Federal Trade Commission Received Documents July 1, 1996 P894219 B18354900183 THE AD HOC GROUP BY HAND DELIVERY July 1, 1996 Mr. Donald Clark Secretary Federal Trade Commission Room 159 Sixth and Pennsylvania Avenue, N.W. Washington, DC 20580 RE: "Made-in USA" Policy Comments, FTC File No. P894219 Dear Mr. Clark: Following the Federal Trade Commission's ("FTC") March 26-27, 1996 Workshop on potential revisions to the "Made In USA" standard, a number of industry associations and individual companies convened an ad hoc group to pursue the possible development of a set of guidelines modeled on the FTC's Environmental Marketing Guides. The goal of the group was to create a document that would reflect the current marketing environment and consumer perception, preserve the value of unqualified "Made in USA" claims, and use the FTC's "reasonable basis" analysis for advertising substantiation. The attached proposed guide is the product of several rounds of discussions by the group over the last few months. The undersigned parties have reached an agreement in principle concerning the content of the proposed guide. While the proposed guide does not exhaust the range of U.S. origin claims that might be made, the undersigned parties believe this document is a substantial step toward creating manageable and realistic guidance for such claims. Although the proposed guide is, itself, responsive to the questions the Commission published in the April 26, Federal Register, the undersigned parties may file their own, independent responses to those questions that will fully explore their independent views. The undersigned parties encourage the FTC to circulate the proposed guide widely and to make the document available for public comment. We hope that the FTC will incorporate the principles included in the proposed guide into official Commission guidance, and urge state legislatures to do likewise. We appreciate the opportunity to provide supplemental comments on the FTC's current "Made In USA" standard and look forward to continued participation in this process. Respectfully Submitted, American Assn. of Exporters & Importers Bicycle Manufacturers Association of America 11 West 42nd Street 3050 K Street, N.W. 30th Floor Suite 400 New York, NY 10036 Washington, DC 20007 American Home Appliance Manufacturers Electronic Industries Association 20 North Wacker 2500 Wilson Blvd. suite 1500 Arlington, VA 22201 Chicago, IL 60606 Automotive Parts and Accessories Association International Mass Retail Association 4600 East West Highway 1700 North Moore Street Suite 300 Suite 2250 Bethesda, NM 20814-3415 Arlington, VA 22209 American Wire Producers Association Minnesota Mining and Manufacturing 515 King Street Company Suite 420 3M Center Alexandria, VA 22314-3127 St. Paul, NIN 55144-1 000 The Stanley Works 1000 Stanley Drive New Britian, CT 06053 The Ad Hoc Group Proposed Guides for Making U.S. Origin Advertising and Labeling Claims July 1, 1996 Statement of Purpose. These guides represent administrative interpretations of laws administered by the Federal Trade Commission ("Commission") for the guidance of the public in conducting its affairs in conformity with legal requirements. These guides specifically address the application of Section 5 of the FTC Act to advertising of U.S. Origin. They provide the basis for voluntary compliance with such laws by members of industry. Conduct inconsistent with the positions articulated in these guides may result in corrective action by the Commission under Section 5 if, after investigation, the Commission has reason to believe that the behavior falls within the scope of conduct declared unlawful by the statute. Scope of Guides. These guides apply to all claims attributing U.S. origin to a product or any part of its material or labor content that are included in labeling, advertising, promotional materials and all other forms of marketing, whether asserted directly or by implication, through words, symbols, emblems, logos, depictions, product brand names, or through any other means (hereinafter referred to as "U.S. origin claims" or "U.S. origin marketing claims"). The guides apply to any claim about the U.S. origin of a product in connection with the sale, offering for sale, or marketing of such product for personal, family or household use, or for commercial, institutional or industrial use. Because the guides are not legislative rules under section 18 of the FTC Act, they are not themselves enforceable regulations, nor do they have the force and effect of law. The guides themselves do not preempt regulation of other federal agencies or of state and local bodies governing the use of U.S. origin claims. Compliance with federal, state or local laws and regulations concerning such claims, however, will not necessarily preclude Commission law enforcement action under Section 5. Structure of the Guides. The guides are composed of general principles and specific guidance on the use of U.S. origin marketing claims. These general principles and specific guidance are followed by examples that generally address a single deception concern. A given claim may raise issues that are addressed under more than one example and in more than one section of the guides. In many of the examples, one or more options are presented for qualifying a claim. These options are intended to provide a "safe harbor" for marketers who want certainty about how to make U.S. origin claims. They do not represent the only permissible approaches to qualifying a claim. The examples do not illustrate all possible acceptable claims or disclosures that would be permissible under section 5. In addition, some of the illustrative disclosures may be appropriate for use on labels but not in print or broadcast advertisements and vice versa. 