FTC: Made In The USA
Comments Concerning Dan Pryor--P894219
251 Welsh Pool Road, Exton,
(610) 363-5450 · 1-800-634-4046
Fax: (610) 363-0167
"Made in USA Policy Comment
FTC File No. P894219
August 11, 1997
Office of the Secretary
Federal Trade Commission
Sixth & Pennsylvania Ave., N.W.
Washington, D.C. 20580
Re: Comments of Exidyne Instrumentation
Exidyne Instrumentation Technologies, Inc. (EIT)
hereby responds to the Federal Trade Commission's (the
"Commission) request for comments on its
proposed "Guides for the Use of U.S. Origin
Claims (the "Proposed Guides"). 1 EIT manufactures environmental
and safety instrumentation at a 60-person facility in
Exton, Pennsylvania. A main source of EITs
competitive advantage is its US-made product - all but
one of EIT's main competitors are foreign-owned, and
customers value the quality that comes from US-made
instruments. EIT strongly opposes the Commission's
proposal to weaken the standard for "Made in
USA" claims from."all or virtually all"
U.S. content to "substantially all U.S.
content. Weakening the
1 ______Fed. Reg.______(Date) (hereinafter
EXIDYNE INSTRUMENTATION TECHNOLOGIES, INC.
standard will lead to consumer deception. It will also
deny EIT the marketing advantage attributable to Made in
I.WEAKENING THE "MADE IN USA
STANDARD WILL DECEIVE A SUBSTANTIAL PERCENTAGE OF
According to the Commission's own findings, weakening
the "Made in USA standard would allow
marketers to deceive at least one third of all consumers.
In announcing its determination to weaken the "Made
in USA" standard, the Commission concluded that
consumers no longer expect "Made in USA
products to have "all or virtually all" U.S.
content. To support that conclusion, the Commission cited
the results of a 1995 Attitude Survey commissioned by its
staff and found that 67% of the Attitude Survey
respondents were willing to accept a "Made in
USA claim for a product with 70% U.S. content and
U.S. final assembly. 2 Based
on that finding, however, 33% of the respondents were not
willing to accept such a "Made in USA claim.
Thus, the evidence cited by the Commission indicates that
weakening the "Made in USA standard will
deceive one third of consumers.
Other consumer perception surveys before the
Commission suggest that the "substantially all"
standard actually will deceive a majority of consumers.
2 Proposed Guides at 55. The percentage cited by
the Commission is inflated. To reach 67%, the Commission
combined the percentage of respondents who strongly
agreed with the claim (26%) and the percentage who
only "somewhat agreed with the claim (41%). The
"somewhat agree" responses indicate some
unwillingness to accept the claim, and therefore the
actual percentage of respondents who were willing to
accept the "Made in USA claim was only 26%.
For example, the 1991 FTC Copy test found that 77% of
consumers expect a "Made in USA"product to have
all or almost all U.S. content.3
The Commission noted several other surveys that produced
American Hand Tool asked respondents what
percentage of a hand tool they assumed was made in
the U.S. Fifty-three percent of the respondents
stated 100%.... Similarly, in the NCL study,
consumers were asked "When you see a product
advertisement or label stating "Made in
USA what amount of U.S. parts (i.e. components)
do you assume is in the product?" Forty-five
percent of respondents stated 100%; an additional 9%
of the respondents stated a minimum ranging between
90% and 100%. When respondents to this survey were
asked about the minimum amount of U.S. labor they
assume is in the product, 58% stated 100%, and an
additional 8% stated a minimum between 90% and 100%. 4
II.THE PROPOSED SAFE HARBORS FOR "MADE IN
USA CLAIMS INCREASE THE POTENTIAL LEVEL OF CONSUMER
The Proposed Guides set forth two alternative safe
harbors to demonstrate a reasonable basis for a
"Made in USA claim under the substantially all
standard. First, a product may be marked "Made in
USA if U.S. manufacturing costs represent 75% of
the total manufacturing costs for the product and the
product was last substantially transformed in the United
States. Second, a product may be marked "Made in
USA if the product was last substantially
transformed in the
3 Proposed Guides at 45.
United States and all significant inputs were last
substantially transformed in the United States. These
safe harbors will not comport with the expectations of a
majority of consumers that "Made in USA means
all or virtually all U.S. origin. In fact, as discussed
below, the safe harbors do not even ensure that a product
meets the weaker "substantially all" standard.
