Federal Trade Commission Received Documents Jan. 16, 1996 P894219 B18354900024 UNITED STATES "APPAREL INDUSTRY COUNCIL 1341 G Street N.W., Suite 820 Washington, D.C.20005-3105 Fax (202) 638,2236 (202) 638-2230 5200 Blue Lagoon Drive, Suite 600 Miami, Florida 33126 (305) 267-9200 Fax (305)267-5155 PRESIDENT EXECUTIVE BOARD Jim Scully Julio Barea Haggar Apparel Co. Sara Lee Knit Products VICE PRESIDENT David Ginn James Kilgore Oxford Industries Levi Strauss & Co. Bill Isaac EXECUTIVE DIRECTOR Salant Corp. Chandri Navarro-Bowman Sandler, Travis & Rosenberg PA. Robert Rowan Wrangler, Inc. January 15, 1996 Mano Howard Bend'n Stretch, Inc. Office of the Secretary Federal Trade Commission Room 159 Sixth and Pennsylvania Avenue, N.W. Washington, D.C. 20580 MADE IN U.S.A. POLICY COMMENTS MADE IN USA WORKSHOP -- REQUEST TO PARTICIPATE FTC FILE No. P894219 Dear Sir/Madam: In Federal Register notices dated October 18, 1995 (60 Fed. Reg. 53922) and December 19, 1995 (60 Fed. Reg. 65327), the Federal Trade Commission ("FTC") solicited comments from the public in preparation for a workshop to be held on March 26-27, 1996, concerning the legal standard applicable to "Made in U.S.A." claims in product advertising and labeling. The United States Apparel Industry Council ("USAIC") herein provides its comments regarding this issue and requests permission to participate in the FTC public workshop. USAIC is a national trade association representing the major U.S. apparel companies importing apparel from Latin America and the Caribbean. USAIC was formed in June of 1986 to address concerns of American multinational apparel companies involved in the offshore assembly of U.S. components. USAIC member companies include Haggar, Levi Strauss, Sara Lee, Oxford, Salant, Wrangler, Bend'n Stretch, Phillips-Van Heusen, Cluett Shirt, Greenwood Mills, Mamiye Brothers, and Tropical Garment, among others. USAIC Board Members include senior officials with vast expertise in origin marking, customs, and other trade-related matters, relevant to this FTC workshop topic. USAIC Board USAIC Office of the Secretary Federal Trade Commission January 15, 1996 Page 2 Members represent the largest apparel manufacturers with domestic (U.S.) manufacturing facilities which also have large off-shore manufacturing operations. Their expertise has been sought by U.S. government officials involved in customs and trade matters and USAIC has worked closely over the past ten years with numerous government agencies in facilitating trade in apparel products. Thus, USAIC's attendance at the workshop would promote the representation of a large segment of the apparel industry potentially impacted by the issues to be raised during the workshop. Furthermore, USAIC's role in promoting the interests of U.S. apparel manufacturers with off-shore operations and facilitating trade in apparel goods thereby appropriately reflects the interests of both U.S. apparel manufacturers and importers. The member companies of USAIC would nominate a USAIC Board member as the USAIC representative to the FTC workshop. USAIC member companies encounter complicated (and oftentimes conflicting) rules and regulations concerning country of origin marking and labeling. For example, in addition to the FTC's "Made in U.S.A." rules, USAIC member companies generally have to comply with the following partial list of country of origin rules and regulations: The North American Free Trade Agreement ("NAFTA") country of origin marking rules (Annex 311 to the NAFTA; 19 C.F.R. Part 102); NAFTA rules of origin (Chapter 4 of the NAFTA; 19 C.F.R. Part 181); U.S. Customs Service country of origin marking regulations (19 C.F.R. Part 134); The Textile Fiber Product Identification Act (15 U.S.C. 70-70k) and the Wool Products Labeling Act (15 U.S.C. 68 et seq.); U.S. Customs Service textile country of origin rules (19 C.F.R. 12.130 et seq.); Secretaria de Comercio y Fomento Industrial ("Mexico Customs") textile labeling regulations (Diario Oficial, November 22, 1995); Mexico Customs rules of origin (Diario Oficial, January 7, 1994); Mexico Customs certificate of origin regulations (Diario Oficial, August 30, 1994); Revenue Canada marking regulations (Can. Gaz., Part II, Vol. 128, No. 1, USAIC Office of the Secretary Federal Trade Commission January 15, 1996 Page 3 December 1, 1994); and Revenue Canada rules of origin (Memorandum DI 1-3-1, Memorandum DI 1-4-3). In order to eliminate the complexity and confusion that often results from the application of these rules, USAIC urges the FTC to work with the U.S. Customs Service, the International Trade Commission and the Office of the United States Trade Representative in their efforts to negotiate, under the auspices of the World Trade Organization, an international standard for determining origin and to adopt the resulting international rules. The adoption of the international rules, along with greater coordination among the involved U.S. agencies and foreign governments in developing and enforcing these rules, would benefit consumers and producers alike. An international standard for determining origin, adopted by the United States and implemented by the U.S. Customs Service, would best reflect consumer expectations concerning country of origin marking. It is not realistic to assume that consumers know or believe "Made in U.S.A." determinations are based on rules which differ from the rules for "Made In [Foreign Country]. With uniform rules, consumers will be able to make informed decisions about product origin without the confusion now associated with country of origin