Federal Trade Commission
Received Documents
Jan. 19, 1996
B18354900061
 

                        January 16, 1995

Office of the Secretary
Federal Trade Commission, Room 159
Sixth and Pennsylvania Avenues, N.W.
Washington, D.C. 20580

         RE:  COMMENT IN RESPONSE TO REQUEST FOR PUBLIC COMMENT IN
              PREPARATION FOR PUBLIC WORKSHOP REGARDING "MADE IN USA"
              CLAIMS IN PRODUCT ADVERTISING AND LABELING

To Whom It May Concern:

         I am writing this comment in response to the Federal Trade Commission's request for
comment on the legal standard for "Made in USA" Claims, appearing in the FEDERAL REGISTER, Vol.
60, No. 201 at 53922 (Wednesday, October 18, 1995).
         These comments are made on behalf of the Jefferson Democratic Club of Flushing, in
Queens, New York, of which I am President.
         I am an accountant with 15 years' experience in the garment industry, I am very familiar
with the economics of the industry and the issues surrounding the use of the "Made in USA" label.
         During my term as President, the Jefferson Democratic Club has held extensive discussion
on trade issues, especially the NAFTA and GATT treaties and so I also understand the wider
economic context of the labeling question.  I am the Club's expert on trade and American
manufacturing issues.
         Finally, I am an American consumer who looks for the "Made in USA" label religiously
and I feel strongly that the standard should not be diluted.
         Today, the "Made in USA" label is like the goose that laid the golden egg -- the label
creates wealth because it sells product, pure and simple.  A 1992 case study commissioned by the
"Crafted with Pride" council found that prominently displaying the "Made in USA" label increases
garment sales 23% (a copy of this study is enclosed).  This, I believe, is the heart of the issue. 
People want to buy garments made in the USA and manufacturers -- whether they actually make
their products in the USA or not -- know it and want access to the selling power of the label.
         However, playing a word game with the meaning of "Made in USA" will undercut -and
ultimately destroy -- the commercial value of the label.  If the Federal Trade Commission allows
the dilution of the legal standard for "Made in USA" claims on a garment, it will  kill the goose
currently laying golden eggs for American consumers, manufacturers and workers.
         Section V of the Commission's request for comment seeks to elicit comment on consumer
perceptions of the "Made in USA" label.
         When I read "Made in USA" on the label of a garment, I -- like most people -assume that
the garment and the material the garment is made of are made entirely or almost entirely in the
United States.  This is simply the plain meaning of the words.
         Speaking to constituents, friends and co-workers about the Federal Trade Commission
request for public comment on changing the meaning of "Made in USA," I discovered that most
people are very surprised that the Federal Trade Commission would change the standard for legal
use of the label "Made in USA" to guarantee anything other than the plain meaning
of the words -- that the product so labeled is made entirely or almost entirely in the United States.
         The words "Made in the USA of imported materials" conveys the impression that the
garment is assembled in the United States.  When it comes to country of origin rules, I prefer to
see exactly which country it is imported from.  When I see the word "imported" by itself, without
a country specified, I assume the worst and do not purchase the product.
         The garment label is the only reasonable means for a consumer to get good information
about the product they are purchasing -- that is why the label is so valuable.  People want to know
accurately what is made in the USA and what is not.  They do not want to feel that they are being
sucked into some sort of slick advertizer's word game.
         In the complex world of garment manufacture, a consumer is almost completely dependent
on labeling in making their choice of products and the content of the label and thus carries great
weight and strongly influences consumer perception.
         Garment manufacture is complex and tracking how and where a product is made can be
difficult.
         As an accountant I understand the garment manufacturing process quite well.  But without
that specialized training and years of experience in the industry, -- in other words, if I were an
average consumer -- I would not.  As an accountant, I can track production of a garment through
the paper trail left by the bill paying process, as a consumer I am at the mercy of labels.
         However, most consumers don't have the time to acquire enough dependable
information to know what is truly made in the USA and what is not.  For example, in 1994, Egypt
was a good source of high-quality cotton, which found its way into the American garment market. 
In 1995, however, the production tapered off and Egyptian cotton was much less prominent in the
industry.  Suppose a consumer wished to avoid buying clothing made with this cotton -- it would
be highly unlikely that consumers could become experts on the complexity of the manufacturing
process so as to be able to track the subtleties of the industry and how they affect the components
of various garments.
         Greater prominence and frequency do lead consumers to believe there is a higher domestic
content.  After all, since most consumers do not have the time to acquire the information from
other sources, they must depend on the label for their information.
         My own experience with New Balance shoes, mentioned in the request for comment,
represents illustrates my point.
         I remember when New Balance began advertising that its product -- running shoes -- were
made in the USA and further, that they were produced in the inner cities.  These concepts are
great.  I was so excited that I told many people about the shoes and worked hard to find and
purchase the shoes myself.
         I was an enthusiastic potential consumer until I had to go looking for these
domestically-produced, economically-progressive shoes.  To my deep disappointment, I found I
