Federal Trade Commission Received Documents Jan. 16, 1996 B18354900038 CRANSTON PRINT WORKS COMPANY 38 CORPORATE OFFICES 1381 CRANSTON STREET, CRANSTON, RHODE ISLAND 02920-6789 401-943-4800 FAX 401-943-3971 January 11, 1996 Office of the Secretary Federal Trade Commission Room 159 Sixth and Pennsylvania Avenues, N.W. Washington, DC 20580 Re: Made in USA Policy Statement FTC File Number P894219 To Whom It May Concern: We are pleased to have the opportunity to submit our comments, albeit brief, on the FTC's regulations regarding "Made in the USA" advertising claims. Our comments are limited to labeling of printed textiles and products made from such textiles. By way of background, Cranston Print Works Company ("Cranston") is the oldest textile printing company in the United States; our basic business is to create original designs and print them on fabric. We are an employee-owned company with three textile printing plants in the United States. We purchase greige goods (unfinished plain fabric) from many sources, both domestic and foreign; in fact, a substantial portion of our greige goods needs can only be purchased overseas. Domestic mills simply cannot or will not weave certain kinds of fabric in the quality and price specifications we need to compete. Although we sell our printed fabrics domestically and internationally, all our production processes occur domestically. First, our stylists and artists, based in New York City and Rhode Island, design and create original artistic works which, in turn, are engraved on screens by Cranston personnel, again in the U.S. At one of our three print plants (located in Massachusetts, Rhode Island and North Carolina), Cranston then prepares, prints and finishes the fabric, Finally, our sales personnel then sell the printed and finished fabric to several markets -- to over-the-counter fabric stores, such as WalMart and House of Fabrics, for purchase by home sewers and crafters; to apparel manufacturers for cutting and sewing into clothing; and to programs for retail stores, such as J.C. Penney, for cutting and sewing into home decorating items -- quilts, bedspreads, pillow shams, etc. To accomplish all these steps, we engage in extensive, sophisticated and expensive processes to turn greige goods into printed and finished textiles. Even though all of these processes are done in the United States, and even though they contribute far in excess of 50 percent of the value-added, current FTC rules preclude Cranston from using the "Made in the USA" label, merely because some of the fabric we purchase is not domestically Federal Trade Commission January 11, 1996 Page Two sourced. In Europe, for example, the rules of origin are established to recognize and encourage our type of value-added. The U.S. should do the same. Especially if one considers the whole chain leading up to a garment, it seems foolish to not be able to label a garment cut and sewn here selling for, say, $25, just because only the greige goods, which cost under a dollar, came from outside the United States. Let's encourage the other $24 of U.S jobs and expenditures. We strongly encourage the FTC to permit textile printing companies, Cranston among them, to label and advertise their products as "Made in the U.S.A.", if, and only if, the domestic portion of the value-added of the product is at least 50%. It is even more clear that manufacturers making apparel or other products from such fabric be permitted to label the apparel or other products as "Made in the U.S.A." without reservation -- in those instances, the domestic content could well be 90% or more. With regard to the specific questions on which the FTC seeks input and comment, we have the following comments: Question 3. "What are the costs and benefits of using the same tests for Made in USA claims as those imposed by U.S. Customs requirements ("substantial transformation"), the Buy America Act(50%) and other domestic content statutes or rules?" Our comments are confined to the U.S. Customs requirements, as we don't have direct experience with or knowledge of the other rules or regulations referenced here. First, it is important to recognize, as the FTC acknowledged, that the U.S. Customs country of origin requirements exist for quota and tariff purposes. In fact, the Customs requirements really only govern goods entering the U.S. borders - once they have cleared Customs, the country of origin determination is not at issue. In Cranston's case, the greige goods we buy from China are clearly and appropriately labeled as "Made in China" when they enter the United States. Once Cranston prints and finishes those greige goods and sells them domestically, we are permitted, under the currently existing 16 CFR 303.33 Textile Fiber Identification Act regulations, to state: "Printed in USA on imported cloth". If, however, the FTC were to adopt the current US Customs country of origin definition, Cranston would have to describe that same domestically finished and printed fabric as "Made in China," if the applicable greige goods were Chinese. That is a most unfair and inaccurate representation and we strongly urge the Commission not to adopt the current "substantial transformation rule" that Customs is using; in fact, we believe it would lead to consumers being deceived, rather than being protected from such deception. That approach would wholly discount all the domestic content of our contributions to the finished product. We would certainly prefer the FTC to maintain the status quo than to adopt the "substantial transformation country of origin rule" that Customs currently uses for its quota and tariff determinations. Federal Trade Commission January 11, 1996 Page Three One additional suggestion for textile products would be the following: The FTC could consider the following, under the scenario described above. The goods coming into the country would be appropriately marked, as required under Customs regulations, with the country of origin. A company such as Cranston would be required to label its printed and finished fabric as it currently does: "Printed in USA of imported cloth". So far, so good -- no changes to the current status quo. However, the FTC could then permit apparel or home decorative manufacturers making products from that same fabric to label and advertise those products, if cut and sewn domestically, simply as "Made in the USA". Certainly, there would have been significant value added on a domestic basis, when factoring in not only Cranston's significant value-added, but that of the product manufacturer, as well. Question 4. Do foreign customs officials prohibit the addition of qualifying phrases on Made in USA labels? If so, does the traditional FTC requirement that labels make disclosures of substantial foreign content add significant manufacturing costs where sellers wish to sell a single item in domestic and foreign markets? Would an option of stating qualifying disclosures only on packages, hangtags, etc. at time of sale in the U.S. market significantly reduce such costs?" We don't believe that foreign customs officials would prohibit qualifying phrases to Made in the USA language. However, if they did, either across the board or in certain specific countries, we don't believe it creates a significant concern, nor do we believe that different label systems, one for domestic sales and one for export sales, is problematic. Cranston sells its goods domestically and internationally and we do not foresee a problem with separate labeling systems. Although the Federal Register notice of October 18, 1995 concerning "Made in USA Policy Comments" does not specifically so state, should FTC implement any changes to the policy, it appears that 16 CFR 303.33 (which defines country of origin labeling for textile fiber products) would require similar changes to be consistent with the policy changes. Again, we appreciate the opportunity to express our views. Sincerely, George W. Shuster President