Federal Trade Commission Received Documents Jan. 16, 1996 B18354900037 Law Offices Sharretts, Paley, Carter and Blauvelt, P.C. Sixty-Seven Broad Street New York, N.Y. 10004 Phone:(212) 425-0055 Telecopier:(212) 425-1797 (212) 742-2180 January 12, 1996 Office of the Secretary Federal Trade Commission Room 159 Sixth Street and Pennsylvania Avenue, N.W. Washington, DC 20580 Re: "Made in USA Policy Comment," "Made in USA Workshop - Request to Participate," FTC File No. P894219 Dear Sir/Madam: These comments are filed on behalf of the American Association of Exporters and Importers (AAEI) , in response to the October 18, 1995 publication by the Federal Trade Commission (FTC) of its intent to hold a public workshop on "Made in USA" claims in product advertising and labeling. This letter also constitutes our request to participate in the Workshop on behalf of AAEI, pursuant to the FTC's December 19, 1995 Federal Register notice. AAEI is a national association representing approximately 1200 United States companies active in the importation, exportation, and domestic processing of a broad range of products. AAEI's members are thus experienced participants in the emerging global economy and are required Sharretts Paley Carter & Blauvelt, P.C. office of the Secretary - 2 - January 12, 1996 to comply with marking and labeling requirements in virtually every nation in the world. As such, AAEI is singularly positioned to lend its expertise in the FTC's Workshop on "Made in USA" marking and advertising. After careful consideration of the issues raised in the October 18, 1995 notice, AAEI is of the opinion that the FTC should conform its requirements to those of the United States Customs Service (Customs), rather than to continue utilizing an outmoded domestic content standard and requiring the use of cumbersome qualifications to the "Made in USA" statement whenever the standard is not met. Conforming FTC marking requirements to those utilized by Customs not only will promote uniformity within the United States, but also throughout the world. Moreover, as more and more companies move to the use of international labels that comply with several countries' requirements, the ability to use the statement "Made in USA" without the addition of qualifications will help to simplify the process and render it much less costly. Historically, the FTC has required that the use of the unqualified statement "Made in USA" only be used when the product was "wholly of domestic origin," in order to avoid the potential deception of consumers. In recent years, the FTC has modified this requirement somewhat, so as to require Sharretts Paley Carter & Blauvelt, P.C. office of the Secretary - 3 - January 12, 1996 that "all, or virtually all" of the components or materials be made in the United States, and that all, or virtually all of the labor be performed in the United States. On the other hand, Customs has traditionally utilized a vastly different standard in its country of origin marking rules. In this regard, Customs has not required that imported merchandise be marked with the country of origin if such merchandise would be "substantially transformed" in the United States, thereby rendering the finished product a product of the United States. Customs and the courts developed a long line of precedents, hammering out a workable legal standard for substantial transformation. Recently Customs has been in the process of codifying this well-established substantial transformation standard in new country of origin rules utilizing an objective tariff shift requirement. Moreover, the International Trade Commission will be participating in an international study of country of origin rules, with the ultimate goal of establishing uniform international rules. It is evident, based on these recent developments, that now is the logical time for the FTC to conform its labeling requirements to those of the Customs Service. The original goal of preventing deception of the consumer will continue to be served by a change to the Customs standard, inasmuch Sharretts Paley Carter & Blauvelt, P.C. Office of the Secretary - 4 - January 12, 1996 as it has been shown that the American public is well aware of the global nature of production, and that many products contain foreign materials or components. Furthermore, the use of the Customs standard, which has been the subject of thousands of administrative rulings and court opinions, will be more objective than the FTC standard, which has never been authoritatively defined. Because the standard is already well-established, the FTC will not be required to develop its own body of law in spelling out a new standard. Utilizing the Customs standard also will set the stage for the United States to take a leading position in the negotiation of uniform international country of origin rules. In this regard, the presentation of a "united front" to the world, rather than a weaker bifurcated system such as exists now, will significantly enhance our ability to influence the outcome of the negotiations. In addition, from AAEI members' experience in dealing with the country of origin marking requirements around the world, it is clear that U.S. Customs' rules of origin, rather than those of the FTC, are more in keeping with other countries' standards. Moreover, U.S. companies will benefit significantly by the adoption of the Customs rules by the FTC. In this regard, more and more U.S. companies are developing Sharretts Paley Carter & Blauvelt, P.C. office of the Secretary - 5 - January 12, 1996 international labels for their products that conform to various countries, requirements, including those of the United States. For example, a company may develop a label listing content, name and address of the company, and country of origin in three different languages, to be placed on the products it intends to sell in the United States and elsewhere. Such labels are obviously growing larger and larger with the addition of more requirements. Furthermore, when forced to add the qualifications to the phrase "Made in USA" currently required by the FTC, not only in English, but also in the other languages, the labels can be particularly cumbersome. Finally, certain countries may find that the use of these qualifications violates their own country of origin rules, and require that a simple statement "Made in USA" be used. In that case, the time, effort and cost spent on developing a universal international label has been wasted. In view of the above considerations, AAEI strongly urges the FTC to adopt the Customs country of origin marking rules to replace the existing domestic content standard, rather than attempt to make changes to the existing standard, which would only result in substantial confusion. Furthermore, we request the opportunity to participate on Sharretts Paley Carter & Blauvelt, P.C. office of the Secretary - 6 - January 12, 1996 AAEI's behalf in the Workshop, as a representative of approximately 1200 U.S. companies with a strong interest in the outcome thereof. If the appropriate FTC officials have any questions with regard to our comments or our request to participate, please contact the undersigned as counsel for AAEI, at (212) 425-0055. Respectfully submitted, Gail T. Cumins GTC:ds Enclosure - Electronic version of comments