marking. Producers also benefit from uniform country of origin rules. Ensuring compliance with diverse country of origin rules is time consuming and costly for USAIC member companies. For example, at least one, full-time employee is assigned by many of our member companies to monitor compliance with these (constantly changing) rules. Moreover, in some instances, differences between the labeling rules for goods sold domestically versus those that are exported can result in some manufacturers having to undergo separate production runs for the same product. Uniformity between the FTC "Made in U.S.A." rules and the international rules for determining origin will allow these manufacturers to make fewer production runs. These savings will ultimately result in lower prices for consumers and greater competitiveness for U.S. exports. Furthermore, Uniformity in country of origin rules will meet a stated objective of NAFTA and the GATT Uruguay Round Agreements. In both treaties, the United States made commitments to achieve global harmonization in labeling regulations. (See, e.g., Article 513 of the NAFTA). Obtaining Uniformity and flexibility in country of origin labeling would enable manufacturers to more efficiently supply wearing apparel to an increased number of countries. This benefits consumers and manufacturers alike, which is the primary objective of both treaties. USAIC Office of the Secretary Federal Trade Commission January 15, 1996 Page 4 During the negotiation and the adoption period for the international origin rules, USAIC urges the FTC not to change its origin criteria for apparel. The apparel industry is already in the midst of preparing for new Customs rules of origin for imported articles, which will take effect July 1, 1996. Upon the U.S.'s adoption of the international standard (expected in about three years), the industry will be required to change again. If at that point in time, the FTC rules for "Made In USA" claims were modified, as necessary, to mirror the international standard, not only would the U.S. apparel industry be better able to implement the new rules, but consumer education as to the meaning of the new rules (for both U.S.-made and imported articles) would be more effective. The result would be a win-win situation for both U.S. consumers and the U.S. apparel industry. In its October 18, 1995 Federal Register notice, the FTC made several suggestions for modifying its "Made in U.S.A." policy. The FTC presently considers unqualified "Made in U. S. A. " claims as implying that products are " wholly of domestic origin. "(See Windsor Pen Corp., 64 FTC 454 (1964)). As possible modifications to this strict rule, the FTC proposed, inter alia, adopting Customs' "substantial transformation" test or developing a formula for determining "Made in U.S.A." claims. Under Customs' substantial transformation test, an imported product comprised of foreign and domestic parts could be marked "Made in U.S.A." if it is substantially transformed into "a new and different product" in the United States. While not objecting per se to the FTC's adoption of Customs substantial transformation test, USAIC cautions against a change to this test unless the international standard is based also on this test because of the confusion which will be caused by separate, disparate standards for U.S. and foreign-produced articles. Moreover, the FTC's adoption of this test could conflict with the country of origin rule for textiles set forth in the Uruguay Round Agreements Act ("URAA")(P.L. 103-465, 108 Stat. 4809). Under the URAA, effective July 1, 1996, the country of origin of textile articles assembled offshore will be that country where the last assembly operation occurred. This is a deviation from Customs' current substantial transformation test. (See 19 C.F.R. 12.130(e)). Additionally, such an approach might well not conform in all instances with the NAFTA marking rules ( 19 C.F.R. Part 102). Similar confusion could exist if the FTC adopts a formula for determining "Made in U.S.A." claims. Pursuant to this proposal, in order for products to be marked with "Made in U.S.A." labels, they would have to contain a certain percentage of domestic content (e.g., 50 percent domestic content). The FTC suggested computing this percentage by dividing domestic content (the total cost of U.S. parts, labor and overhead) by total product costs. While USAIC also does not object per se to the use of a formula for determining "Made in U. S.A. " claims, USAIC Office of the Secretary Federal Trade Commission January 15, 1996 Page 5 it recommends that no such test be adopted unless in conformity with the international standards to be negotiated. As stated above, USAIC believes the best alternative would be for the FTC to actively participate in the WTO negotiations on origin standards and then adopt rules in accordance with these standards. This would promote uniformity and ease the adoption of and education concerning the World Trade Organizations' final rules. For the reasons stated above, USAIC recommends that the FTC maintain its current "Made in U.S.A." rule for apparel products and coordinate with the involved U.S. government agencies and foreign governments in developing and enforcing an international standard rules, so as to promote greater consumer awareness in the use of "Made in U.S.A." claims. Should you have any questions, please telephone Chandri Navarro-Bowman at (202)638-2230. Thank you for your attention to this matter. Sincerely, UNITED STATES APPAREL INDUSTRY COUNCIL By: Chandri Navarro-Bowman Executive Director I:\WORK\DOC.3DOC