A.The 75% U.S. Content Safe Harbor
The 75% U.S. content safe harbor has two significant
loopholes that allow products with less than 75% U.S.
content to be labeled "Made in USA." First, the
safe harbor only requires a manufacturer to trace the
origin of inputs that are likely to have
"significant" foreign content.5
Therefore, inputs that contain "insignificant"
foreign content can be counted as 100% U.S. origin. For
many products, the safe harbor expressly limits the
obligation to identify foreign content to inputs
"one step back" in the manufacturing process. 6 As a result, a manufacturer
can meet the safe harbor and advertise its product as
"Made in USA if the product has less than 75%
U.S. content. In fact, if a product has many parts, each
of which the manufacturer believes contain only
insignificant foreign content, the actual U.S. content
could fall well below 75%.
A second loophole in the 75% U.S. content safe harbor
allows a manufacturer to average its costs to determine
whether a product line meets the
5 Id. at 77.
substantially all" standard. 7
Individual products that do not meet the 75% standard,
nevertheless can be marked as "Made in USA so
long as the average U.S. content is 75%. Consumers in the
marketplace will have no basis to distinguish products
that meet the safe harbor from those that fall below it.
In addition to these loopholes, the 75% U.S. content
safe harbor does not ensure that a majority of the parts
or labor that go into a product are U.S. origin. In fact,
the outcome under the test does not turn on the amount or
value of U.S. parts and labor, but instead depends on the
cost of imported parts and labor. By sourcing from the
lowest cost country possible, a manufacturer can maximize
the imported parts and labor that go into a product while
remaining within the safe harbor. In fact, it is possible
for a product made from 100% foreign parts or materials
to meet the 75% U.S. content safe harbor. These results
are contrary to consumers' views that both the origin of
parts and the location of processing are significant in
defining "Made in USA."8
B.The Two Levels of Substantial Transformation Safe
The second safe harbor, two levels of substantial
transformation", similarly does not ensure that a
"Made in USA product conforms to consumers'
7 Id. at 85-86.
8 Id. at 45, 47-48.
expectations. The Commission itself noted that minor
processing steps can satisfy the substantial
By itself, however, substantial transformation does
not necessarily ensure that a product contains
significant foreign content. It may, for example, reflect
a relatively unsophisticated final assembly process
putting together parts made elsewhere or it may be met by
a process that in fact changes the nature of the product,
but requires little work. 9
Doubling the substantial transformation requirement
simply means that the test can be met by two minor
operations, and therefore does not ensure that a
"Made in USA" product will have significant
U.S. content in terms of value, parts, or labor.
The Proposed Guides specify that a product with more
than 25% foreign content can meet the two levels of
substantial transformation safe harbor. 10
In fact, because the safe harbor does not impose any
ceiling on foreign content, a product with substantially
more than 25% foreign content by value can qualify as
"Made in USA." That result runs contrary to the
Commission's findings about consumer acceptance of
"Made in USA claims. 11
Moreover, the two levels of substantial transformation
safe harbor (like the 75% U.S. content safe harbor) can
apply to products made from 100% foreign parts. 12 Again, this result is
9 Id. at 57.
10 Id at 79 (example 3).
11 Id at 48, n.193, 56.
12 Id at 79 (examples 1 and 3).
consumers 'belief that the "Made in USA
definition relates to both parts and processing.
* * *
For all of these reasons EIT strongly urges the
Commission not to weaken the standard for unqualified
"Made in USA claims and instead to reaffirm
the "all or virtually all" standard. In
addition, the Commission should revise and expand the
provisions of the Proposed Guides relating to qualified
U.S. origin claims, U.S. origin claims for specific
processes or parts, and comparative claims. Further
guidance on these issues within the framework of the
"all or virtually all" standard would (1)
permit marketers to derive whatever market advantage
applies to a product that is partially U.S.-made; (2)
increase the information available to consumers regarding
the U.S. content of products; and (3) ensure that
consumers are not deceived as to the content of a product
labelled "Made in USA."
Vice President and General Manager