1 Review Procedure. Three years after the date of adoption of these guides, the Commission will seek public comment on whether and how the guides need to be modified in light of ensuing developments. Parties may petition the Commission to alter or amend these guides in light of substantial new evidence regarding consumer interpretation of a claim or regarding substantiation of a claim. Following review of such a petition, the Commission will take such action as it deems appropriate. Definitions (a) Minor Processing.- For the purposes of these guides, minor processing means the following processes applied individually. A combination of such processes may result in significant processing: (i) Mere dilution with water or another substance that does not materially alter the characteristics of the good; (ii) Cleaning, including removal of rust, grease, paint or other coatings; (iii) Application of preservative or decorative coatings, including lubricants, protective encapsulation, preservative or decorative paint, or non-functional metallic coatings; (iv) Trimming, filing, sanding or cutting off negligible amounts of excess materials; (v) Unloading, reloading or any other operation necessary to maintain the product in good condition; (vi) Putting up in measured doses, packing, repacking, packaging, repackaging; (vii) Testing, marking, sorting, or grading; (viii) Repairs and alterations, washing, laundering, or sterilizing. (b) Simple Assembly: For the purpose of these guides, simple assembly means the fitting together of five or fewer parts all of which are foreign (excluding fasteners such as screws, bolts, etc.) by bolting, gluing, soldering, sewing or by other means without more than minor processing. (c) Cost of U.S. Processing: For the purpose of these guides, the cost of U.S. processing is generally the cost of U.S. materials, U.S. direct labor and U.S. manufacturing overhead, and does not include profit, selling expenses, packing or shipping costs attributable to the sale of the finished product. For the purpose of these guides, the costs of materials and parts which are not considered to be products of a foreign country (either marked as such or imported as such) may be counted as part of the cost of U.S. processing. When calculating such costs, the entity making the U.S. origin claim need look only "one step back," and if the raw material, part, subassembly, intermediate product or other input is made in the U.S., then its total cost may be considered a part of the cost of U.S. materials. However, if U.S. materials are subjected to further processing in a foreign country, the U.S. materials should be counted as part of the cost of U.S. processing and the foreign processing should be taken into account separately as part of the cost of goods sold. 2 (d) Cost of Goods Sold. For the purpose of these guides, the cost of goods sold is all direct manufacturing costs, both foreign and domestic. The value of imported natural resources which are not indigenous to the United States may be excluded in computing the cost of goods sold. (e) Natural Resources: For the purpose of these guides natural resources are products such as minerals, plants or animals that are processed no more than necessary for ordinary transportation. (f) De minimis Foreign Costs: When calculating the cost of foreign processing (a cost that does not qualify as a cost of U.S. processing), a product's foreign processing, materials, components and labor qualify as de minimis if (1) their cost is negligible in relation to the cost of goods sold; and (2) they are immaterial to either the identity or function of the product. Interpretation and Substantiation of U.S. Origin Marketing Claims. Section 5 of the FTC Act makes unlawful deceptive acts and practices in or affecting commerce. The Commissions s criteria for determining whether an express or implied claim has been made are enunciated in the Commission's Policy Statement on Deception. In addition, any party making an express or implied claim that presents an objective assertion about the US origin of a product or product component must, at the time the claim is made, possess and rely upon a reasonable basis substantiating the claim. A reasonable basis consists of competent and reliable evidence. In the context of U.S. origin marketing claims, to be "competent and reliable" for purposes of these guides, that assessment must