Federal Trade Commission Received Documents May 7, 1996 P894219 B18354900153 US HOUSE OF REPRESENTATIVES COMMITTEE ON COMMERCE Room 2125, Rayburn House Office Building Washington, D.C. 20515-6115 The Honorable Robert Pitofsky Chairman Federal Trade Commission Washington, D.C. 20580 Dear Chairman Pitofsky: Last summer, the Commission announced its intention to conduct a "comprehensive review/' of "Made 'Ln U.S.A." advertising and labeling claims. The Commission recently conducted a two-day public workshop during which numerous parties presented testimony and written statements for the Commission's consideration. I am informed that the record of this proceeding will be held open until April 30 in order to allow participants and other interested persons to submit written information and materials. To that end, I am writing to suggest several key points the Commission should consider in this proceeding. I believe the Commission should evaluate carefully: the need for any proposed changes to the current standard; whether any such change will be consistent with the commissions's general charge to prohibit unfair or deceptive acts or practices in or affecting commerce; and how any such change will affect American companies that currently meet the Commission's "all or virtually all" standard. The current FTC standard only applies to situations where a manufacturer chooses to make an advertising or labeling claim. It is important to remember what the FTC standard does not do. There is no requirement that a manufacturer-disclose the percentage of domestic content, work, engineering and design, or other features in a given product. There is no requirement that a manufacturer use any set percentage of American materials in making a product. There is no requirement that American workers be hired to manufacture, transform, or alter the product. There is no prohibition against making other claims, such as "Made in U.S.A. of foreign and domestic components" -- in fact, the Commission specifically authorizes the use of such claims. Instead, all the FTC standard requires is that "Made in U.S.A.' claims -- watch are voluntarily made -- be truthful and non-deceptive. Common sense tells us that "Made in U.S.A." does not mean that a significant portion of a product is made of materials from another country. Common sense tells us that "Made in U.S.A.!' does not mean that non-domestic workers made the product. Common sense tells us that "Made in U.S.A." generally means that all or virtually all components and materials of a product have been produced in the United States. A consumer who decides to purchase a product that is labeled as "Made in U.S.A." would feet deceived if the Commission's standard failed to recognize these common sense notions. As several other commenters have noted, "Made in U.S.A.!' should mean what it says. It should not become a watered down concept that can be used in virtually any situation where value is added by an American company. Some have commented that the realities of the current marketplace are such that it is virtually impossible to comply with the FTC's standard. Nothing could be further from the truth. There are many American businesses who can and do make the "Made in U.S.A." claim with pride and absolute confidence. These companies have made the judgment that being able to make a valid "Made in U.S.A." claim is valuable. Their ongoing employment, purchasing, and other manufacturing practices and decisions are in part premised upon the continuing integrity of the FTC's standard. Compromising the current standard would punish these companies and reward companies who make conscious decisions to purchase foreign materials or use foreign labor. Much has been made of supposedly "conflicting" requirements of the Customs Service under section 304 of the Tariff Act of 1930, which regulate country of origin markings. In my previous correspondence with the Secretary of the Treasury in 1994, Secretary Bentsen noted that the Customs standard "is necessarily different from the standard used by the FTC" and addressed the question of conflicting standards as follows: There is not a conflict between FTC rules with respect to marking goods as products of the United States and Customs rules for administering section 304 of the Tariff Act of 1930. For purposes of section 304, foreign articles that are substantially transformed in the United States cease to be foreign articles and are no longer required to be marked with. their foreign country of origin. However, there is no provision under section 304 to require or authorize foreign articles that have been substantially transformed in the United States to be marked affectively as products of the United States. Affirmative marking of goods as products of the United States is within the jurisdiction of the FTC and subject to its rules. This creates a category of goods that are not required to be marked as products of a foreign country and yet may not be marked as products of the United States without further qualification. However, it does not create a conflict between FTC and Customs rules. The simple fact is that the FTC standard and the Customs Service rules serve different purposes and are not inconsistent with each other. The Commission should be guided by its statutory charter of prohibiting unfair or deceptive practices rather than focusing on the red herring argument made by certain companies that the FTC and Customs Service should use identical standards. Finally, I note that the Congress explicitly recognized the FTC standard in recent legislation. Section 320933 of the Violent Crime Control and Law Enforcement Act of 1994 (P.L. 103-322) relates to labels on products and provides that "Made in U.S.A." labels or their equivalent "shall be consistent with decisions and orders of the Federal Trade Commission issued pursuant to section 5 of the Federal Trade Commission Act." I can assure you that Members of Congress were well aware of the Commission's "all or virtually all" standard when this provision was written. The standard was the topic of considerable discussion and correspondence among Members of the conference committee, the Commission, the Treasury Department, and the United States Trade Representative. The provision enacted was a clear recognition and affirmation of the Commission's current standard. Some have argued the Commission's "all or virtually all" standard is too stringent. But drawing a different fine would present numerous problems and would fail to advance the Commission's basic charter of prohibiting unfair or deceptive acts or practices in or affecting commerce. In particular, setting specific content percentages could result in rigid rules that would become obsolete quickly, cause confusion, and create conflicts with other laws, The current standard allows the Commission to gauge usual and realistic expectations of consumers while providing the Commission ample discretion to consider circumstances in each separate case. I am mindful that many good companies would prefer the Commission to liberalize its standard so that products that are made with significant amounts of foreign parts or labor nonetheless could avail themselves of the "Made in U.S.A." claim. However, I believe the Commission will best serve the interests of consumers and carry out its statutory mandate by maintaining its "all or virtually A" standard to ensure that "Made in U.S.A." means what it says. I request that this letter be made a part of the Commission's proceeding. Sincerely, JOHN D. DINGELL RANKING MEMBER