Federal Trade Commission
Received Documents
Jan. 16, 1995
B18354900047


                           BEFORE THE
                    FEDERAL TRADE COMMISSION
                        WASHINGTON, D.C.


                   MADE IN USA POLICY COMMENT
                     FTC FILE NO.  P894219


                     COMMENTS ON BEHALF OF
           THE FEDERATION OF THE SWISS WATCH INDUSTRY


     The Federation of the Swiss Watch Industry (hereinafter the
"Federation"), by its undersigned counsel, hereby submits these
comments in response to the Federal Trade Commission's ("FTC")
Request for Public Comment in Preparation for Public Workshop
Regarding "Made in USA" Claims in Product Advertising and
Labeling (60 Fed.  Reg. 53922, October 18, 1995; 60 Fed.  Reg.
65327, December 19, 1995).
     The Federation, which is headquartered in Bienne,
Switzerland, is the Swiss watch industry's trade association. 
Currently, more than 90% of the Swiss watchmaking companies
involved in all sectors of the industry are members of the
Federation.  Most of them do business in the United States.  The
Federation's principal activities involve legal, economic and
commercial matters for the industry on a worldwide basis.
     The Swiss watch industry has had considerable experience
dealing with the question of origin marking of products.  As a
result, the Federation can provide some perspective on the

analogies between its experience and the issues surrounding "Made
in USA" marking.  Among other things, Switzerland's efforts to
promote adequate disclosure to consumers of the origin of watches
have in recent years involved refinements to the definition of
"Swiss Made" watches.  We are submitting these comments on behalf
of the Federation in order to provide the FTC with the benefit of
the Swiss experience on this subject.
     As far back as 1966, the Federation has submitted comments
on questions involving origin marking to the FTC, and more
recently has submitted comments on such questions to the U.S.
Customs Service.  The Federation submitted extensive comments on
September 25, 1992 in response to the FTC's Request for Public
Comments Concerning the Guides for the Jewelry Industry, the
Guides for the Watch Industry and the Guides for the Metallic
Watch Band Industry.1/ The Federation made many of the same
points in a July 10, 1995 submission to the Customs Service in
response to a Notice of Proposed Rulemaking regarding "Rules for
--------------
-1/   In its September 1992 comments to the FTC, the Federation
urged the FTC to revise Guide 10 so as to abandon reliance on the
origin of a watch movement and its substantial and significant
parts as the sole basis for determining country of origin.  The
Federation proposed instead that Guide 10 provide for an origin-
marking category reserved for single-source finished watches,
i.e., a watch (1) whose movement is assembled in one country with
more than 50% of its parts manufactured in that same country and
(2) whose casing and final inspection following assembly of the
movement take place in that same country.  The Federation
submitted that single-source designations such as "Swiss" or
"Swiss Made" should be reserved to such single-source watches. 
At the same time, the Federation suggested that "hybrid" watches
(i.e., watches whose movement is manufactured in one country with
subsequent processing taking place elsewhere) should be clearly
marked to show the origin of their movements, with terms such as
"Swiss Movement," "Movement Japan."

                               -2-Determining the Country of origin of a Good for Purposes of Annex
311 of the North American Free Trade Agreement; Rules of Origin
Applicable to Imported Merchandise."
                              ******
     As an overall matter, we urge the FTC to give consideration
to means by which the U.S. government can establish a uniform
approach for country of origin determination.  At present, there
are several sets of differing requirements.  The Customs Service
still generally utilizes the rule of "last substantial
transformation" for determining country of origin.  The NAFTA
rules incorporate a "tariff line shift" methodology.  Guide 10 of
the FTC Watch Guides is also being reconsidered.
                              ******
     The Federation does not believe that an origin marking
scheme with "qualified claims" based on some percentage of U.S.
parts would be effective for Made in USA markings.  The
Federation's policy is "one product, one origin." In the case of
a watch containing 80% U.S. parts, it is possible that the
remaining 20% may include some of the most crucial parts of the
watch.  In other words, a percentage-of-parts marking would
ignore the relative importance of different parts of the product.
     Additionally, such a percentage-of-parts marking scheme for
"Made in USA" would ignore the importance of manufacturing steps
that might be performed outside of the U.S. With the global
sourcing of components becoming increasingly prevalent in many
industries including the watch manufacturing industry, and with
                               -3-
the evolution that has taken place in the types of watches (power
source and method of timekeeping), methods of manufacturing,
protective and other important features (chronograph and water
resistance), design features, and time and quality control, the
party responsible for casing and control of the watch (including
assembly, casing and final inspection) has an increasingly
important responsibility for ensuring quality control of the
various components and for making sure that the various
components fit together and work together properly.  These casing
and control steps are much more important and bear a greater
relationship to the "value" of a watch than in the past. 
Accordingly, if a watch were permitted to bear a "qualified"
marking such as "80% US parts," this marking might significantly
overstate the importance of the watch's U.S. content.
                              ******
     At the same time, the Federation agrees with the proposition
that the FTC's current standard of "all or virtually all" U.S.
parts and labor for an unqualified "Made in USA" marking is too
stringent.  The Federation proposes that the FTC consider
adopting a "Made in USA" test similar to Switzerland's "Swiss
Made" rule.
     Under the Swiss law, which was adopted by the Swiss Federal
Council in 1992, unqualified designations such as "Swiss," "Swiss
Made," and "Made in Switzerland" can only be used on Swiss
watches.  A watch is defined as Swiss only if it meets three
cumulative requirements: (1) it must contain a Swiss movement,
                               -4-(2) the movement must have been encased in Switzerland, and (3)
the watch must have undergone final inspection by the
manufacturer in Switzerland.2/ The Swiss statute provides that a
movement is Swiss if at least 50% of the value of all of its
components parts is of Swiss manufacture, and if the movement is
assembled and inspected in Switzerland.
     The "Swiss Made" rule recognizes both the continued
importance of the movement3/ and the new importance of casing and
control to the quality of today's watch.  Thus, a "Made in USA"
rule that followed the approach of the Swiss statute, would
provide that the "Made in USA" marking could only be used for a
watch (1) with a U.S. movement (i.e., a movement assembled and
inspected in the U.S. with more than 50% of its parts
manufactured in the U.S.), (2) with the movement having been
encased in the U.S., and (3) with the watch having undergone
final inspection by the manufacturer in the U.S.
                              ******
     We note that, among other things, the FTC is seeking
evidence of how consumers view Made in USA claims.  The
Federation has not recently studied this precise issue, but we
---------------------
2/   Watches that do not meet this standard, but which contain a
bona fide Swiss movement, must be marked "Swiss Movement."