be conducted in an objective manner and evaluated by persons qualified to do so. In some cases, a reasonable basis may require an assessment of the cost of U.S. processing and the cost of goods sold. The cost of U.S. processing and cast of goods sold should be calculated in a reasonable and internally consistent manner. Such costs can be assessed based on a variety of accepted methods. Further guidance on the reasonable basis standard is set forth in the Commission's 1983 Policy Statement on the Advertising Substantiation Doctrine, 49 FR 30,999 (1984) (appended to Thompson Medical Co., 104 F.T.C. 648 (1984)). General Principles. The following general principles apply to all U.S. origin marketing claims. (a) Qualifications and Disclosures. The Commission traditionally has held that in order to be effective, any qualifications or disclosures such as those described in these guides should be sufficiently clear and prominent to prevent deception. Clarity of language, relative type size and proximity to the claim being qualified, and an absence of contrary claims that could undercut effectiveness, will maximize the likelihood that the qualifications and disclosures are appropriately clear and prominent. (b) Comparative Claims. U.S. origin marketing claims that include a comparative statement should be presented in a manner that makes the basis for the comparison sufficiently clear to avoid consumer deception. In addition, the advertiser should be able to substantiate the comparison. 3 EXAMPLE 1: An advertiser claims that its telephone "Has the Most U.S. Content" on the market ' The advertiser can substantiate that the product's cost of U.S. processing as a percent of cost of goods sold is higher than any other telephone on the market but is still less than 100 percent. The claim is not deceptive, provided that: 1) the product could be labeled with the claim "Made in the US", 2) the comparative difference between the product and its competitors is significant, and 3) the -specific comparison can be substantiated. EXAMPLE 2: An advertiser compares its product to a competitor's with the claim, "Our product is Made in the USA, our competitor's product is imported." The claim is not deceptive, provided that: 1) the advertiser's product could be non-deceptively labeled as "Made in the USA," 2) its competitor's product is required to be labeled by the U.S. Customs Service with its country of origin, and 3) the advertiser can substantiate the claim. EXAMPLE 3: An advertiser claims "Our product is the only product on the market that is All American Made." The claim is non-deceptive, provided that the product could be non-deceptively labeled as "Wholly American Made," and the advertiser can substantiate the accuracy of the comparison. (c) Distinction Between Products and Packaging. U.S. origin claims should be presented in a way that makes clear whether the claim refers to the product, the case or usual container in which the product is sold, or the product's packaging. For products that are sold in a package or container, such as shoes, an unqualified U.S. origin claim is understood to refer to the contents of the package or container. An unqualified claim that is intended to refer only to the case or package and not to its contents would be deceptive. EXAMPLE 1: Glassware is made in Hungary, but is. sold in a highly decorative case that is made in the United States. The glassware is properly marked as being the product of Hungary. Nevertheless, an unqualified "Made in USA" claim on the display case would be deceptive. EXAMPLE 2: Razor blades that are manufactured in the United States using U.S. origin materials, components and labor are packaged in the United States using a U.S. origin spring and pusher slide combined with an imported plastic dispenser and end clips. The dispenser is designed to be thrown away when the blades are used. It would not be deceptive or misleading to label the package with "Made in the USA" or "All American Made," since the product contains only de minimis foreign materials, components and labor." (d) Mixtures, Goods Consisting of Discrete Articles or Components, and Goods Put Up in Sets for Retail Sale. U.S. origin marketing claims involving goods that are mixtures, goods consisting of discrete articles, and goods put up in sets for retail sale, in which some of the components are not of U.S. origin should be presented in a way that makes clear to which component the claim pertains. An unqualified claim of "Made in the USA" may be made for such goods, if the cost of the foreign components and processing is negligible to the cost of goods sold. EXAMPLE 1: 100 assorted plastic construction items, most of which are domestically produced and some of which are imported are put up for retail sale as a child's building 4 set. The foreign-made items comprise only 7 percent of the product's cost of goods sold. A "Made in the USA claim on the box would not be deceptive. EXAMPLE 2: Audio equipment, consisting of a foreign-made receiver, and domestically made CD player, tape player and speakers are packaged and sold