63756 Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 / Notices

1See, e.g., