FTC: Made In The USA Comments Concerning JBC International--P894219
August 8, 1997
Office of the Secretary
"Made in USA" Policy Comments, FTC File No. P894219.
Dear Secretary Clark:
On behalf of JBC International (hereinafter JBC), I respectively submit the following comments with regard to the Federal Trade Commission's request for comments as published in the Federal Register on May 7, 1997 (62 Fed. Reg. N0. 88 250191). Thank you for your efforts to seek a new standard to replace the out of date "all or virtually" standard for making "Made in USA" origin claims. Last year I testified before the International Trade Commission that all of our product marking laws, import and domestic, should be repealed and new standards adopted in their place. With that personal prejudice stated up front, I still offer my full support for the adoption of the proposed Guides and the "safe Harbors" policy which requires a product be substantially all made in the US in order to be labeled "Made in USA".
We are opposed to percentage content rules, including 100 percent as in "all or virtually all". From experience, such rules can be consciously manipulated, affected by exchange rates, and otherwise made administratively impossible to enforce. With the massive changes in today's global market place, electronic commerce, and competitive environment, it should be the goal of governments to develop simple rules that are made known to the public. It is then the responsibility of the business community to be informed and voluntarily comply with those rules. The Commission has taken a bold step in these proposed Guides to attain that goal.
JBC is a consulting firm providing strategic advice to the international business community. Jim Clawson, CEO of JBC, has been working in and out of government, domestic and international, for 25 years. As a chairman and member of advisory groups to governments, frequent speaker at international conferences and a university professor, it has been Jim's goal to simplify, harmonize and publicize the rules for international business for the benefit of the consumer and company alike.
After several years of consideration, public comment and study, the Commission has proposed new guides for determining "Made in USA" labeling. The proposed standards and guides will replace the current antiquated "all or virtually all" standard with a combination of percentage content and substantial transformation criteria. I will not restate the proposals in this submission.
While we at JBC do not support percentage content requirements for the reasons given above, we believe the Commission proposals adopt the substantial transformation criteria in such a fashion as to allow most manufacturers to properly mark goods for the benefit of the consumer. There will be no consumer deception if substantial transformation is used.
Currently the consumer is not receiving a clear message from the "Made in . . ." mark. For example, a consumer purchases two products, one labeled "Made in Canada," the other "Made in the USA." The average consumer has every expectation that the same standard was applied in both cases to arrive at the correct labeling decision. In fact, the processes are quite different. For the "Made in Canada" label, the product is produced in Canada under the substantial transformation standard; no value added content is required. The "Made in the USA" label, on the other hand, is derived from the application of the all or virtually all standard.
The consumer's expectation that application of a uniform standard determined the labeling of these products is therefore based on a faulty premise and is certain to result in confusion or a feeling of deception. If consumers believe the products are labeled according to the all or virtually all standard, they will be wrong about the product from Canada. If they believe the standard is substantial transformation, they will be wrong about the U.S. product. In either case, the consumer is being confused or deceived.
The Commission proposals move significantly to correct this condition by providing for a substantial transformation standard, even though it still requires some value content in certain circumstances. For these reasons, it is our recommendation that the Commission adopt the proposed guidelines.
The current marking standards are a barrier to US companies that compete globally. They restrict US manufacturers with complex and contradictory regulatory schemes that result in added costs and complexities. It is clear from the Commission's proposed Guides For Use of the "Origin: USA" mark that it recognizes it can fulfill its responsibilities to the American consuming public, and at the same time alleviate much of the competitive disadvantage US businesses have been subject to under the old "all or virtually all" standard.
We support Section XIII "Origin: USA" Labels of its proposed Guides.
The following points respond to the Commission's specific requests for additional information on this very important provision of the Commission's proposed Guides.
Whether such a mark is likely to be of significant utility to those selling goods in more than one country.
We believe that a "lesser" mark for country of origin marking will be of significant utility to US manufacturers of exporting and selling US products in foreign markets. Currently, US manufacturers are subject to conflicting and contradictory requirements for labeling country of origin on US products. The ability to mark labels on US products with a lesser mark, such as "Origin: USA," would alleviate the necessity for US manufacturers to maintain packaging plants in foreign countries for the sole purpose of meeting foreign country of origin marking requirements, and eliminate the need for costly special labels on US products being exported.
JBC created and supports the United Labeling Coalition for the purpose of harmonizing consumer labels within NAFTA. We have seen first hand the hidden costs to the consumer of multiple labels just to meet an arbitrary government established standard. One point we wish to make is that "Origin: USA" may be an acceptable marking to foreign Customs officials but more work needs to be done to make this mark acceptable. JBC encourages the Commission to work with the United States Trade Representative (USTR), the Department of Commerce and US Customs to determine what "lesser" marks will be acceptable by Customs officials in foreign markets.
On the specific request, we believe that it is unlikely that a small alternative label marking of US origin would mislead consumers into believing the product is substantially all US made.
Whether the distinction between consumer goods and goods sold to businesses for commercial use is an appropriate one.
JBC believes there are distinctions between classes of goods. There should be different standards for industrial/capital goods and consumer/business goods. In the first instance, the requirements set forth in Section XIII A and C of the proposed Guides are not necessary for industrial goods. They are necessary for consumer goods.
Whether the additional requirements for disclosure on consumer goods are sufficient to prevent consumer deception.
JBC believes that the additional labeling or disclosure, as set forth in requirement C of Section XIII, is not necessary to prevent consumer deception for the labeling of the product. We believe that "Origin: USA" will not be confused with "Made in the USA". As the FTC observed in its review of its consumer perception studies, consumers understand the concept of modified/lesser marks to mean something different from and less than the "Made in USA" claim. Moreover, as appropriate language for these lesser marks on package labels is developed, US consumers will come to understand exactly what such language means that this is a US product with less than substantial US content. US consumers are already becoming accustomed to changes on labeling of US products as a result of harmonization efforts by other US government agencies.
In conclusion, JBC International recommends adoption of the proposed guides. I personally wish to thank the Commission and the staff for allowing me to participate. Clearly this is an example of "good government" by seeking the full participation of the private sector in the development of these Guides. One size does not fit all! I thank you for all the hard work and effort that has been directed to this most important issue.
James B. Clawson