had been tricked.  The New Balance shoes I found were all made overseas.
         Had I been able to look at New Balance's accounts, I would have been able, as a
highly-trained, experienced professional accountant, to trace the origin of the shoes and see
through the company's advertising.  Since I was not able to check the books, I had to rely on
advertizing and labeling.  Had I not examined the product very carefully, I would have purchased
the shoes, believing that I was buying a domestically produced product.
         The importance of accurate information and consumer confidence in the source of
information -- product labeling -- brings us to the costs and benefits of a change in the labeling
standard from an "all or virtually all" standard to another, weaker standard.
         The cost of any lower threshold (be it 50% or 70% or some other standard) for legal use
of "Made in USA" is first and foremost the loss of the very credibility which makes the label
valuable.  Any lower threshold would also damage the economy and deprive consumers of choice
in the marketplace.
         The enclosed article shows foreign manufactures could made the 70% made in the
USA with as little as 35% actually being made domestically, depending on the accounting
methods employed.  Lowering the standard for the legal use of "Made in USA" reduces the label
to the level of the accounting tricks necessary to make the claim.  Consumers would eventually
realize this and the label would lose its force as a selling tool.
         It is important for those of us who look for the label that advertising means what it says --
that we can rely on a purchasing a product made in the USA when those words appear on the
product or in an advertizing campaign.
         Moreover, a less stringent standard will entail a massive monitoring effort which will cost
an enormous amount of money.  The Federal Trade Commission will have to hire a team of
accountants to help it try cases of deceptive use of the "Made in USA" label.  In these days
of government cutbacks, additional funds for auditors seem unlikely.
         In addition to increased costs to taxpayers, benefits to companies that make watered down
claims that their products are made in the USA will be, short-lived.  Consumers, quickly drawing
the conclusion that "Made in USA" means little, would cease to pay any attention to the label
when buying clothes.  Domestic manufacturers would thus be deprived of an important selling
tool in the competitive domestic garment market.
         Domestic manufacturers will then find the "Made in USA" label about as useful as expired
patent rights -- the market will be flooded with cheap imitations.  If consumers do not have a
reliable way to find and purchase American garments, the American garment industry will likely
lose out to low-cost foreign imports.
         If the domestic garment industry suffers, the country will suffer as well.  The costs to the
American consumer will come in the form of the loss of manufacturing jobs -- exactly the higher
paying blue collar jobs which the economy can ill-afford to lose.
         Since American consumers and American job-holders are actually the same people, loss of
good jobs will also result in a further loss of buying power in the domestic market.  This will, in
turn, lead to the all-too-familiar phenomenon of workers unable to afford to buy the products they
make, directly contributing to weak demand in all sectors of the economy.
         Crafted with Pride has reported that every manufacturing job creates as many as 7 indirect
jobs.  Thus, the manufacturing jobs not only support jobs for blue collar workers, but also for
people like myself -- accountants -- as well as computer programmers, lawyers, product designers
and many others.
         Moreover, let's not forget that Federal employees' salaries are paid out of the tax dollars of
these same American workers and consumers.  Falling wages mean falling tax revenues and
increased spending as more people apply for unemployment, food stamps and other benefits. 
This, in turn, means less money left for education, defense and trade law enforcement.
         Finally, changing the meaning of "Made in USA" has disturbing Orwellian overtones.  If
the label is changed to mean something other than its current -- and logical meaning, American
consumers will lose their liberty to operate as rational consumers in the free market.
         For me, and millions of other Americans, buying American is an expression of our liberty
as Americans -- a key reason that the accurate labeling on product origin is so important.
         The "Made in USA" label provides consumers the opportunity to look not only at price
and quality of garments, but also at the other elements of value -- such as the opportunity to
support the American economy and, by extension a political and social system of which we
approve.
         I look for liberty when I purchase.  As a consumer making choices in a free market, I look
to trade only with countries whose citizens have the same right that I do.  Most people, myself
among them, would rather purchase a garment made in Canada, with its strong democratic
tradition and commitment to human rights over a garment made in China, a country whose
commitment to democracy and civil rights is suspect, to put it mildly.
         Therefore, if the Federal Trade Commission changes its ruling, to allow deceptive
labeling of foreign-made products as made in the USA consumers will lose the right to determine
what social, political and economic systems to support with their hard-earned dollars.  Poor
information will thus make us less free.
         The costs of changing to the standard of the U.S. Customs requirements, and the Buy
American Act are accuracy and truth.
         It is important to understand the stated mission of the Federal Trade Commission is to
protect consumers against deception.  As I wrote earlier in these comments, a lesser standard can
only come at the price of a loss of credibility which will directly translate into serious damage
across a wide sector of the economy.
         The mission of the U.S. Customs is to enforce trade and tariff laws, and purpose of the