together as a unit. Each of these components could be used separately and the components are merely packaged by the retailer. Even though the receiver is marked with its country of origin, it would be deceptive to advertise the set in a store circular or newspaper advertisement as "Made in the USA," or to label the packaged set as "Made in the USA." Unqualified "Made in USA." Claims Guidance about the use of unqualified marketing claims that suggest that a product is created in the United States, such as "Made in USA," "Manufactured in USA" or their equivalent (hereinafter referred to as "Made in USA" claims) is set forth below. Three specific "safe harbors" are provided. Each is followed by several examples that illustrate, but do not provide an exhaustive list of, claims that do and do not comport with the guides. In each case, the general principles set forth above should also be followed. In general, a product that contains materials, parts or components that are not wholly obtained or produced in the United States can be non-deceptively advertised or labeled "Made in USA if either: 1) The last significant manufacturing process occurs in the United States and substantial value is added in the United States as measured by the percentage of the cost of U.S. processing to the cost of goods sold; or 2) The majority of all manufacturing processes that create a new product occur in the United States, including the last significant process, and the value added in the United States, as measured by the percentage of the cost of U.S. processing to cost of goods sold is not insignificant. (1) Value Added. If a good contains materials, parts or components that are not wholly obtained or produced entirely in the United States, an unqualified "Made in USA" claim would not be deceptive if it is substantiated by competent and reliable evidence that the following conditions are met: (i) the last significant manufacturing process or processes in the creation of the good are performed in the United States, and (ii) such process or processes are more significant than simple assembly or minor processing, and (iii) the cost of U.S. processing is not less than 50 percent of the cost of the goods sold. EXAMPLE 1: A manufacturer of shoes assembles a variety of parts into a pair of running shoes in the United States. Some components of the shoes are imported and others are manufactured in the United States out of parts that are of domestic and foreign origin. The cost of U.S. processing is 55 percent of the cost of goods sold. A label reading "Made in the USA" affixed to the inside tongue of the shoe would not be deceptive. EXAMPLE 2: In the United States, an imported steel forging with the contours of a wrench is subject to machining to create the shape and dimensions of a workable tool, heat treated to achieve the requisite physical strength and hardness and electroplated with imported nickel and chromium to produce a finished hand tool. The cost of U.S. 5 processing is 66 percent of the cost of goods sold. A claim that the wrench is "Made in the USA" is not deceptive. EXAMPLE 3: A manufacturer puts an American Flag on the frame of a bicycle that is assembled in the United States from 5 imported components. The assembly operation is achieved by screwing the various parts together, and the cost of the U.S. assembly represents only 15 percent of the bike's cost of goods sold. The prominent, unqualified presentation of the American flag on the bike's frame would be deceptive because the assembly operation is a "simple assembly" and the cost of U.S. processing is less than 50 percent of the cost of goods sold. EXAMPLE 4: The words "Manufactured in the United States" are prominently displayed on the side of a blender that is assembled in the United States. The component parts of the blender come from a variety of sources, some foreign and some domestic. Collectively the cost of U.S. processing is 70 percent of the cost of goods sold. The label is non-deceptive. EXAMPLE 5: A newspaper advertisement shows a hand mixer with the claim "American Made" prominently displayed. The advertiser substantiates the claim on the basis that the cost of U.S. processing is 75 percent of the mixer's cost of goods sold. However, the mixer was assembled in Canada. Under this "safe harbor, the advertisement would be deceptive because the last significant manufacturing process takes place outside the United States. The advertiser could, however, non-deceptively claim that the product contained "75 percent U.S. parts and labor," or was "Assembled in Canada of U.S. and foreign parts." (2) Majority of processing: If a good contains materials, parts or components that are not wholly obtained or produced entirely in the United States, an unqualified "Made in USA claim would not be deceptive if it is substantiated by competent and reliable evidence that the following three conditions are met: (i) a majority of all the processing that is normally undertaken to produce a product (including the last significant manufacturing process or processes) take place in the United