03/11/96...Comments to the NACAA regarding FTC changes in Made in USA claims Federal Trade Commission Received Documents March 11, 1996 P894219 B18354900137 NACAA//NATIONAL ASSOCIATION OF CONSUMER AGENCY ADMINISTRATORS 1010 VERMONT AVE., N.W., SUITE 514, WASHINGTON, D.C. 20005 - (202) 347-7395 - FAX (202) 347- 2563 March 7, 1996 Office of the Secretary Federal Trade Commission Sixth and Pennsylvania Avenue, NW Room 159 Washington, DC 20580 Re: Made in USA Policy Comment FTC File No. P894219 Dear Mr. Secretary: The National Association of Consumer Agency Administrators (NACAA) is pleased to provide the comments of our members on the issue of "Made in USA" claims in product advertising and labeling. NACAA represents consumer protection agencies at all levels of government nationally and in several foreign countries. Our member agencies respond to constituents' inquiries and complaints concerning a wide variety of consumer problems, including those relating to disclosure and perception issues. Attached to this letter is a statement from the Canadian federal government summarizing its labeling and advertising policy for evaluating "Made in Canada" claims, and similar policy information from the Queensland, Australia Office of Consumer Affairs concerning "Made in Australia" claims. We are also providing information from the Consumer Affairs Coordinator of the Santa Cruz, California District Attorney's Office, including correspondence to the U.S. Customs Service from that agency and from a multi-state group of attorneys general, regarding country of origin claims. We appreciate the opportunity to share our members' experiences on this issue. Sincerely yours, Lawrence A. Breeden NACAA President enclosures cc: Douglas Blanke, NACAA Vice President Susan Giesberg, NACAA Public Policy Chair Susan Grant, NACAA Executive Director COUNTY OF SANTA CRUZ Office of the District Attorney Division of Consumer Affairs 701 Ocean Street, Room 200 Santa Cruz, CA 95060 454-2101 or 763-8130 DATE: January 30, 1996 TO: Susan Giesberg NACAA Public Policy Chair CA Attorney General's Office FROM: Robin M. Gysin Consumer Affairs Coordinator SUBJECT: COMMENT ON PROPOSED FTC RULES ON "MADE IN USA" CLAIMS Attached to these comments is our letter to U.S. Customs regarding country of origin marking for frozen produce. Within the letter is reference to a survey which we commissioned in order to determine what attitudes California consumers had towards domestic and frozen products. The survey was conducted by an established market research firm who conducted interviews in large cities in California, of shoppers who made monthly purchases of frozen vegetables. One of the things that the survey was able to determine was that the product name (in this case) , "American Mixtures, indicated to 87% of those surveyed that there was a domestic, United States origin of the vegetables. The survey further indicated a strong preference among consumers for domestic frozen produce. The reasons for this preference may be for health, environmental, economic, or patriotic reasons. Made in USA claims are obviously complicated by the fact that many manufactured items have percentages of domestic and foreign products, and the product may be partially assembled is the U.S. and in other countries. Though consumers are entitled to the ?made in . . .? information before making a purchase, too much information in small print will most likely defeat the purpose of labeling. Clear, short disclosures on labels would be preferable. "USA 80%?, for example, would meet the concern. Consumers would most likely view "Assembled in USA" as suggesting a product as having a majority of foreign content. Print advertising would logically have a more complete disclosure of percentages and where a product is assembled. The FTC should prepare rules to cover the different aspects of the "Made in USA" claims. DISTRICT ATTORNEY COUNTY OF SANTA CRUZ ARTHUR DANNER III E. HOPKINS DISTRICT ATTORNEY CHIEF DEPUTY. CRIMINAL OPERATIONS DAVID GENOCHIO CHIEF DEPUTY. ADMINISTRATION November 5, 1993 U.S. Customs Service Regulations Branch Office of Regulations & Rulings 1301 Constitution Avenue N.W. (Franklin Court) Washington, D. C. 20229 RE: COUNTRY OF ORIGIN MARKING FOR FROZEN PRODUCE This letter is submitted pursuant to the invitation published in the September 9, 1993 Federal Register to comment on the application of country of origin marking requirements to imported frozen produce. It urges front panel disclosure, a revision in 19 CFR 134.47, which allows for more lenient corrective treatment when a misleading or false, but trademarked, suggestion of geographical origin is placed on an imported product, and the need for type size and color of lettering regulations. In March, 1993, the Santa Cruz County District Attorney's Office brought a civil suit seeking penalties and injunctive relief against The Pillsbury Company for violating California's unfair competition statutes in the marketing of Pillsbury's "American Mixtures" line of frozen vegetables. Underlying the unfair competition charges are allegations that Pillsbury violated 19 U.S.C. 1304 by concealing the imported character of the vegetables in parts of the "American Mixtures" line, in placing the country of origin disclosure in small print on the rear panel quite literally hidden amidst other text. Lest there be any question that purchasers of the Pillsbury vegetables might readily determine their source, the words "Product of Mexico" were printed in black against a dark green background, further obscuring the country of origin disclosure. Also underlying the unfair competition charges is an assertion that Pillsbury violated a California law, Business and Professions Code Section 17533.7, by its use of the word "American" to describe a product that was substantially imported. As part of its case preparation, the District Attorney's Office commissioned a survey of California consumers to ascertain attitudes toward domestic and frozen produce and to determine, among other things, a) if the words "Product of Mexico" on Pillsbury's. "American Mixtures" bags were discoverable or "conspicuous," and b) If the name "American Mixtures" was misleading when applied to imported vegetables. An established market research firm conducted the survey through face-to-face interviews in Los Angeles, San Francisco, Sacramento and San Diego, of shoppers who purchased frozen vegetables at least once a month. The shoppers were presented with an "American Mixtures" bag that bore the words "Product of Mexico," and were then asked a series of questions. The survey in its entirety is attached to these remarks as Exhibit "A?. A more detailed description of the methodology is presented at page 3 of the survey. When asked, "Does the name 'American Mixtures' say anything to you about where the vegetables are grown, " 213 out of 300 respondents stated that the. name suggested a geographical source for the vegetables. Of those 213, 186 or 87% indicated the name "American Mixtures" suggested domestic, United States, origin. When handed one of Pillsbury's "American Mixtures" packages and asked to determine the country of origin of the vegetables, 60% were unable to do so, were unable to find the words "Product of Mexico" on the rear panel, even though they were allowed to look for the disclosure for up to two minutes, far longer than the normal selection process in a store. While most packages of imported frozen vegetables may not be as crudely deceptive as Pillsbury's "American Mixtures" line, the results of this survey are of interest to the overall question of whether rear panel disclosure is conspicuous. Clearly, in the case of the "American Mixtures" bags, it was not. It is the view of the District Attorney's Office that rear panel disclosure is generally not conspicuous and is inadequate for the reasons stated at length in Nor- Cal I (Nor-Cal/Crosetti Foods, Inc. v. United States Customs Service, 758 F.Supp. 729 (1991)). The purpose of the country of origin disclosure law has been stated over and over again in decisions interpreting 19 U.S.C. 1304. It is to inform consumers of the country of origin so they may choose whether or not to buy imported goods if the country of origin is important to them. For a person not encumbered by years of Customs rulings, the notion that rear panel disclosure fulfills the purpose of the statute, when the much more informative, easily achievable, alternative of front panel disclosure is available, is silly. The inadequacy of rear panel marking extends to most goods, but particularly to frozen vegetables, which in the past have been produced almost exclusively in the United States, which typically lie face up in freezer compartments, which are cold to the touch and therefore not handled for long and which are sometimes covered by frost. In the briefing of Nor-Cal I, it was argued on behalf of respondent that since there are statutes overseen by agencies other than Customs which require labeling information to be readable or conspicuous, and since these other agencies allow rear or side panel disclosure,.by analogy such disclosure should be considered conspicuous for country of origin purposes. In particular, the Federal Food, Drug and Cosmetic Act was cited as requiring "nutrition information" to be conspicuous as was the FDA?s interpretation of the statute, which allowed "nutrition information" to be presented on rear or side panels. Further, so the argument went, Judge Musgrave in Nor-Cal I did not anticipate future law, when, in 1991, he criticized Customs' view that a country of origin disclosure became conspicuous by virtue of its proximity to "nutrition information." Judge Musgrave noted that "nutrition information" was not required for most foods. At the time of the opinion it was compelled only for foods for which nutrition or health claims were made. However, according to this line of reasoning, the Nutrition Labeling and Education Act has since mandated "nutrition information" for virtually all foods, beginning in April, 1994, thereby resurrecting the notion that juxtaposing country of origin with "nutrition information" makes the country of origin disclosure conspicuous no matter where it is placed on a package. The first point to be made in response is that the failure to anticipate the future, as it applied to "nutrition information", does nothing to negate the force of the reasoning in Nor-Cal I, that a host of other factors dictate front panel disclosure of country of origin-- from the unambiguous purpose of the disclosure law, to the way frozen vegetable packages are displayed, to the plain meaning of the word "conspicuous." In addition, there is a distinction between the ?nutrition information" presented as a large block which is easily identifiable whether, on the front, side or-back, and the difficult, hard to find three word country of origin disclosure "product of ____? or "made in ____.? Apart from the relative ease in finding the mass of required nutrition information", mandating front panel disclosure of such material might be said to interfere with reasonable design and graphic needs for the labels of food manufacturers. No such consideration would apply to front panel disclosure of, typically, a three word phrase such as "Product of France," which is succinct enough to leave the designer of even small labels full creative room. A further consideration against the assumption that placing the country of origin near "nutrition information" somehow makes the country of origin disclosure conspicuous comes from the nature of the products which are the subject of this rulemaking, namely, frozen produce. Consumers are less likely to look for "nutrition information", and as a result maybe stumble on the country of origin disclosure, with vegetables whose healthy attributes are generally known and which are not processed beyond freezing and in some cases the addition of sodium, than they would be for heavily processed foods. Let me turn now to the administrative regulations designed to combat misleading geographical references. 