Federal Trade Commission Recieved Documents Jan. 16, 1996 P894219 B18354900042 January 12, 1996 Office of the Secretary Federal Trade Commission, Room 159 Sixth and Pennsylvania Avenue, NW Washington, DC 10580 Re: "Made in USA Policy Comment", FTC File No.P894219 Dear Mr. Secretary: I am submitting these comments on behalf of OKIDATA, Division of Oki America, Inc. (OKIDATA) in response to the request of the Federal Trade Commission published in the October 18, 1995 Federal Register for public comments on the proposed changes to the Commission's policies on the use of the term "Made in USA" on labels and in advertising. OKIDATA assembles printers and consumable supply items thereof, from parts and components, both made in the United States and imported from a variety of countries. OKIDATA employs approximately 700 employees nationwide. These products are then distributed to other countries throughout North, Central, and South America. OKIDATA wishes to emphasize that the imposition by the Commission of labeling rules that are inconsistent with the requirements of other U.S. laws, and of foreign countries, can result in significant costs to U.S. manufactures. Our specific concerns are set forth below. I. The Commission Should Use the Existing Customs Rules, Rather Than Creating Additional Regulatory Burdens The U.S. customs law already contains a comprehensive set of rules for determining when product must be marked as being of foreign origin, and what country of origin must be marked on the product. However the Commission's notice rejected the possibility of using the customs rules, asserting that the "substantial transformation" test is "principally aimed at determining the country of origin for purposes of tariffs and quotas, not anticipating the degree of domestic content that consumers would attach to affirmative Made in USA claims." We believe that this assertion is incorrect. The customs marking statute was enacted for the purpose of informing consumers of the origin of the goods they purchased.....the same goal as the rules of the Commission. See, e.g., United States v. Friedlaender & Co., 27 CCPA 297, 302 (1940), in which the Court of Customs and Patent Appeals stated: Congress intended that the ultimate purchaser should be able to know by inspection of the marking on imported goods the country of which the goods [are] the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were purchased, be able to buy or refuse to buy them, if such marking should influence his will. Accord, Koru North America v. United States, 701 F. Supp. 229 (Ct. Int'l Tr. 1988) The Customs Service has applied that substantial transformation test for many years. Beginning in 1994, a different set of rules of origin...based on shifts in tariff classifications...has been applied to imports from the NAFTA countries. Therefore, OKIDATA and other U.S. companies presently must apply the substantial transformation test to components imported from non-NAFTA countries, and the tariff-shift rules when importing from NAFTA countries. Since Mexico and Canada also are applying the tariff-shift rules, OKIDATA must use the tariff-shift rules when exporting to these countries. The need to use two different sets of rules will be eliminated if the Customs Service adopts the tariff shift rules for imports from all countries, as it has proposed to do. The maintenance by the Commission of its currently different rules of origin....or the creation of a new formula, as discussed in the Commission's notice...would add further complexities and costs to manufacturing in the United States. Companies such as OKIDATA must apply these various rules each time they experience a shift in the source of components. It would be more preferable to use one set of rules on a consistent basis for all purposes. II. The Commission Should Recognize that U.S. Exporters Must Comply with the labeling Rules of Foreign Countries Other countries have rules on the marking of country of origin on products. In some countries those rules are part of the customs law, as in the United States; in others, the rules are contained in more general labeling laws. As part of NAFTA, Canada and Mexico agreed to allow products from the United States to be marked "Made in the USA" if they complied with the tariff shift rules agreed on pursuant to NAFTA Annex 311. (These rules are distinct from those applied for purposes of determining whether a product is eligible for tariff preferences.) Currently, however, a product that qualifies to be marked as made in the United States when exported to Canada or Mexico cannot be so marked when sold in the United States, because of the inconsistent rules maintained by the Commission. OKIDATA foresees that this type of problem will grow as additional countries join the NAFTA, and because there is a trend in foreign countries to adopt increasing strict labeling requirements. It is expensive and cumbersome for a company to have to apply different labels to the same products, depending on the planned destination of the product. Different labels and boxes must be printed; the products must be segregated in inventory; and tracking systems are needed to ensure that a product is sent to the specific country destination for which the product is labeled. The costs of these burdens would not be reduced significantly by allowing further information to be conveyed through hangtags or other special labeling for specific destinations, as suggested by the Commission. The Commission might consider distinguishing between requirements for labeling (where a company may be simply fulfilling disclosure obligations imposed by the U.S. and foreign laws) and advertising (where a company is affirmatively attempting to influence consumer purchasing patterns). We hope these comments will be useful to the Commission's review of the "Made in USA" labeling issue. Sincerely, David L. Vaughn Manager, Legal Affairs