States, and (ii) such process or processes result in the creation of a new article of commerce that has a different name, character and use than the materials, parts or components from which it is made, and (iii) such process or processes, when taken together, are more significant than simple assembly or minor processing and result in a ratio of the cost of U.S. processing to the cost of goods sold that is not insignificant EXAMPLE 1: The standard for full production in the industry producing cordless electronic telephones is to design and engineer the phones, acquire electronics and mechanical piece parts generally available on the market, create subassemblies from those piece-parts that are designed and built to function in the cordless phone, then to take those subassemblies and some additional parts and assemble them into the cordless phone. A manufacturer designs and assembles a cordless phone in the U.S. out of four major subassemblies, three of which are also designed and built in the United States and the fourth is of foreign origin. The manufacturer's U.S. process represents significant U.S. investment, and employs a significant number of workers. The majority of all manufacturing processes, including the last significant process and the manufacture of the majority of the major subassemblies, take place in the United States. The cordless 6 telephone has a name, character and use different from those of the imported piece parts and subassembly. The value added in the United States is not insignificant and the ratio of the cost of goods sold is not insignificant. A label that the phone was "American made" would not be deceptive. EXAMPLE 2: In the United States, imported needle blanks or "swages" are bored to form an eye, bent, milled to remove excess metal and form of groove along the length of the needle, sharpened to form a point, hardened, tempered, straightened, buffed, polished, cleaned and electroplated to create a finished sewing needle. Although the swages are produced abroad, it is not deceptive for the manufacturer to claim that the finished needles are "Made in the USA" because the majority of all the manufacturing processing that results in the finished product is done in the United States. The needle has a name, character and use different from the imported swage, and the cost of U.S. processing to the cost of goods sold is not insignificant. EXAMPLE 3: An electronics product is designed in the United States and the subassemblies for the product are produced in the U.S., but the product is assembled in a foreign country in a process that is not considered "simple assembly." Since the last significant process or processing did not take place in the United States it would be deceptive to advertise such a product as "American Made." EXAMPLE 4: A shoe is assembled in the United States from 10 components. Each component is made from materials which have undergone various manufacturing steps prior to their readiness for sale to the shoe manufacturer. While a few of the components are of U.S. origin, the majority, including the unlisted leather upper, are manufactured abroad from foreign materials. The manufacturer. places a label on the tongue that says "Manufactured in the US." The assembly process is not a simple assembly and the advertiser relies upon U.S. Customs rulings to the effect that an article of commerce with a new name, character and use is created when an imported unlisted upper is assembled with other shoe components. However, the majority of all the manufacturing processes do not take place in the United States, since one of the major components--the shoe upper (which requires numerous manufacturing steps)--is made abroad, as are many of the dedicated shoe parts. In addition, further investigation finds that the cost of U.S. processing is only 20 percent of the cost of goods sold. The claim would be deceptive since the U.S. manufacturing process adds only insignificant value, as measured by the ratio of the cost of U.S. processing to the cost of goods sold. (3) North American Free Trade Agreement (NAFT,4) Preference Rules: If a good contains materials, parts or components that are not wholly obtained or produced entirely in the United States, an unqualified "Made in USA" claim would not be deceptive if it is substantiated by competent and reliable evidence that the product would meet the tariff shift and/or value-added requirements listed in Chapter Four of the NAFTA, based solely on U.S. content and/or processing operations, and, where applicable, using the modified NAFTA net-cost method described below. NAFTA Modified Net Cost Method: Labelers may use the principles set forth in the United States' NAFTA Rules of Origin Regulations (I 9 CFR pt. 18 1. App.) for determining the cost of U.S. processing and the cost of goods sold, except that the NAFTA "value of non- 7 originating materials" ("VNM") as defined in those regulations shall include the value of any materials produced in Canada and Mexico and the value of any labor undertaken in Canada or Mexico that is not reflected in the value