19 CFR 134.46 essentially states that if the words "United States," "American," "U.S.A." or the name of other cities or localities in the United States appear on an imported products there must appear "legibly and permanently in close proximity to such words. . .and in at least a comparable size, the name. of the country of origin preceded by 'made in,' 'product of' or other words of similar meaning." The requirements of "close proximity" and' "comparable size" apply also to foreign place names other than those of the actual country of origin. How this regulation ought to operate is illustrated by Pillsbury's misleading use of the name "American Mixtures." The Customs Service itself noted, in considering Pillsbury's case, that it "counted at least twenty references to America or a U.S. location on the 'San Francisco Style' ["American Mixtures"] product package .... Most prominently, each bag bears the words 'American Mixtures' in approximately sixty-three points printed across the top front side." in fact, it is hard to imagine a company plastering its packages with more references to the United States. Customs did not insist that Pillsbury's country of origin disclosure be commensurate with the prominence with which it created the impression that the contents of its "American Mixtures" bags were grown in the United States, clearly the purpose of Section 134..46. Instead, Customs noted that the name "American Mixtures" was trademarked, and invoked the following regulation, 134.47. This regulation, which applies to the names of locations in the United States which are part of a trademark or trade name, requires conspicuous disclosure of country of origin but it removes the requirements that disclosure must be in close proximity and in comparable size to the misleading references of geographical origin. Citing Section 134.47, Customs ordered Pillsbury to disclose on the front panel the Mexican origin of those "American Mixtures" styles which contain foreign produce, but in letters far smaller than, and not remotely as conspicuous as, the name "American Mixtures." Section 134.47 assumes that the act of trademarking a name which turns out to contain misleading or false geographical references, somehow diminishes the capacity of the name to mislead purchasers. This makes no sense. In fact, there is nothing inherent in trademarking a name which provides any additional information to consumers. The words "American Mixtures" are no less misleading because they were trademarked. If there were any doubt, refer to the survey, Exhibit "A," in which 87% of those who thought the name "American Mixtures" suggested a geographical origin for the vegetables, believed that origin to be the United States. It should be noted that although there are Federal and California statutes designed to prevent trademarking misleading geographical references, it is obvious they are of limited effect. FDA regulations dealing with trademarking a misleading geographical name are much more realistic. In 21 CFR 101.18, the FDA lists various misrepresentations that render a food "misbranded." One applies to any representation which expresses geographical origin of the food unless the representation is true. Trademarking a false reference to geographical origin provides no special treatment unless the trademark or trade name "has been so long and exclusively used by a manufacturer or distributor that it is generally understood by the consumer to mean the product of a particular manufacturer or distributor.? Customs should seek to alter Section 134.47 to reflect the approach of the FDA regulation. With regard to Pillsbury's "American Mixtures" bags, surely the name "American Mixtures," trademarked in 1992, has not been "so long and exclusively used...that it is generally- understood by the consumer to mean the product of a particular manufacturer." After changing Section 134.47, Customs could give Pillsbury the choice of either abandoning the continuing deception of naming imported products "American Mixtures," or retaining the name and disclosing the country of origin "in close proximity" in letters of "comparable size" to the name "American Mixtures.? (Whether the latter choice would satisfy the Federal Trade Commission and California law against deceptive names is a separate question.) Finally, I urge Customs to adopt standards dictating typesize and design requirements for country of origin disclosure. While the overriding requirement of "conspicuous disclosure" would seem to suffice, it has not prevented companies from hiding the disclosure-- witness Pillsbury's use of small black. print, surrounded by other text, against a dark green background. Federal regulations in other areas again suggest an approach. FDA rules require disclosure of the percentage of a "characterizing ingredient" in a food "in easily legible boldface print or other type in distinct contrast to other printed or graphic matter." (21 CFR 102.5(b)(2)). Various height alternatives for the disclosure are also presented in this regulation. In conclusion, when all the cant is removed from the discussion, it is overwhelmingly clear that importers of most products, and certainly importers of frozen produce, would prefer not to disclose that their goods come from outside the United States. Why? The evidence is everywhere that for patriotic, economic, health or environmental reasons people generally prefer to buy domestic goods. This is evident from "Buy American" campaigns, ads which note the domestic manufacture of the advertised item, politicians' statements about the importance of supporting domestic manufacturers and producers, the NAFTA debate with its consideration of lesser health and environmental standards in Mexico, and the survey in the Pillsbury case showing an overwhelming preference for domestic frozen produce. Congress has given expression to this preference by passing a law which states that people have a right to know, by virtue of conspicuous disclosure of the country of origin, if the goods they are offered are imported. It is certainly possible to find reasons or excuses why the needs of companies importing products, to minimize disclosure of country of origin, should take precedence over Federal law and the desires of ordinary consumers. But Customs should not continue to defer to