FTC: Made In The USA Comments Concerning The Footwear Distributors and Retailers of America--P894219
JOHN B. PELLEGRINI
August 15, 1997
Office of the Secretary
"Made in USA" - Policy Comment (FTC File No. P894219)
Dear Mr. Clark:
These comments are submitted on behalf of the Footwear Distributors and Retailers of America ("FDRA") in response to the Commission's request for comments on "Made in USA" claims. 62 Federal Register 25020 (May 7, 1997). FDRA is an association of some 70 retailers, importers, distributors and producers of footwear that account for approximately three-quarters of footwear sales in the United States.
FDRA generally supports the Commission's proposed Guides for the Use of U.S. Origin Claims (the "Guides").
The Commission should be congratulated for recognizing that the "virtually all" rule created significant incentives for domestic manufacturers to use domestic materials and components. A domestic manufacturer who was unable to obtain materials from domestic sources, e.g., rubber in the case of footwear, was not able to use the "Made in U.S.A." label even though all other materials were of domestic origin, all components were manufactured here and final assembly was performed here. The Guides would permit this manufacturer to assert domestic origin without qualification. The "virtually all" standard made that task virtually impossible.
The Commission requests comments in three areas: 1) whether compliance with each of the safe harbors is likely to ensure that a product promoted as being of domestic origin will be substantially made in this country; 2) whether a product which does not satisfy either of the safe harbors should be permitted to be marketed as "Assembled in the U.S." without qualification; and, 3) the proposed lesser mark, "Origin: USA".
Safe Harbors. FDRA believes that both of the safe harbors will ensure that products marketed as being of domestic origin will be "substantially made" in this country. Requiring a minimum of 75 percent "local content" and substantial transformation, or a double substantial transformation will ensure that consumers will not be deceived. These approaches balance consumer rights and the legitimate desire of domestic manufacturers to market their goods as of United States origin even though the product may have some minimal foreign content. At the same time, the safe harbors are sufficiently rigorous to ensure that products with substantial foreign content, e.g. a major component, could not be the subject of an unqualified claim of domestic origin.
FDRA's earlier comments noted that origin rules based on manufacturing costs were difficult to administer and could lead to anomalous results. Although FDRA remains skeptical of the utility of the content approach, it believes that the practical interpretations embodied in Section XII of the Guides may alleviate some of the difficulties FDRA foresaw.
"Assembled in USA" The Commission asks whether a product which does not satisfy either of the safe harbors and, for that reason, may not claim domestic origin without some qualification should be permitted to be labeled or advertised as having been assembled in this country. FDRA opposes this approach.
FDRA agrees that consumers will understand "Assembled In" as the equivalent of "Made in". Indeed, the Customs Service equates the two terms for purposes of country-of-origin marking requirements. 19 C.F.R. 134.43(e). This claim should be considered deceptive unless the product satisfies one of the safe harbors for unqualified claims of domestic origin or is qualified in an appropriate fashion.
"Origin USA" The Commission asks whether it should permit products which do not satisfy the requirements for an unqualified "Made in USA" claims to be labeled "origin: USA". This would be permitted when the product is exported to a foreign country which requires a declaration of United States origin, the product is not required to be marked with a foreign country of origin under Customs rules, the label used is no more permanent than is necessary to meet the requirements of the country to which the product is being exported and, in the case of consumer goods, the existence of any substantial foreign content is disclosed.
FDRA opposes this approach because it is not necessary and could be abused.
A manufacturer which knows that a certain production batch is to be shipped to a particular market will be able to ensure that the correct label for the market is applied to the good. The problem arises because manufacturers do not always have that information at time of production. If different labeling is required, the adjustment is done after production as part of the packing process. The "Origin: USA" label does not alleviate the problem. The additional disclosure concerning foreign content would be applied only to goods destined for domestic consumption. The dynamic is not altered. Labeling remains a function of destination and cannot be affixed until the destination of particular goods is determined.
The types of qualified statements sanctioned by the Guides, e.g. "Made in USA of Imported and Domestic Parts" likely would be accepted as an adequate declaration of origin by foreign officials.
On the other hand, use of the "Origin: USA" label likely will prove deceptive even if there is appropriate qualifying language on a hangtag or packaging. We are certain that consumers will see the "Origin: USA" label but suspect that many will not bother to locate and read the qualifying language. Also, "Origin: USA" is far too similar to "Made in USA" and we believe that most consumers will read the statement as a claim of unqualified domestic origin in much the same fashion as "Assembled in USA". Balancing the likelihood of consumer deception and confusion against the rather minimal dislocation to manufacturers, given the requirement for qualifying language on packaging or hangtags, the Commission should not authorize the "Origin: USA" designation.
Specific Comments FDRA also has the following comments on specific provisions of the Guides.
1. The first paragraph under II. Scope of the Guides provides that the Guides apply to origin claims whether asserted directly or by implication through words, symbols, emblems, logos, depictions, etc. We assume that the Guides are intended to cover products which depict the American Flag for example. However, it is not clear whether simply stating a United States address such as in distributed by Retailer, Inc., New York, New York, is an assertion of United States origin. The same comment applies to warranty cards and similar consumer information materials which necessarily have a United States address. We do not believe that these types of statements are misread by consumers as a claim of origin. Accordingly, we suggest that this provision of the Guides make it clear that the Guides do not apply to United States addresses.
2. Example 1, Section IX is misleading. This example states that luggage produced in this country from leather of Italian origin could be labeled "Made in USA of Italian Leather". This example indicates that the luggage would not qualify under the 75 percent safe harbor. However, the processing described in this example qualifies as a double substantiation safe harbor. Leather is classified in Chapter 41 of the Harmonized Tariff Schedule of the United States ("HTS"). Luggage parts of leather likely would be classified in HTS heading 4205 and completed luggage in Heading 4202. Under the NAFTA rules of origin, a change in classification from leather to leather parts constitutes a substantial transformation and a conversion from leather parts into complete luggage also constitutes a substantial transformation. See 19 C.F.R. §102.20(h). Thus, there is a double substantial transformation of the imported leather. Accordingly, the luggage in the example would be labeled "Made in USA" without qualification. The example, if it is to be retained in the final Guides, should make this clear.
3. Example 2, Section XIII. This example, which concerns the "Origin: USA" designation indicates that the foreign content disclosure could be satisfied by a sticker affixed to the outside of a shoebox which says "Made in USA of US and Imported Components". Given this sticker, the example indicates that the "Origin: USA" statement would not be deceptive. The Commission should keep in mind that a great deal of footwear, although shipped commercially in shoeboxes, is not presented to consumers in the same fashion. In fact, it is for this reason that the Customs Service does not accept country-of-origin marking on shoeboxes as satisfying Tariff Act requirements. Customs requires that each shoe be marked. As stated above, FDRA believes that the "Origin: USA" label is unnecessary. However, if the Commission decides to retain that approach in the Guides, it should make it clear that the qualifying statement must be attached to the footwear and not simply on the shoebox, which as noted above, frequently is not presented to the ultimate consumer.
FDRA and its members appreciate the opportunity to comment on this important topic and urge that its suggestions be adopted.
ROSS & HARDIES
cc: Mr. Peter T. Mangione, FDRA