Federal Trade Commission Received Documents July 1, 1996 P894219 B18354900178 UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION In The Matter of POST-WORKSHOP SUBMISSION OF THE RUBBER MADE IN USA POLICY COMMENT AND PLASTIC FOOTWEAR FILE NO. P894219 MANUFACTURERS ASSOCIATION The FTC's Made in USA's workshop provided several guideposts for the Commission as it deals with the difficult questions of when Made In USA means what it says: As a point of reference on the question of consumer deception one could do no better than cite the Chairman's opening remarks: "The real issue is what do they think Made in America means and what are they entitled to think it means....Aside from perception, however, there's a background against which this question needs to be measured. And the background has to do with issues of International Trade" (Transcript, 6&7, emphasis added). Several consumer surveys were introduced at the workshop, but the conflicting nature of their results shed more fog than light on the issue at hand. We suggest that the single most relevant finding was that in the Commission's own survey; Commission staff member Anderson summarized that finding as follows "...many respondents were ready to accept a Made In The USA on products that contained significant amounts of foreign parts, provided the product was assembled in the US"(Transcript, 38). In short, there is consumer recognition that American manufacturing today is an integral part of a global economy. A further significant contribution of the workshop was the testimony of various industry witnesses evidencing the difficulty of developing a standard which would meet the legitimate needs of all American industries. In this regard, one thing became clear: the FTC's "all or virtually all" rule is unworkable for the majority of the industries represented at the workshop; see, for example, the testimony of spokesmen for the following industries: rubber footwear, non-rubber footwear, automobile manufacturers, bicycle manufacturers, electronics, luggage and leather goods, electrical manufacturers, home appliance manufacturers, wire producers, the 3M company and the Stanley Works. In addition, the International Mass Retailers Association, whose constituents market the products of virtually every industry, emphasized the inappropriateness of an all or virtually all standard. An additional way in which the FTC workshop proved its value was its encouragement of the Herculean effort leading to the production of the proposed safe harbor guidelines which we understand will be submitted to the Commission in behalf of many of the workshop participants. The development of these guidelines was spearheaded by Robin Lanier of the Mass Retailers, and we applaud her initiative, her patience and her draftsmanship. These proposal guidelines buttress the evidence that one size does not fit all and that the problem may best be approached by providing a variety of safe harbors. However, in considering what would be appropriate safe harbors, the Commission should be wary of the danger of creating loopholes so wide that a claim of Made In The USA becomes of little value. For example, given the nature of footwear production, a final assembly, substantial transformation or significant processing test, standing alone without a required percentage of domestic value and/or labor, would so dilute the significance of a Made In USA logo on footwear as to be virtually meaningless. A domestic footwear company which imports all or a significant number of its components and does little more than assemble them into a finished product could meet the requirements of substantial transformation. As an incentive to use as much American labor and as many American components as possible, a Made in USA test - at least for footwear - must require a combination of final assembly in this country with domestic components of more than 50% in value. (The justification for a 50% standard was set forth in detail in the pre-workshop Statements of the Rubber and Plastic Footwear Manufacturers Association, the Footwear Industries of America and New Balance and need not be repeated here.) Just as substantial transformation ,or final assembly, or significant processing, standing alone would be insufficient, a percentage value requirement standing alone would also be insufficient. In 1995 more than 9,000,000 pairs of fabric-upper, rubber-soled footwear made entirely with United States components entered this country from the Dominican Republic; failure to require final assembly to take place in the United States would permit such Dominican footwear to be labeled Made In The USA. Because of our view that there ought not to be an alternative to a standard which requires both final assembly and a fixed percentage of value, the Rubber and Plastic Footwear Manufacturers Association regretfully cannot sign onto the Mass Retailers' proposed guidelines. Finally, as we pointed out in our pre-workshop Statement, it would be unduly burdensome on manufacturers to look further than one step back in determining the source of a given component for purposes of the 50% requirement, and there should be an exclusion from this calculation of raw materials - such as natural rubber- not indigenous to this country. We believe that both of these principles are endorsed in the proposed guidelines. In conclusion, the FTC workshop provided additional justification for the adoption of a rule, or a safe harbor under a broadly stated rule, requiring that the value of domestic materials, manufacturing overhead, and labor and components in a given product should exceed 50%; also, final assembly must take place in the United States. The value of foreign components should exclude raw materials -such as natural rubber- not indigenous to this country, and manufacturers should not have to look more than one step back in computing such value. ________________ Mitchell J. Cooper Counsel, Rubber and Plastic Footwear Manufacturers' Association June 28, 1996