such narrow, sectarian interests. Clear, prominent front panel disclosure of country of origin will give effect to congressional intent and will not interfere with anyone's ability to design labels or to market products on their merits. Customs should mandate such disclosure. Sincerely, ARTHUR DANNER III DISTRICT ATTORNEY DON GARTNER ASSISTANT DISTRICT ATTORNEY Attachment DANIEL E. LUNGREN State of California Attorney General DEPARTMENT OF JUSTICE 110 WEST A STREET, SUITE 1100 SAN DIEGO. CA 92101 P.O. Box 85266 SAN DIEGO, CA. 92186-5266 (619) 645-2001 FACSIMILE: (619) 645-2062 (619) 645-2089 November 5, 1993 U.S. Customs Service Regulations Branch Office of Regulations and Rulings 1301 Constitution Avenue N.W. (Franklin Court) Washington, D.C. 20229 RE: Comments on 19 CPR Part 175; Petition Concerning Country of Origin for Frozen Produce Gentlemen: The Attorneys General of the States of California, Connecticut, Florida, Missouri, Pennsylvania and New York welcome this opportunity to comment upon the Customs Service's request for comments regarding the proper manner for "country of origin? disclosure to made on frozen produce packages. As you are no doubt aware, the State Attorneys General are responsible for enforcing their state laws which prohibit the use of untrue and deceptive representations and unlawful or deceptive business practices. Many of the actions that we bring involve situations where, although a required disclosure is made, it is made in such a manner that its import is hidden from the public. Such hidden disclosures are the equivalent of no disclosure and subvert the intent behind laws and regulations requiring that the disclosure be made. As regards the current petition, it is our understanding that Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), requires that, unless excepted, every article of foreign origin shall be marked in a conspicuous place with the English name of the country of origin. Customs Regulations (19 CPR 134) have implemented the requirements, and exceptions, of 19 U.S.C. 1304. Customs? decisions in the past have allowed rear or side panel disclosure of the country of origin in many circumstances, while in some circumstances front panel disclosure has been required. The petition currently under review asks that Customs require that packages of imported frozen produce be required to show country of origin marking on the front panel of the package in order to be considered "marked in a conspicuous place.? Additionally, the petition asks Customs to require that the marking appear in a size and type style or color of lettering which would make the marking conspicuous. Apparently, Customs currently has no requirements in this latter regard, other than the general necessity that the article be marked in a conspicuous place and as legibly, indelibly, and permanently as the nature of the article will permit. You have asked for interested parties? comments on both of these issues. REQUIREMENTS FOR SIZE, TYPE STYLE AND COLOR OF DISCLOSURE Turning to the issue of size and type style or color of lettering first, we believe we have experience to comment upon this area. Our experience is that often those who want to hide a disclosure they are required to make, do so by using mice size type, lettering which is "squashed" together, or coloring of lettering which blends into the background color. We are aware, for instance of situations where advertisers have made required disclosures in yellow print on a spotted light blue background. Such lettering is very difficult to read. Likewise, we have seen lettering in black which appears on a dark green background. The combinations are endless. We have also seen required disclosures "buried" as the fourth line of a six line statement, all in the same print size, with little or no punctuation and little or no spacing between words. In order to deal with this problem, we have often resorted to defining the term "clear and conspicuous" in our judgments and assurances of discontinuance. This gives future guidance to the party required to make the disclosure and also ensures that the disclosure will be able to be read by the audience to whom it is directed. One formulation of the definition we have used on a number of occasions, modified for the matter currently under consideration, which we would commend to you, is as follows: "Clear and conspicuous" means that the country of origin statement is of such size, color, and contrast and is so presented as to be readily noticed and understood by the person to whom it is being disclosed. The disclosure is "clear and conspicuous" if it appears in the same type style and color on the same color background as that used to state the product's name on the principal display panel and if the product's name makes reference to a country, the statement of country of origin is in close proximity to the product's name. Such a definitional approach of "conspicuous" would ensure that the "person to whom the disclosure is being disclosed" would actually see it. Based upon the information available to us, and the facts as set forth in Norcal/Crosetti Foods v. U.S. Customs Service, 758 F.Supp. 729 (CIT 1991) (?Norcal 1"), it seems that in the marketplace of the 1990's it is more important than ever that consumers have the country of origin of the produce they purchase conspicuously disclosed to them. As the Norcal I court states: "imported frozen vegetables increased exponentially in the past few years. The foreign produce appears to have blended seamlessly into the stream of commerce and is sold under well-known U.S. labels such as Green Giant and Bird?s Eye. . . . because of the lower labor costs and comparatively lax regulatory requirements, Mexican producers in particular are able to export frozen vegetables into the United States at a fraction of the domestic production cost. . . . (F.D.A.) inspectors at various border crossings have found levels of pesticides in imported vegetables that would be unacceptable in domestic produce. . . .on the sample packages supplied to Customs, the country of origin marking appeared almost exclusively on the rear