Buy American Act is to determine how federal funds are to be spent -- they are not designed to
provide information to consumers.  Moreover, the U.S. Customs and Buy American Act depend
on specialized information gathering determine how to meet its standard standards.
         Consumers should not be expected to marshall the same resources for information
gathering as the Federal Government when at the store trying to decide which shirt to buy.  In
order not to be deceived, consumers must have accurate information easily available to them.  In a
garment, the best way to get that information to the consumer is to sew it into the label.
         Different labels for different garments will not impose significant costs on clothing
manufacturers.  In the apparel industry, the country of origin is known when the order is placed. 
The label -- particularly in private label garments -- is produced separately from the apparel.  Even
in cases were the garment is made overseas, the label is produced in the United States and placed
in the garment in the final stage of production.
         Thus, garment manufacturers can place accurate information on the garment fairly easily. 
The process is identifiable, since the garment is made to order.  The labels can be made to fit the
order.  The process is very simple and cost-effective.
         In the case of private labels, the goods are normally exclusively sold in the Untied States,
therefore the labeling requirements would need to meet U.S. Customs labeling standards.
         There are a myriad of details which must be monitored if we abandon the "all or virtually
all" standard.  Determining where a manufacturing process takes place could be very difficult.  It
would no doubt involve complicated a formula, with many opportunities for "finessing" on the
part of unscrupulous manufacturers and retailers.  Simplicity is what is needed, if we keep the
standard what it is today, enforcement will remain relatively easy.
         Enforcement of the Federal Trade Commission should be done on a case by case basis.  It
is important that each manufacturer have the opportunity to defend themselves in keeping with the
traditions of American justice.
         However, the standard should be kept at the same "all or virtually all" standard in effect
today.  As consumers deserve that right of protection and taxpayers deserve the least costly type
of protection.
         The globalization of America is based on -- and justified by -- several myths.  One, our
borders are no longer important.  Two, we no longer need a manufacturing base, because we live
in a service-based economy.  Lastly, the countries that receive our factories will be
able to import products made in the USA, thus creating jobs in the United States.
         Myth # 1: Our borders are no longer important.  One only needs to look at our federal
budget to see that this is just not the case.  We spend over $ 250 billion dollars to defend our
borders.  In these times of Federal budget cuts, the defense department budget will be spared
because of the perceived importance of maintaining our borders.  Further, people who live in
other countries do not bear the costs of our budget deficit, medical care, social security, safety
standards, ecology, schools, etc.  Life inside our borders is very different from life outside our
borders.
         Myth # 2: We no longer need a manufacturing base, now that we live in a servicebased
economy.  The economists will argue that the United States' move to a service-based economy
from a manufacturing-based economy is as logical as moving from the farmingbased economy to a
manufacturing-based economy.  There is one major flaw in this theory, however, we never
stopped producing food.  The manufacturing base supported the farming base by producing
machinery to make farming more efficient, creating a "super farmer." In fact, the United States is
still so efficient in farming that it is one of the very few trade categories in which we still have a
trade surplus.  One needs only to visit any supermarket to see for themselves, how efficient and
vital our farming base is to the United States.  The same success can happen in the manufacturing
sector if we allow American manufacturers to compete using a "Made in USA" label which has
credibility and selling power with American consumers.
         Myth # 3: Countries that take our factories will be able to import products made in
the United States, thus creating jobs in the United States.  The results of the NAFTA speaks for
themselves.  In 1993, prior to the NAFTA, we had a trade surplus.  In 1995, two years after the
NAFTA, we have a trade deficit.  Further, in the Caribbean basin nations, a favorite area of
relocation of the American apparel companies, unemployment is running close to 50%.  The
current wages in these countries is seventy-five cents an hour.  At 75 cents an hour, there is little
opportunity for a worker to a new, $ 10,000 American car.  With 50% unemployment there is
very little hope of wages raising to allow large numbers of consumers to afford American
products.
         America is liberty-driven, this is what drives us to succeed, the pursuit of liberty.  With
liberty come the natural advantages of capitalism.  Liberty brings capitalism, but capitalism does
not bring liberty, capitalism simply enforces the system of ownership in place.
         The Chinese government is reaping large advantages by our purchases of Chinesemade
goods.  They are continuing the testing of nuclear weapons. (June 10, 1994) They got President
Clinton to discontinue the link between Most Favored Nation trading status and human rights.
(June 6, 1994).  The more we purchase goods in China, the more influence China will have in the
world.
         More recently, the New York Times has been reporting abuses in the Chinese-run
orphanages, where babies that are not suitable for foreign adoption are starved and die of
malnutrition.
         Perhaps the American government can turn a blind eye to these activities.  I as an
American want to use my liberty to do what I can to stop them.
         Please let me know accurately and truthfully where products are produced.
         Sincerely,
         Edward O'Brien
         300 Lake Ave.
         Black Rock, Ct. 06605