FTC: Made In The USA Comments Concerning The Weldbend Corporation--P894219
August 8, 1997
Office of the Secretary
Re: "Made in USA" Policy Comment, FTC File No. P894219
Ladies and Gentlemen:
In my letter of June 28, 1996, I explained Weldbend Corporation's strong support for the current "Made in USA" policy of the Federal Trade Commission. In the past decade, Weldbend has invested millions of dollars in plant and equipment to enable us to make world-competitive butt-weld pipe fittings and flanges here in the United States. We have done so because we know that our customers want to buy fittings and flanges that are manufactured by workers in this country from American steel. Our investments have enabled us to represent that the overwhelming majority of our products are truly "Made in USA."
We would have been foolish to make these investments in American manufacturing, however, if we had foreseen the Commission's "Proposed Guides for the Use of U.S. Origin Claims." If adopted, the "Proposed Guides" would enable competitors that lately have invested little in the United States to claim that their fittings and flanges are every bit as much "Made in USA" as Weldbend's. For example, under the proposed double substantial transformation standard, fittings and flanges made of 100-percent foreign materials could be marketed as "Made in USA," head-to-head with Weldbend's "Made in USA" products of 100-percent U.S. steel. Indeed, the "Proposed Guides" would force most of Weldbend's fittings and flanges -- made all or virtually all of American materials by American workers -- to share their hard-earned "Made in USA" labels with competitors' products having less than 50-percent U.S. content value.
How is it possible that the interests of American consumers could be served by a truth-in-advertising standard that equates "all or virtually all" with "not even half"?
I am sure that the Commission did not intend to permit such a distortion of the "Made in USA" standard. Unfortunately, although the "Proposed Guides" devote much attention to manufacturing processes that consist of the integration of components, they virtually ignore manufacturing processes, like those for fittings and flanges, that consist of the refinement of a raw material into a finished product. In these latter manufacturing processes, the raw material can constitute a substantial proportion of the total value of the finished product. For example, depending on the size of the butt-weld pipe fitting, the steel pipe that is the raw material for the fitting may constitute from about one-half to about two-thirds of the value of the finished fitting. U.S. producers that import steel pipe and then forge (one "substantial transformation") and finish (another "substantial transformation") the fittings in the United States could, under the "Proposed Guides," market their products as "Made in USA" even though one-half to two-thirds of the value of each fitting is of foreign origin. These same U.S. producers would be permitted, under the "Proposed Guides," to represent that their products are "Made in USA" although 100 percent of the materials in the products are foreign.
This disturbing result also seems possible under the proposed 75-percent-U.S.-content-value standard. Particularly for "simple products," the Commission would permit the costs of "those inputs that undergo their last significant manufacturing step in the United States" to be counted 100 percent toward the 75- percent-U.S.-content-value requirement. Is it possible, then, that a fitting or flange manufacturer could import foreign steel pipe or billet, forge it in the United States, and sell the forging to a U.S. finisher, which in turn could market the finished product as "Made in USA" because the full cost of the forging would count as "American"? This would not be consumer protection. It would be fraud.
Whatever "Made in USA" means to American consumers, it surely does not mean a product that contains absolutely no U.S. materials and that has one-half to two-thirds foreign content value. The Commission itself found in its 1991 Copy Test that 77 percent of the respondents who interpreted "Made in USA" as "all or nearly all" made in the United States considered the "all or nearly all" to apply to both parts and labor. And the Commission's 1995 Copy Test found that most respondents did not consider a product assembled in the United States to be "Made in USA" if its overall U.S. content was low. Furthermore, the Commission noted in the "Proposed Guides" that the percentage of consumers considering a product to be "Made in USA" drops off quickly when the U.S. content value falls below 70 percent. Based on these findings, the Commission would be inviting consumer deception if it permitted fittings and flanges made of foreign steel to be marketed as "Made in USA."
This brief discussion of the implications of the "Proposed Guides" for Weldbend and its customers demonstrates the danger of departing from the longstanding Commission policy that "Made in USA" means what it says. The "all or virtually all" standard is one that Weldbend and other U.S. manufacturers have relied on for years in making investment and marketing decisions. Moreover, it is one that U.S. consumers can understand without becoming experts in the complexities of "substantial transformation" or "content value."
We urge you to retain the current "Made in USA" standard.
James J. Coulas, Sr.