of such materials. The purpose of this modification is to count only U.S. processing costs and materials (as opposed to regional processing costs and materials) for the purpose of qualifying for this safe harbor. Thus, under this modified method: The cost of goods sold is the same as NAFTA "net cost." The cost of U.S. processing is "net cost 'less the "value of non-originating materials" as defined above (i.e., non-U.S. materials). EXAMPLE 1: A U.S. flag and the words "Made in the USA are affixed to the frame of a complete bicycle that was assembled in the United States out of a variety of components. Some of the components of the bicycle the frame, the fork, the rims and the seat post) were fabricated and finished by the firm undertaking final assembly; other components were purchased from specialized parts manufacturers based in the United States; and the remaining components were purchased from foreign suppliers. The cost of U.S. processing is greater than 50 percent of the cost of goods sold, using the modified NAFTA net-cost method described in these guides. The flag and the claim are not deceptive because the product meets the specified tariff shift and value-added requirements included in Chapter Four of the NAFTA agreement. EXAMPLE 2: A calculator is assembled in the United States out of circuit boards and other parts. The process of connecting together transistors, capacitors, and integrated circuits on a blank circuit board Copulating the board") takes place in the United States for three-quarters of the calculator's circuit boards. The cost of U.S. processing represents 50 percent of the cost of goods sold, as calculated using the modified NAFTA net cost method. The remainder of the circuit boards are imported from the Far East. An advertising claim stating that this product was "Made in America" would not be deceptive, because the product meets the Chapter Four requirements of the NAFTA, with major subassemblies that are made in the United States, and substantial U.S. value-added. EXAMPLE 3: A refrigerator is advertised as "Produced in America." The product was assembled in the United States out of components and subassemblies. Some components (the compressors, controls and motors) are of foreign origin. All major subassemblies (as defined by the NAFTA Chapter Four rules) were assembled in the United States. The claim is not deceptive since the product meets the requirements of the North American Free Trade Agreement preference rules with subassemblies that were assembled in the United States. EXAMPLE 4: A manufacturer of a stand mixer obtains parts, including the metal bowl, beaters and controls from sources outside the United States. All other components, materials and labor are of North American origin. Final assembly of the product takes place in the United States, and exports of the product to Mexico and Canada qualify for duty preferences under the North American Free Trade Agreement because of the high value of Mexican and Canadian (as well as U.S.) value, and because the product is considered to "originate" in North America under the normal NAFTA rules. However, 8 the majority of the mixer's major components were made in Mexico, and the value of only the U.S. processing (excluding the parts from Canada and subassemblies from Mexico) is very small. Using the modified NAFTA net cost rule defined above, which excludes Mexican and Canadian processing and value, it would be deceptive to label this product "Made in the USA." It could, however, be labeled, "Assembled in the United States out of foreign parts." Wholly U.S. Origin Claims. It is deceptive to misrepresent, directly or by implication, that a product is wholly of U.S. origin unless the representation is substantiated by competent and reliable evidence that all or virtually all of the processing, materials, components and labor used in the production of the product are of U.S. origin. A product can satisfy this requirement if it contains only de minimis amounts of foreign processing,'materials, components and labor. A product's foreign processing, materials, components and labor qualify as de minimis if (1) their cost is negligible in relation to the cost of goods sold; and (2) they are immaterial to either the identity or function of the product. Foreign materials exclude imported natural resources (for example, minerals, plants, animals) that are processed no more than necessary for ordinary transportation. EXAMPLE 1: A combination wrench is forged in the United States, from U.S. origin steel. The wrench forging is machined, shaped, heat treated, and broached in the United States. It then is chrome plated in the United States using foreign origin chromium. The plating is less than 1/11 inch thick and improves the appearance and durability of the wrench, but it does not affect the function of the wrench. The chromium accounts for less than 1 percent of the wrench's cost of goods sold. In these circumstances, it would not be deceptive to label this combination wrench "All American Made" or "Wholly Made in the USA." EXAMPLE 2: In the United States, an