FTC: Made In The USA Comments Concerning International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW)--P894219
Comments of the
International Union, United
Automobile, Aerospace and
Federal Trade Commission
Proposed Guides for the Use of U.S. Origin Claims
(FTC File No. P894219)
The UAW opposes the adoption of the Proposed Guides for the Use of U.S. Origin Claims, as published in the Federal Register of May 7, 1997. In a very short time, the Federal Trade Commission (Commission) has shifted the standard for "Made in USA" advertising and labeling claims from "wholly of domestic origin", used for decades, to "all or virtually all" parts and labor performed in the U.S., to the language of the proposed guides, "substantially all" made in the U.S. This action, in itself, is likely to, simultaneously, undermine the value and credibility of the "Made in USA" claim and diminish the U.S. worker contribution to products that bear this claim. The result of the adoption of the proposed guides would be deceived American consumers and embittered American workers.
To win the support of the UAW and American workers for a newly defined "Made in USA" standard, the Commission must produce Made in USA guides that effectively promote the employment of American workers and the utilization of American production. We strongly believe that the integrity of the Made in USA claim should not be cheapened by significantly watering down the U.S. inputs of products that use the claim, as would be the case under the proposed guides.
Beyond the changes in terminology proposed by the FTC and the direction of allowing more foreign content in "Made in USA" products, the proposed guides offer "safe harbors" for the "substantially all" made in the U.S. claim that present serious problems. A product that satisfies the 75 percent of total manufacturing cost test simply cannot be considered substantially all U.S.-made. A product that satisfies the double transformation test suffers from a similar deficiency; there is no way to ensure that "substantially all" of the labor and value of the product is of U.S. origin. In fact, in both safe harbor cases, it is possible to identify products that are substantially of foreign value that would qualify as "Made in USA" under the proposed guides.
Concerning the 75 percent value content safe harbor, the Federal Register notice states that "even a largely U.S.-made product may necessarily include a relatively minor amount of foreign content." (page 56) It is simply inconsistent with common perception to describe 25 percent of a product's value as "relatively minor". This is a dramatic departure from the de minimus foreign content that is allowed under the current "all or virtually all" standard, which is met by producers of a wide variety of consumer products.
In the context of addressing the lower wages paid to workers in other countries, and the inadequacy of a 50 percent content standard, the notice states that, "The Commission believes that a 75% safe harbor more effectively ensures that a product promoted as "Made in USA" has substantially all U.S. content and better reflects consumer understanding" (page 56) This implies that the 75 percent safe harbor is meant only to make it likely that more than half of the work that goes into a product that is "Made in USA" actually takes place in this country. Such a dilution of the current standard is not warranted by the increased use of international sourcing by global corporations or by consumer perceptions.
The difference in rates of worker compensation between the U.S. and countries such as China allows for the possibility that 75 percent of the manufacturing cost could be U.S. value, but that the product would be "substantially" made abroad. A component that, if made in the U.S., would account for 50 percent of the manufacturing cost of a product could account for a much smaller share if imported from China, Mexico or many other countries. Purchasing some U.S. components and performing final assembly in the U.S. could add up to 75 percent of the total manufacturing value of such a product, even though most of the parts and work occurred abroad, albeit at very low costs for the U.S. assembler. In this case, the safe harbor would allow consumers to be seriously misled by a 'Made in USA" claim or label.
The consumer survey data cited by the Commission to defend the proposed guides is unconvincing. For instance, in testing consumer responses to different U.S./foreign cost shares for products, the Commission's 1995 attitude survey found that 46 percent of consumers would disagree that a U.S.-assembled product with 50 percent foreign costs was "Made in USA". For a product that had 30 percent foreign costs, a very sizable 31 percent rejected the "Made in USA" claim and a still large 22 percent objected to this description of a product with 10 percent foreign costs. The proposed guides' safe harbor for a product with 75 percent U.S. manufacturing costs would accept misleading 30 percent of consumers, while asserting that it would be inappropriate to mislead 46 percent. The 22 percent of consumers who would reject the "Made in USA" description for a product with 10 percent foreign content would, in our view, also be too large a proportion of consumers to be misled by "Made in USA" claims and labels.