panel. Manufacturers place the country of origin marking where it is not easily found by the consumer. Most often, it is lost among the various small typeface information contained on the back or side panel of the package.? (Id., at 731-732.) The court goes on to point out that information which the manufacturer wants the consumer to know--product type, brand name, weight--the manufacturer has no difficulty in placing on the front panel in clearly readable type and color. While we do not have enough information to independently validate that the court is suspicion that "The manufacturers do not place the country of origin mark conspicuously, perhaps for fear of losing sales," is correct, we do know from other contexts that those required to make disclosures know how to make them conspicuously when they want the public to be aware of the disclosures and know how to hide the disclosures when they do not want the public be aware of them. We believe that the purpose of 19 U.S.C. 1304 is to let consumers know the country of origin of non- domestic products. For consumers to have realistic choice in buying the products they want, such country of origin designation must be made in a clear and conspicuous manner. We believe adopting a standard such as that proposed above will ensure that ultimate consumers will be able to easily find the marking of country of origin. This is the minimum required by 1304 to ensure that consumers can have the country of origin in mind when they make a purchasing decision. FRONT PANEL DISCLOSURE As did the Norcal I court, we too believe that one can "judicially notice" that the common method of displaying frozen vegetables in grocery stores is in shelved freezers or in frozen food bins with the front panel displayed and the rear panel buried. Access is limited, people usually read the type of product and size from the front panel through the closed freezer door or by looking down into the case and then select the vegetables they want without studying the packages once they take them out of the freezer, because they are cold. If one is buying carrots or broccoli, or a combination of raw vegetables, one may not be concerned about reading the nutrient panel because the product only contains the vegetables, and possibly some added sodium. Section 1304 requires that the country of origin be marked "in a conspicuous place.? Thus, the question becomes whether, when one considers the product in question, and the context in which the consumer will most usually see and examine the product, rear panel disclosure of country of origin is "in a conspicuous place?" Customs itself has recognized the need to review country of origin statements in light of the context in which they appear. See, e.g., letter of June 4, 1993, from John Durant, Director Commercial Rulings Division to Robert F. Ruyak, Howrey & Simon, MAR-2-05 CO:R:C:V 735085 RC/NL, wherein Customs determined that in the case of a Green Giant product called "American Mixtures, " which contains significant quantities of foreign produce, "The circumstances and context dictate that the marking appear on the front side of the packaging, rendered in such a manner as to satisfy the standard requirements of permanence and legibility. . . This location is necessary to . . . assure that the ultimate purchaser is. not misled or deceived as to the origin of the products which he purchases." Based upon our experience in enforcing consumer laws aimed at preventing deception, we believe that front panel disclosure, in a "clear and conspicuous" manner, is the only way to ensure that consumers can see the country of origin marking. No one disputes that consumers have the right to information regarding the origin of the produce they purchase. Consumers for a variety of reasons, be they valid or not, may believe that vegetables grown in the United States are the ones they want to buy. Whether such a decision is based on the consumer's belief that s/he should support American workers, that American grown products contain fewer pesticides or are grown with fewer environmentally dangerous chemicals being used or that they are "just better," it is the consumer's decision to make. 19 U.S.C. 1304 recognizes that consumers have a right to this information. It is incumbent upon Customs to make certain that consumers can exercise this right by having the country of origin information readily available to them. On frozen produce products, we believe that this can only be accomplished through the requirement of front panel disclosure--such disclosure will forestall the possibility of deception, through use of a descriptive geographic/specific place name (whether trademarked or not) or otherwise, and allow the consumer to have the necessary information in making consumer choices which Congress intended consumers to have. It is important to note, by way of analogy, that where information upon which consumers make comparisons when shopping is involved, such as the weight of the contents of a package, federal law already requires disclosure on the principal display--front-- panel- See, e.g., 15 U.S.C. 1453 (a)(2)-(3). Country of origin is a matter of great importance to many consumers. Customs and the states are aware of situations where the country of origin although disclosed, has in actuality been hidden from consumers. There is simply no reason, other than to hide it, that the country of origin should not be required to be disclosed on the front panel of frozen vegetables in order to be considered "marked in a conspicuous place.? Thank you for considering our views. Sincerely, RICHARD BLUMENTHAL ROBERT A. BUTTERWORTH Attorney General of Connecticut Attorney General of Florida MEGAN O?NEILL JACK NORRIS Assistant Attorney General Assistant Attorney General JEREMIAH W. (JAY) NIXON ERNEST D. PREATE, JR. Attorney General of Missouri Attorney General of Pennsylvania GLENNON P. FOGARTY ROBIN DAVID BLEECHER Assistant Attorney General Deputy Attorney General ROBERT ABRAMS Attorney General of New York SHIRLEY STARK Assistant Attorney General DANIEL E. LUNGREN Attorney General of California ALBERT NORMAN SHELDEN Supervising