3/   In the Federation's view, no other component of the watch
(as contrasted to manufacturing process) has as much importance
as the movement.  Neither the watch case nor the watch dial
should be a substitute for the movement in such a test.  Thus, a
watch with a non-U.S. movement, a U.S.-manufactured case, and
which is cased and finally inspected in the U.S., should not
qualify for an unqualified Made in USA marking.


                               -5-have carefully examined the question of how U.S. consumers view
the country of origin of watches.  Since the U.S. is the single
largest national market for ultimate purchases of Swiss watches,
this question is of considerable significance to the Federation.
         The Federation commissioned a poll by the Gallup
Organization in 1992 of U.S. adults, the results of which were
provided to the FTC in our September 1992 comments on the Watch
Guides.  Half of the adults surveyed by Gallup reported that the
country in which a watch is manufactured is important to them
when deciding to purchase a watch; more than a quarter of those
polled actually described this as a "very important" factor.  At
the same time, the poll revealed that more than two-thirds of the
adults surveyed reported that if they had a choice, they would
prefer to have a watch manufactured in Switzerland, rather than
in France, Hong Kong or Japan. (The U.S. was not included in the
list of countries for the poll, since there is no significant
watch manufacturing in this country.)
         The Gallup Poll also surveyed the respondents' confidence
that an unqualified "Swiss" marking on a watch meant that the
complete watch was manufactured in Switzerland.  More than half
(52%) of the adults surveyed were at least "somewhat confident"
that a watch marked "Swiss" was completely manufactured in that
country.  The percentage was even higher (59%) among those who
stated that they would prefer a watch manufactured in
Switzerland.

                               -6-         These polling results confirmed that, at least with respect
to watches, consumer buying preferences are certainly influenced
by perceptions of quality associated with the manufacture in
Switzerland of such products.  If the U.S. consumer were to have
similar favorable associations for U.S. manufacture of other
products (as a function of perception of quality, national pride,
economic self-interest, or the like), the results of the
Federation's Gallup Poll support a correlation between such
feelings and purchase decisions.  The polling results also
indicate that, at least with respect to watches, substantial
numbers of consumers would believe that an unqualified country of
origin marking on the watch meant that the product was completely
manufactured in that country.
                              ******
         As noted above, the Federation's chief purpose in commenting
at this time is to provide the benefit of our experience on these
subjects.  While the Federation does not have as direct an
involvement in FTC rules on "Made in USA" marking as U.S.
manufacturers might have, the Federation views "Made in USA"
origin markings as very powerful in the U.S. and international
marketplace.  Consequently, the Federation has a strong interest
in seeing that such markings are reserved for products that truly
deserve them.  The "Made in USA" rule should not be so liberal as
to permit a watch to bear that marking even though it fails to
meet a test for U.S. origin that would be similar to the "Swiss
Made" rule.  At the same time, an overly liberal "Made in USA"
                               -7-rule might permit watches that should not be eligible for a
"Swiss" marking to be sold in the U.S. as "Swiss" watches,
thereby improperly capitalizing on the Swiss reputation for
quality in watch manufacturing.
         The Federation is not requesting an opportunity to be a
participant in the upcoming public workshop on "Made in USA"
claims.  Nevertheless, if the Commission or its staff feel that
the Federation could provide any additional information or
perspective on this subject, please do not hesitate to contact
US.

Respectfully submitted,
Michael G. Kushnick
Andrew R. Plump
ZUCKERT, SCOUTT & RASENBERGER, L.L.P.
888 17th Street, N.W. #600
Washington, D.C. 20006

Attorneys for the Federation of the
Swiss Watch Industry






Jean-Daniel Pasche, Esq.
Director
Federation of the Swiss Watch Industry
Rue d'Argent 6
CH-2501 Bienne, Switzerland

January 16, 1996













                               -8-