The FTC seems to understand the limitations of the substantial transformation as a means of assuring significant U.S. labor input. The UAW addressed these limitations in an earlier submission. Requiring two substantial transformations is an improvement over one, but this safe harbor is still too imprecise to ensure that "substantially all" value is of U.S. origin. Even if this test "minimizes the vagaries of the substantial transformation standard and ensures that a product coming within the safe harbor is likely to meet consumer expectations for U.S. content" (page 57), that is not enough to satisfy UAW members that a product is "Made in USA". The remaining "vagaries" are simply too large and ill-defined to instill confidence in using this method as a safe harbor. The variation from product to product in the impact of the double transformation test would prevent consumers from having a real sense of the U.S. content of the product that is being presented as "Made in USA".
The first example cited by the Commission in the proposed guides (page 79) justifies our strong opposition to the use of the double transformation safe harbor. A U.S.-assembled taperecorder consisting of three U.S.-assembled subassemblies that are each made primarily of imported components would meet the "Made in USA" standard of the proposed guides even if the imported components accounted for 80 or 90 percent of the value of the final product. Allowing the use of a "Made in USA" claim or label for such a product would certainly seriously mislead consumers.
The proposed guides specify that, to qualify for the substantial transformation safe harbor, "all significant inputs into the final product were last substantially transformed in the United States." (page 79) There is no method included in the guides to determine which inputs are "significant", leaving the decision entirely in the hands of the producer. If challenged to show why a particular imported input was not "significant", any excuse would be as legitimate as another due to the absence of any criteria in the guides.
The Commission has undertaken a serious review of the "Made in USA" issue. It has assessed the many arguments supporting and opposing the current standard and supporting and opposing various alternatives. The use of existing trade-related national origin standards as a "Made in USA" standard was appropriately rejected by the Commission. Unfortunately, the proposed guides do not satisfy the requirements for "Made in USA" standards that the UAW and our members demand. We believe it would be a serious error for the Commission to implement the proposed guides.
The Commission's studies and workshop demonstrated that there are very strong feelings attached to the "Made in USA" claim, by consumers and producers alike. Many consumers are dedicated to using their purchases to stimulate the addition and retention of American jobs and they rely on the "Made in USA" label and claim to help them accomplish that goal. Producers eager to satisfy the desires of consumers are strongly motivated to use the "Made in USA" claim or label for their products. They recognize the consumer appeal of this mark and its value to their sales efforts. Because of the intensity of its appeal, the credibility of the "Made in USA" claim must not be undermined. It is the equivalent of a widely known and respected company logo. The tenacity with which companies protect their identifying trademarks should be the model the Commission uses to assess the "Made in USA" standard; it is not to be trifled with.
The "substantially all" standard of the proposed guides and the safe harbors provided to satisfy it do not afford adequate respect to the current standard. Changing from allowing only de minimus foreign content to meet the standard currently in effect to allowing 25 percent foreign content in the proposed guides would, indeed, significantly undermine the credibility of the "Made in USA" claim. That would not serve the interests of the workers whose jobs are dependent on the devoted purchasing efforts of consumers who look for the "Made in USA" label or claim, the producers that meet the current standard despite the pressure to increase the use of imported parts, material and labor, or the Commission, which must rely on the credibility of its rules if they are to provide consumers with the information they need to make purchasing decisions.
August 8, 1997
Office of the Secretary
To Whom it May Concern:
Attached are six copies of the submission of the International Union, UAW on the Proposed Guides for the Use of U.S. Origin Claims (FTC File No. P894219). Also enclosed is a computer diskette with the submission, formatted in Word for Windows 2.0.
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