Deputy Attorney General Industry Canada 16th Floor, Place du Portage, Phase I CONSUMER PRODUCTS DIRECTORATE 50 Victoria Street Hull, Quebec KIA 0C9 Telephone: (819) 953-3187 Fax: (819) 953-4792 E-mail: brown.zane@ic.gc.ca January 29, 1996 Susan Giesberg NACAA Public Policy Chair California Attorney Generals Office 300 South Spring Street, Suite 500 Los Angeles, California 90013 Dear Ms. Geisberg: In response to your inquiry of January 19, 1996, regarding information relevant to a review of the. US FTC policy on claims of ?Made in USA?, please find enclosed ?A Guide to ?Made In Canada? Labeling and Advertising", which summarizes the policy of Industry Canada for evaluating claims of ?Made in Canada?. I hope this will be of some assistance to you. Please do not hesitate to contact me, or my colleague Steve Clarkson at (819) 953-1338, if you require further clarification in this matter or wish to discuss the application of the Canadian policy. Sincerely yours, M. Zane Brown Director General Industry Canada Information April 1994 A GUIDE TO "MADE IN CANADA" LABELING AND ADVERTISING MADE IN CANADA The following policy has been adopted by Industry Canada as a guide to the evaluation of label declarations and advertising claims which refer to Canada as the country of origin of a product, and relates to the administration of Section 7 of the Consumer Packaging and Labeling Act, Section 5 of the Textile Labeling Act and Section 2 of the Regulations (Consumer Products Branch), and Section 52 of the Competition Act (Marketing Practices Branch): (I) Implicit declarations of domestic origin of products (e.g. ?Shop Canadian?, ?Proudly Canadian?, ?Think Canadian?, the Canadian flag symbol, the maple leaf symbol, etc.) which appear on labels or in ads will be interpreted by the department as giving the same general impression to the public as explicit statements, such as "Made in Canada" and "Product of Canada? (ii) There are two facets to the department?s analysis of a declaration claiming Canada to be the country of origin of a product. First, it must be determined whether the product "came into being?(1) in Canada. Secondly, an assessment must be made as to the amount of Canadian direct labour and/or material that went into the various components of the final product. (iii) It is likely that the Department would not take exception to the labeling and/or advertising of a product as being of Canadian origin if it could be demonstrated that such a product came into being in Canada with a Canadian direct labour and/or material content of at least 51%.(2) (iv) In instances where it is clear that a declaration other than a reference to Canada as to the country of origin would more clearly and accurately ref1ect the circumstances surrounding a product's evolution, then such other statement shall be strongly recommended by the department. For example, ?Assembled in Canada?, ?Distilled in Canada?, ?Printed in Canada?, ?Processed in Canada?, ?Sewn in Canada?, etc. A ?Made in Canada? declaration means that the last substantial production operation was performed in Canada, resulting in a new and identifiable product. In other words, the important and significant stage of manufacturing and production that transformed the product into its final form has to have occurred in Canada. Thus, the product need not have ?evolved? in Canada from scratch. It should be noted that this policy reflects the position taken on this issue for the past several years by the Consumer Products and Marketing Practices programmes of Industry Canada. (Cc document est aussi disponible en francais) Footnotes: (1) This is to say that the last substantial production operation was performed in Canada resulting in a new and identifiable final product. (2) This figure is calculated as a percentage of the product?s total direct labour and/or material cost. No other costs of production enter into the calculation. Refer to paragraph (iv) re assembly of all-foreign components. CONSUMER AFFAIRS QUEENSLAND S A Jones 27 FEB 1996 Ms Susan Giesberg NACAA Public Policy Chair National Association of Consumer Agency Administrators 300 South Spring Street Suite 500 Los Angeles CALIFORNIA USA 90013 Dear Ms Giesberg I refer to your facsimile received at this office on 19 January 1 996 regarding a review by the Federal Trade Commission of rules relating to ?Made in USA? product claims and your request for input on the issue. The Australian Government is in the final stage of reviewing legislation affecting country of origin labeling and I have attached a paper outlining the background of the review, major issues and input by the Queensland Office of Consumer Affairs. I trust that this material may be of some assistance and thank you for the invitation to provide input. It would be appreciated if you would send me any information on the outcome of this issue. Yours sincerely Neil W. Lawson Commissioner for Consumer Affairs A PAPER ON COUNTRY OF ORIGIN LABELING IN AUSTRALIA, BY THE OFFICE OF CONSUMER AFFAIRS STATE OF QUEENSLAND February, 1995 1.0 BACKGROUND In Australia the federal government is in the final stage of reviewing law affecting country of origin labeling. Existing law allows food products processed here in Australia from imported ingredients to be labeled "Product of Australia" or ?Made in Australia". This has generated widespread complaints from Australian consumers and primary producers. The current labeling system causes confusion and there have been calls for clear and informative labels that accurately distinguish Australian content Industry opposed more prescriptive labeling on the basis that it would be costly and logistically difficult to implement. The Queensland Office of Consumer Affairs provided input to federal review which included consumer surveys and consultation with interest groups in this state. In March 1994 new law pertaining to representations about the Australian origin of both food and non-food items was introduced into Federal Parliament for inclusion under the Trade Practices Act 1974. This is currently 'bogged down' in the Senate because of calls for more stringent controls. The proposed