Federal Trade Commission Documents Received Jan. 23, 1996 B18354900108 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. 701 Pennsylvania Avenue, N.W. Washington, D.C. 20004 One Financial Center Boston, Massachusetts 02111 Telephone: 202/434-7300 Telephone: 617/542-2241 Fax: 202/434-7400 Fax: 617/542-2241 Telex: 753689 Michael F. Kleine Direct Dial Number 202/-434-7357 January 22, 1996 Office of the Secretary Federal Trade Commission Room 159 Sixth and Pennsylvania Ave., N.W. Washington, D.C. 20580 Re: FTC File No. P894219 Dear Sir/Madam: Enclosed please find the Association of Home Appliance Manufacturers' comments regarding "Made in USA" claims and AHAM's request to participate in the "Made in USA" workship. Sincerely yours, Michael F. Kleine Encl. COMMENTS SUBMITTED BY THE ASSOCIATION OF HOME APPLIANCE MANUFACTURERS ON THE USE OF "MADE IN USA" CLAIMS IN PRODUCT ADVERTISING AND LABELING AND REQUEST TO PARTICIPATE IN "MADE IN USA" WORKSHOP FTC File No. P894219 Office of the Secretary Federal Trade Commission Room 159 6th Street and Pennsylvania Avenue, N.W. Washington, D.C. 20580 January 22, 1996 The Association of Home Appliance Manufacturers ("AHAM") appreciates the opportunity to comment on the Federal Trade Commission's policy on "Made in USA" claims. AHAM is an international trade association that represents manufacturers of both major and portable home appliances. AHAM members sell approximately 160 million appliances annually. Consequently, product labeling issues, including "Made in USA" labeling, are of great interest and concern to the home appliance industry. It is AHAM's belief that the current "Made in USA" labeling policy is outdated and obsolete. At present, a manufacturer may claim that its product is "Made in USA" only if all, or virtually all, of the component parts of the product are made in the United States and all, or virtually all, of the labor in assembling the product is performed in the United States. This policy hearkens back to the 1950s and 1960s when manufacturing and economic conditions were much different than they are today. At that time, the manufacturing base of the country was broader and it was exceptional if a consumer product was not made entirely in the USA of materials and components originating entirely in this country. When first crafted, the policy served the public interest and reflected contemporary consumer perceptions. In the past thirty years, however, business conditions have changed dramatically. Modern manufacturers are operating in a global economy where very few products are made solely in one country of wholly domestic components. Consequently, few manufacturers are able to meet the "all or virtually all" test regarding domestic content. The FTC's present policy penalizes manufacturers whose products are made in the United States from materials and labor substantially originating in this country. Further, present policy deprives consumers of the ability to recognize products whose domestic content is high, but not total. The FTC should adopt a "Made in USA" labeling policy that reflects modern manufacturing practices and modern consumer perceptions. AHAM suggests that the Commission look to the NAFTA Rules of Origin for a viable and up-to-date standard for determining when a product is "Made in USA." For some products, including most portable appliances, North American origin will be conferred if: (1) over 50 percent of the product is of domestic origin using the net cost method, or (2) more than 60 percent of the product is of domestic origin using the transaction value method. For major appliances, the NAFTA approach is different. Under NAFTA, major appliances are not subject to a percent content requirement to qualify as "North American." Rather, certain essential components have to be made in either Mexico, Canada or the United States to qualify the finished product as "North American." See Attachment 1. All other components may be imported. Pursuant to this principle, if the designated essential components are produced in a United States factory, then the end product may be labeled "Made in USA." If adopted by the FTC, the NAFTA rules would allow consumers to identify products that are substantially made in the United States and it would provide clear guidance to consumers and manufacturers as to the meaning of "Made in USA." The manufacturers of portable appliances should be allowed to claim their products are "Made in USA" if they fulfill the NAFTA 50 percent/60 percent formulation. Manufacturers of major appliances, meanwhile, should be able to claim United States origin if their products satisfy the "essential components" test. AHAM is grateful for this opportunity to present its views on this important issue and would be pleased to participate in the upcoming public workshop relating to "Made in USA" claims. For additional information, please contact Michael F. Kleine, AHAM Counsel, at (202) 434-7357. Attachment 1 Major Appliance NAFTA Essential Components Electric Stove Cooking Chambers Top Surface Panels Door Assembly Control Boards/Panels Gas Stove Cooking Chambers Top Surface Panels Door Assembly Washers Control Boards/Panels Tub & Tub Assembly Cabinet/Case Washer Assembly (Agitator, Motor & Clutch, etc.) Dishwashers Door Assembly Control Boards/Panels Water Containment Chamber Water Circulation System Freezers Door Assembly Cabinet/Case Assemblies with Compressor, Condenser, Evaporator Refrigerators Door Assembly Cabinet/Case Assemblies with compressor, Condenser, Evaporator Dryers Control Boards/Panels Cabinet/Case Drying Chamber F1/48036.1