FTC: Made In The USA Comments Concerning Robert D Croog--P894219
August 8, 1997
Office of the Secretary
Re: Made in U.S.A. Policy Comment
As a major U.S.-based manufacturer, Eastman Kodak Company has a significant interest in what products the Commission considers are eligible to be marked "Made in U.S.A. Though we have manufacturing facilities in such foreign locations as England, France and Brazil, our principal location for making sensitized products (e.g., photographic film and paper) is in our headquarters city, Rochester, New York and we are currently the only company sensitizing film in the United States.
As indicated by the range of public comments already made to the Commission, this is a subject of many views and conflicting interests. Since all of these views and interests cannot be accommodated by a single (or even the proposed two-pronged) standard, it seems useful to determine whose interests should be given priority and then see whether other interests can be accommodated as well.
1. Whose interests should predominate? -- We recognize that the current process grew out of certain American manufacturers' dissatisfaction with the current "all or virtually all standard as being ill-suited to contemporary global manufacturing practices. While there are certainly costs to American businesses from the imposition of such standard, such costs are inherent in meeting almost any standard that the Commission would establish. Various countries have particular requirements for package markings, not only to designate origin, but to meet linguistic and other needs, and consumer goods manufacturers often need to modify packaging to suit both legal and marketing needs in a given country. Therefore, the argument that a less stringent and more commonly used standard (such as simply "substantial transformation") would permit a manufacturer to have a single package for marketing both in the U.S. and elsewhere does not seem terribly persuasive. Also, the FTC has gone rather far towards meeting the need for greater uniformity with its proposed "Origin: USA" marking and, if this is adopted, the Commission will have to exercise care to see that this marking is not abused to the detriment of consumers.
It seems to us that the principal need is for clear consumer understanding of what "Made in U.S.A." on a product means. It should be remembered that 'Made in U.S.A. is a voluntary marking for goods sold in this country and while it certainly confers a marketing advantage, no manufacturer is required to use it here. Since this marking is essentially a product claim used to gain acceptance in the marketplace, the consumers interest must be paramount in revising the current standard.
We believe this dominant interest can be accommodated with the needs of American businesses to compete fairly with those whose goods are largely made abroad. More specific markings indicating country of assembly, packaging or various components (e.g., "Assembled in U.S.A., from parts made in Zanzibar") may already be used to delineate for consumers the role of domestic operations in goods which also have foreign content. But we believe, given the work the Commission has done, a new standard can be established for making an unqualified claim of "Made in U.S.A." which balances some of the competing interests without doing substantial damage to the consumers' understanding of the term.
2. What standard should be adopted? Based on the foregoing, we have no strong objection to the FTC's maintaining its current "all or virtually all" standard which affords the best guarantee that no consumer will be confused or misled (assuming appropriately vigorous enforcement measures, which in the current climate of governmental downsizing may be a large assumption). However, we recognize some of the legitimate disadvantages this may place on businesses who are very heavily committed to maintaining manufacturing processes here but cannot ignore the economic realities of using at least some foreign components. Nor are these companies looking to foreign operations and suppliers simply to obtain parts more cheaply. There are some items which are not made, or raw materials which are not found, in the United States and even some situations where using a U.S.-origin component might actually lessen the quality of the final product.
So a change from the current standard might well enhance the consumer's position, motivating U.S. companies to offer the best quality at the best price without sacrificing the "American" identity of their goods. All this assumes the foreign input to the goods is not so great as to make "Made in U.S.A." a misleading claim.
By the Commission's own admission, the research on the public's understanding of this term is by no means complete or conclusive. Such research as exists, however, does seem to give the Commission permission to lower the U.S. content requirement somewhat without leading consumers astray. By and large, consumers do not expect the sort of absolute purity built into the current standard. It seems safe to say that permitting 10-15% of manufacturing costs to be incurred abroad so long as the product's "last substantial transformation" is done here would continue to serve consumer interests. We are, however, not entirely convinced that allowing as much as 25% of such costs to be spent abroad would be similarly inconsequential in the eyes of many consumers.
Consumers seem more interested in the essential meaning of the term "Made in U.S.A." rather than in any precise numerical apportionment of expenses. Yet a quantitative approach has the advantage of providing a measure of certainty and objectivity in approaching this subject. While any numerical cutoff is going to be somewhat arbitrary, we think that allowing more than 15% of manufacturing costs to be spent outside the U.S. leaves too much room for consumer misunderstanding. Though the Commission's 1995 Attitude Survey shows 67% of consumers would permit as little as 70% of costs (plus final assembly) of a "Made in U.S.A." product to be domestic, we think the possibility of a group as large as 33% of consumers being misled or confused is simply too great.
Consequently, we recommend that in order to have a less substantial likelihood of consumer misunderstanding, the FTC's proposal should be modified to permit a safe harbor only if "85% or more" of manufacturing costs were incurred in the U.S. (plus the last substantial transformation was done here). Otherwise a qualification should be added to the claim. (On determining what qualifying words are appropriate, due consideration should be given to the limited space available on the packages of many smaller items.)
As to the second noncost-oriented safe harbor, it appears to protect" consumers adequately by requiring two successive substantial transformations. It also answers the needs of businesses to simplify this process and relate it to existing standards for determination of origin.
In summary, we believe:
We appreciate your consideration of the foregoing position and would be pleased to provide any further information or explanation to assist the Commission in its decision.
Robert D Croog
Robert D Croog