new requirements for the top level origin label to be restricted to the use of 'Product of Australia' or 'Produce of Australia' are positive. These terms may only be used if each major ingredient or component and all operations of manufacture or production originate in Australia. Proposed changes to the law are designed to set a new base line for other authorities responsible for labeling. Labeling non-food would be voluntary but any statement must comply. Food would continue to be compulsory and administered by the National Food Authority (NFA) through state health authorities. The NFA would be at liberty to build upon the new baseline providing it is consistent with the new Bill. 2. The use Of the 'Made in Australia' label would only be conditional upon goods acquiring their essential character or qualities in Australia. For example, Jam made here from imported fruit could be labeled just 'Made in Australia'. This presents a problem as surveys show that most consumers believe that 'Made in Australia' means made here using Australian ingredients. Queensland Consumer Affairs prefers the adoption of a more meaningful label so at the ]cast it reads 'Made in Australia .... from Imported Ingredients" or...... from Local and Imported Ingredients", as the case may be. The Federal Government recently requested the NTFA to see if it can resolve the issue in so far as food products are concerned. The NFA has since gathered formal submissions and held a number of public forums and workshops in this regard. Queensland Consumer Affairs made a strong submission on the consumer interest. In October, 1995 the NFA announced an agreement on a new labeling scheme supported by peak organizations representing the unions, primary producers, consumers, and food processors. Under the proposed system, all packaged food and some unpackaged food such as fruit, vegetables, fish, nuts, ham and bacon sold in Australia, must be labeled with their country of origin. The labeling system will provide for three categories; . PRODUCT OF AUSTRALIA ?All ingredients are Australian and all processing takes place in Australia? To use the term "Product of Australia", essentially all ingredients (except minor components) must be Australian and all processing must have taken place in Australia. MADE IN AUSTRALIA "The essential character of the food must be obtained in Australia? To use the term "Made in Australia" without qualification, the food must have obtained its essential character in Australia and all major ingredients must be Australian. Imported ingredients must be declared truthfully. For example: -"Made in Australia from Australian and Imported Ingredients" means that more than 50 % of ingredients are Australian; -?Made in Australia from Imported and Australian Ingredients" means that at least one major ingredient is Australian; and -"Made in Australia from Imported Ingredients" means that all major ingredients are imported. P. 05 3. ?major ingredient" means any ingredient other than water, which is present in the food in a Proportion of 5 per cent or greater, by weight . PACKED/BLENDED/CURED/SMOKED ETC IN AUSTRALIA FROM "Food which has some Australian input even though the ingredients may all imported? To use any of these terms, the food must have some Australian input. The Australian character Or Process must be declared, as well as the nature of the imported ingredients. For example "Squeezed in Australia from USA oranges". It is important to note that food producers would be unable to use the claim 'Made in Australia" unless the essential character of the food was obtained in Australia and the presence of any imported major ingredient has been declared. In particular, where the essential character of a minimally processed food is derived solely from a single imported ingredient, the food could not be labeled "Made in Australia". Thus ham or bacon processed in Australia from imported meat would be labeled 'Processed in Australia from imported pork". This outcome is consistent with the position promoted by Queensland Consumer Affairs from the outset of the review. The NFA now seek endorsement of the proposal from state Health Ministers via the National Food Standards Council. 2.0 MAJOR ISSUES The major issues identified by the Office of Consumer Affairs in this review are as follows: 2.1 Mandatory Origin Labeling Australian consumers strongly believe that current mandatory country of origin labeling law relating to food products should be strengthened. They want to be able to make informed choices, based on reliable and accurate information. This includes being able to distinguish Australian and imported ingredients in products processed in this country 2.2 Product of Australia Australian consumers are satisfied with the proposal to restrict the use of Product of Australia and Produce of Australia to products with major ingredients originating in Australia and the major ingredients of food products being defined as suggested by the NFA. 4. 2.3 Made in Australia Consumer and primary producers have major concerns about the previous use of the term Made in Australia as it applies to food. The proposal to amend the made Practices Act 1974 so that the use of the Made in Australia label is only conditional upon goods (food and non-food products) acquiring their essential character or qualities in Australia. For example peanut butter processed here from imported peanuts would be labeled Made in Australia and would not require any mention of imported ingredients. Consumer groups, primary producers and the unions claim that the Made in Australia label would continue to be confusing and misleading to the public. Relevant surveys indicate community support for this proposition. For example, a Queensland Consumer Affairs survey involving 163 grocery shoppers in six Brisbane supermarkets showed: . 89 per cent of respondents want to distinguish Australian from non- Australian produce in food items manufactured here; . 57 per cent consider Made in Australia to mean both manufactured and grown here, and: . 96 per cent consider Manufactured in Australia insufficient to describe a product processed here using a substantial mix of Australian and imported ingredients. 