

in thousands of dollars. Dividing values by quantities yield the four yearly prices as $9.2, $9.3, $9.7, and $10.4), suggesting 

that it is indeed safe to infer the rise and fall in quantities with values. Finally, to estimate, we computed the average of the 

average prices in 2007 and 2008 to be $10.04 per square meter and used this estimated price and reported 2009 and 2010 

import values to obtain the estimated 2009 and 2010 import quantities.

e The growth rates have been computed for 1993–2008, 1997–2008, 1997–2010, and 1993–2010, because import data for 2009 

and 2010 are estimates and export quantities for 1993–1996, 2009, and 2010 are also estimates.

Sources: U.S. Department of Commerce, Census Bureau. 2011. Current Industrial Reports for Clay Construction Products—

Summary 2010.

U.S. Department of Commerce, Census Bureau. 2009. Current Industrial Reports for Clay Construction Products—Summary 

2008.

U.S. Department of Commerce, Census Bureau. 2007. Current Industrial Reports for Clay Construction Products—Summary 

2006.

U.S. Department of Commerce, Census Bureau. 2005. Current Industrial Reports for Clay Construction Products—Summary 

2004.

U.S. Department of Commerce, Census Bureau. 2004. Current Industrial Reports for Clay Construction Products—Summary 

2003.

U.S. Department of Commerce, Census Bureau. 2003. Current Industrial Reports for Clay Construction Products—Summary 

2002.

U.S. Department of Commerce, Census Bureau. 2002. Current Industrial Reports for Clay Construction Products—Summary 

2001.

U.S. Department of Commerce, Census Bureau. 2000. Current Industrial Reports for Clay Construction Products—Summary 

1999.

U.S. Department of Commerce, Census Bureau. 2000. Current Industrial Reports for Clay Construction Products—Summary 

1998.

U.S. Department of Commerce, Census Bureau. 1998. Current Industrial Reports for Clay Construction Products—Summary 

1997.

U.S. Department of Commerce, Census Bureau. 1996. Current Industrial Reports for Clay Construction Products—Summary 

1995.

U.S. Department of Commerce, Census Bureau. 1995. Current Industrial Reports for Clay Construction Products—Summary 

1994.
A-4

References:

U.S. Census Bureau. 2013 (b); Geography Area Series: County Business Patterns: 1995-2011; 

generated by RTI International; using American Factfinder. http://factfinder2.census.gov. 

(August 16, 2013).