imported steel rod is subject to extensive machining and heat treatment, and thereafter imported nickel and chromium are used in an electroplating operation to produce a finished hand tool. The foreign rod is not negligible in relation to the overall cost of producing the tool. In these circumstances it would be deceptive or misleading to label the finished tool as "All American Made," or "Wholly Made in the USA" EXAMPLE 3: A hammer is assembled in the United States from a hammer head and handle that themselves are produced in the United States from U.S. origin steel. The handle is nickel plated in the United States using imported nickel and is fitted with a cushion grip made in the United States from imported rubber. Both the nickel and the rubber were imported in their natural state, no further processing of these materials was required other than that necessary for ordinary transportation. It would not be deceptive to label this hammer "All American Made." EXAMPLE 4: Dental X-ray film is manufactured in the United States using all U.S. origin materials except imported raw safety base film. Because the raw safety base film is the principal and essential component without which there can be no x-ray picture, it 9 would be deceptive and misleading to label the finished dental x-ray film "All American Made." Other Qualified U.S. Origin Claims. In cases where an unqualified "Made in USA" claim or "Wholly Made in USA" claim would be deemed deceptive in accordance with the examples presented above, it may be permissible to make an appropriately qualified U.S. origin claim. In general, it is not deceptive to represent, directly or by implication, that a product containing a substantial amount of imported raw materials, parts, or subassemblies was assembled, processed, machined or otherwise subject to the addition of U.S. value or processing, so long as that representation is coupled with a reference to the presence in the article of foreign-origin materials or components or a required statement of the product's foreign origin. Notwithstanding the foregoing, it is deceptive to misrepresent, directly or by implication, that a product contains U.S. components or value if that product is required under established rules of Customs law to be marked as a product of a foreign country, unless such representation is made in close proximity to, and in the same typeface and size as, the required country of origin label. EXAMPLE 1: A manufacturer advertises a bicycle as "Assembled in the USA." The bicycle in question is assembled in the United States from 20 imported components, in a process that is therefore not considered a simple assembly. Nevertheless, the cost of U.S. processing represents only 15 percent of the cost of goods sold. The claim is deceptive because it does not adequately disclose the fact that the majority of the content of the bicycle is of foreign origin. The advertiser could, however, make a qualified claim such as "Assembled in the United States out of foreign-parts," or could disclose the amount of U.S- content, such as "Assembled in the United States. 15 percent U.S. value." EXAMPLE 2: A small appliance is assembled in the United States out of numerous parts and several subassemblies. A majority of the parts and subassemblies are imported, and only a small minority are made in the United States. It would be deceptive to label or advertise the product "Assembled in the U.S. out of U.S. and foreign parts," because such a claim suggests that a substantial portion of the appliance's parts and subassemblies were created in the United States. It would not, however, be deceptive to advertise the appliance as "Assembled in the US of primarily foreign parts." EXAMPLE 3: A bicycle is imported in fully unassembled or partially assembled form, with all of the parts needed for the complete bicycle packed in a single carton. The bicycle is then fully assembled prior to sale to the consumer. Even after assembly, Customs law requires that the imported bicycle be marked as a product of a foreign country. It would be deceptive to advertise the bicycle in a store circular as "Assembled in the USA of imported parts." EXAMPLE 4: A consumer appliance is designed in the United States, but assembled in Taiwan of U.S. and foreign origin parts. It would be deceptive to advertise the appliance as "Designed in the USA" without also disclosing, in the same type face and in the same statement that the product was "Made in Taiwan." 10 EXAMPLE 5: A game is packaged in the United States and put up for sale. All of its component parts are made in China. It would be deceptive to label the product "Packaged in the USA" without also disclosing, in the same type face and in the same statement that the product was "Made in China." EXAMPLE 6: A manufacturer of ceramic giftware designs artwork in the United States, and using sophisticated manufacturing techniques transfers the artwork to blank china plates imported from the Far East. It would not be deceptive for the manufacturer to advertise the plates as "Painted in the USA on imported plates."