70 per cent said Made in Australia from Local and Imported Ingredients is an acceptable description. Similarly a survey conducted by Quadrant Research Services Australia showed 47 per cent of respondents believe Made in Australia means the product is made from all Australian ingredients and 74 per cent believe it should mean that. It is clear that a great majority of consumers clearly want country of origin labels to reflect more than just where the product gained its essential character or qualities. At the least they want to distinguish between Australian processed foods that contain Australian major ingredients and those containing imported major ingredients. Court cases about origin labeling have largely involved non-food items. Decisions have assessed the narrowest possible understanding of Made in... that is in terms of a secondary process. They have not addressed the average persons wider perceptions and expectations of origin labels as they relate to food. 5. Restricting the use of Made in Australia to the top level so as to have equal standing to Product of Australia, and in the next level requiring Made in Australia to be accompanied by "... from Imported Ingredients" or ... from Australian and Imported Ingredients? is a practical and popular compromise. Naturally products in both levels would still have to gain their essential character or qualities in Australia. Should this position be adopted by the NFA, it would not conflict with the proposed amendments to the Trade Practices Act 1974. However as consideration of the Bill is 'bogged-down' in the Senate the non-food side of the issue is yet to be fully resolved. 2.4 Placement and Size of Descriptors Consumer and primary producer groups believe that origin descriptors should be required by law to be laced on the front or a main labeling panel of the product. They believe that the minimum size of the print (1.5 millimeters) is too small for easy identification. 2.5 Australian Representations Australian representations such as flags, maps, native animals and so on should not be allowed on products made overseas and which have minimal Australian input. A toy koala designed in Australia but fully made in another country should not display an Australian flag. This would be misleading and confusing to many consumers. Consumer groups have consistently demanded that Australian representations be restricted to the top level labels such as Product of Australia. 2.6 Education Campaign The Queensland survey shows that the public has a very different perception of the meaning of the Made in Australia label so it is problematic whether an education campaign will overcome the confusion or satisfy the interests of consumers unless the above issues are fully resolved. New law by itself, however, will not extinguish the confusion unless sufficient resources are allocated to a public education campaign before implementing a revised scheme. 2.7 Costs and Benefits of Re-labeling Business has expressed concern about the cost of more prescriptive labeling. Representatives for grocery manufacturers state that changes would cost up to $1 million for the largest manufacturers. In 1989 an Industries Assistance Commission report on labeling of food products estimated the cost for member companies of the Australian Chamber of Manufacturers at $1,200.00 per label change. 6. Under normal practice however Manufacturers Would change their labels periodically to meet various marketing needs. In this case the costs are 'one off and because the new law would be phased in Over 13 months manufacturers can utilize existing label stocks and assimilate the new requirements into the marketing exercise. Consequently the overall costs would be substantially reduced. Exports are not affected by the proposed law. In any Case they are usually relabelled in the language of the importing nation and the manufacturer must respond to different mandatory and marketing requirements of other countries such as Providing ingredients, nutritional, and quantity information. Research commissioned by the Advance Australia Foundation shows that 66 per cent of Australians will buy the Australian variety of a product whenever possible and the majority will pay a premium of up to 10 per cent to buy products made in this country. The consumers desire to distinguish Australian origin of ingredients has been criticized as imposing a market disadvantage on local manufacturers when competing with imported products. This is incorrect as Made in Australia from Imported Ingredients has higher Australian content and therefore greater appeal, according to surveys, than made in another country. The current proposal would enable the public to distinguish manufacturers' products whose first preference is to source ingredients locally. When manufacturers cannot obtain inputs locally there is no disadvantage. The Queensland consumer survey shows a strong demand for information On labels distinguishing Australian grown ingredients in manufactured foods. When the information is unreliable they become cynical and cease to bother with origin labeling as an influence on product choice. Surveys indicate that a much greater proportion of locally Brown product would be purchased if labeling provided adequate information. This would assist consumers who wish to maximize support for both Australian primary and secondary industries. The patriotic impetus is reinforced by the belief that Australian grown food is of good quality and is safe. 3.0 CONCLUSION Consumers have the right to make informed choices. Information is vital to a competitive and fair marketplace, and informed consumers are an important factor in market efficiency. Therefore it is important to increase both the availability and quality of marketplace information for all participants. While there are number of competing interests and different perceptions about ... need and application of country of origin labeling, it is... current requirements should focus on enabling consumers to make informed choices based on true and accurate information.