Federal Trade Commission Received Documents Jan 22 1996 B18354900105 Secretary MEEKS & SHEPPARD ATTORNEYS AT LAW JEFFREY A. MEEKS* 330 MADISON AVENUE TEL: 212-949-7120 RALPH H. SHEPPARD 39TH FLOOR FAX: 212-949-7271 LISA LEVAGGI BORTER NEW YORK, NEW YORK 10017 ROBERT J. LEO customs@interramp.com *ADMITTED TO A BAR OTHER THAN NEW YORK January 22, 1996 Office of the Secretary Federal Trade Commission Room 159 Sixth Street and Pennsylvania Avenue, N.W. Washington, D.C. 20580 Re: "Made in USA Policy Comment" & Request to Participate in Workshop FTC File No. P894219 Dear Sir: As a law firm engaged in the practice of Customs and international trade law, we submit these initial comments regarding the upcoming review by the Federal Trade Commission (hereafter "FTC" or "Commission") of country of origin marking requirements, including "Made in USA" claims in Product Advertising and Labeling. We further request the opportunity to participate in the Commission's workshop on these issues which is scheduled to be held in Washington, D.C. on March 26-27, 1996. This effort by the FTC is a welcome development for many of our clients who routinely struggle with compliance with U.S. Customs Service marking requirements, only to find that such compliance does not insure compliance with FTC requirements and restrictions. In particular, we frequently see situations where foreign materials "substantially transformed" in the U.S. into articles meeting Customs standards as domestic products do not meet FTC "Made in U.S.A." requirements due to the presence of foreign materials. There is clearly a need for the FTC to develop a standard which is consistent with other prevailing and developing rules of origin, so that U.S. manufacturers and retailers can comply with uniformly enforced marking requirements and meet the overall goal of informing the consuming public as discussed below. We understand that one of the FTC's objectives is to protect the consumer from deceptive advertising and labeling. By requiring accurate information be provided to the consumer regarding the origin of a product, the Commission ensures that the consumer may make an informed decision in choosing products. However, the current standard for marking a product "Made in U.S.A." is unrealistic and unworkable. The requirement of "all or virtually all" U.S. content in order for a product to be permitted to be labelled "Made in U.S.A." is overly burdensome, inconsistent with prevailing multinational sourcing of components and materials, and inconsistent with the marking requirements generally accepted in the international global marketplace. With the vast increase in globalized production, U.S. consumers clearly recognize that many products are no longer made, or capable of being made, wholly in the U.S. of U.S. components and materials. Similarly, former concerns with inferior or unsafe products of foreign countries do not reflect the high international standards required and maintained in most industries. Therefore, we believe the FTC's concern with protecting consumers from deceptive claims of U.S. origin are no longer as compelling as they once may have been. Consumers are aware of the reality of international commerce and foreign sourcing by companies engaged in manufacturing operations in the U.S. In fact, if now the marking "Made in Japan" carries an implicit indication of quality, the rule for imported products would permit a high degree of non-Japanese content, which creates the same type of concern underlying the "all or virtually all" contained in the FTC rule. The implementation of NAFTA marking rules and the more recent GATT agreement, with its stated goal of arriving at internationally recognized rules of origin, underscores the timeliness of this FTC effort. It is time the Commission recognized the international trading environment and consider utilizing the standards being used by the United States Customs Service as well as those of our trading partners. In fact, we believe that the NAFTA marking rules form a strong point of departure for the FTC, and may in fact preempt FTC rules in cases where goods are considered "Made in USA" for NAFTA marking purposes. The principal rules enforced by Customs are as follows: country of the last "substantial transformation" into a new and different article of commerce; the NAFTA rule based on a specified change in classification or some value-based criteria; and the more recently enacted rule, to be effective for textile products beginning July 1, 1996, which includes elements of the NAFTA rules with more product-specific variations. We believe that the FTC's pending efforts should focus on adoption of these criteria, specific to the trading context. Conclusion Many importers face an ongoing struggle to meet the requirements of Customs and the FTC which, we believe are presently at odds with one another. The agencies should be operating under the same standard in order to promote a consistent result. Practically speaking, the Customs approach of focussing on the last significant commercial activity is the only workable approach in our global economy. We recommend that during the World Trade Organization development of an international-accepted rule of origin, the Commission should consider implementing the standards enforced by the U.S. Customs Service, which has long experience and a substantial staff dedicated to reviews of this issue. Once the WTO review is concluded and multilateral implementation of a uniform rule begins, the FTC should adopt the uniform approach as the U.S. marking standard. We look forward to participating in your forum and to providing a more detailed analysis and critique of current origin standards. This is a worthwhile undertaking by the FTC which we will support in any useful manner deemed appropriate by the agency. Please contact us at (212) 949-7120 if we can be of further assistance and to arrange for scheduling related to the forum. Sincerely, MEEKS & SHEPPARD Jeffrey A. Meeks Ralph H. Sheppard RHS/bls