Federal Trade Commission Received Documents Jan. 22, 1996 B18354900085 AIADA American International Automobile Dealers Association 99 Canal Center Plaza Suite 500 Alexandria Virginia 22314 703 519 7800 FAX 703 519 7810 Office of the Secretary Federal Trade Commission Room 159 6th St. and Pennsylvania Avenue, NW Washington, DC 20580 RE: "Made in USA Workshop - Request to Participate" FTC File No. P894219 Dear Secretary: On October 18, 1995, the Federal Trade Commission (FTC) published a request for public comments in the Federal Register (Vol. 60, No. 201) on consumer perceptions of "Made in USA" claims in product advertising and labeling. The American International Automobile Dealers Association (AIADA), which represents the more than 10,000 American small businesses employing more than 300,000 American workers that sell and service international nameplate automobiles, submits the following comments and requests to participate in the March 26-27 public workshop on these issues. As the trade association dedicated solely to representing America's retailers of international nameplate vehicles in the U.S., AIADA is keenly aware of how an "all or virtually all" standard for advertising and labeling of autos would impact its members, consumers, and the retail auto industry. The central question is whether the FTC should impose or enforce a "Made in USA" standard for products assembled in the U.S. The FTC has not enforced a standard for "Made in USA!' labeling and advertising for decades. Doing so now when manufacturing processes in most industries have become increasingly global would only serve to confuse consumers, burden American business and disrupt market forces -- all to the detriment of the American consumer. 1. Potential Impact of "Made in USA" Standard on America's International Nameplate Auto Dealers While domestic content labeling of autos is dictated by the American Automobile Labeling Act, auto advertising and sales could be impacted by FTC action on "Made in USA" standards. Thanks to the global nature of today's auto industry, international nameplate auto makers can boast products made in the U. S. For this reason, AIADA's members sell international nameplate vehicles manufactured in the U.S. and abroad, and highlight this fact with American consumers. Many consumers want to purchase vehicles manufactured domestically. To appeal to these consumers, Toyota dealers often stress the fact that many of their vehicles are built in either Kentucky or California by American auto workers, just as Honda dealers promote their Ohio-built or Indiana built products. This year BMW dealers will offer the new Z3 convertible, and many of them will highlight the fact that this German-nameplate vehicle is made in South Carolina. By the same token, many consumers specifically seek out vehicles manufactured abroad. To satisfy consumer demand for international products, Mercedes-Benz dealers may discuss the German engineering and craftsmanship of their vehicles. Volvo dealers may promote their Norwegian-built vehicles as some of the safest autos on the road today. Under the current parameters of the FTC's consent agreement with Hyde Athletic Industries, Inc. (FTC File No. 922-3236), dealers of American-made international nameplate vehicles would be violating FTC advertising standards since these automobiles do not meet the "all or virtually all" standard. However, there is no vehicle in mass production today made with virtually all American parts. Even Detroit's auto makers, General Motors, Ford, and Chrysler, could not meet such a standard. The FTC might have to prevent such advertising as GM's Saturn commercials which advertise the Saturn as built in Spring Hill, Tennessee, because the Saturn contains parts imported from other countries -- as all vehicles do. A "Made in USA" labeling standard may encourage a "Buy American" sentiment, which could cast an unfavorable shadow on imports. Consumers would be misled into believing that purchasing an import instead of an "all or virtually all" American vehicle would either be unpatriotic or have a negative impact on the U.S. economy. A "Made in USA" standard which misleads American consumers about the value of this or similar industries' contribution to the American economy or which distorts trade away from such global industries would only serve to harm American workers and families, as well as limit healthy competition. Competition from international auto manufacturers have created more than 500,000 American jobs, and provided consumers with the greatest selection vehicles, with the highest quality, at the lowest price of any country in the world. Consumers have benefitted the most from America's competitive auto industry. Furthermore, "Made in USA" laws, just like "Buy American" laws, could set a dangerous example for our trading partners. At a time when our government and American exporters are working diligently to further open markets abroad, a move by the FTC which appears to recognize only a limited range of goods as made in USA may lead other countries to do the same, potentially harming overseas sales of American goods or goods made with American components. As the world's leading exporter, the U.S. would only be harmed by such an outcome. II. Issues Regarding the Computation of Domestic Content The FTC proposes a number of options to the "all or virtually all" standard such as setting a percentage threshold for goods to be labeled "Made in USA." It considers such issues as how far back in the production process a manufacturer must look to determine country of origin and how to value domestic content added during final assembly. The complexity and difficulty of dealing with such issues has already been demonstrated within the auto industry thanks to the American Automobile Labeling Act (AALA). Congress passed the AALA in an effort to give auto buyers country-of-origin information about new vehicles. In reality, the AALA confuses consumers, forces small business auto dealers to maintain and explain a misleading and inaccurate label, and poses such a costly and bureaucratic problem for auto manufacturers that the National Highway Traffic Safety Administration has postponed enforcing the law for a second straight year. AIADA believes the FTC would be consigning America's businesses to nationwide bureaucratic confusion similar to that caused by the AALA in imposing a Made in USA standard on all goods. In light of the fact that President Clinton has sought to review all regulations in terms of their administrative and compliance burdens, their impact on American businesses, and their enforceability, any enforcement of the current "all or virtually all" standard or other artificially created formula would only defeat the President's efforts to shrink government red tape. III. Conclusion AIADA believes the American consumer makes purchasing decisions based primarily on price and quality of a product. The central question at issue is whether preventing a manufacturer or retailer from promoting an American-made product as such would aid consumers in their purchasing decisions. AIADA submits that to do so would be preventing manufacturers and retailers from merely stating the facts. To prevent Nissan from advertising its product as made in Tennessee or a dealer from promoting that fact to a consumer would be preventing them from telling the truth. As FTC Commissioner Mary L. Azcuenaga stated before the International Congress of Advertising and Free Market in Lima, Peru last May "the more fully consumers are informed, the better equipped they will be to make purchase decisions." AIADA supports giving consumers honest and accurate information to make educated purchasing decisions and contends that enforcing an "all or virtually all" standard or creating an artificially set "Made in USA" standard for labeling and advertising would only serve to limit the flow of meaningful consumer information. The FTC has not enforced a "Made in USA" standard for products assembled in the United States for decades. Because only a handful of complex products could meet an "all or virtually all" standard, consumers who want to buy a product made in the U.S. may search fruitlessly to find a car, computer, or television with 100 percent American content. Doing so now in an era of increasing industrial globalization only would serve to mislead and confuse the American consumer, burden American business, and distort market forces and international trade. AIADA appreciates the opportunity to provide FTC its views and comments on this important issue.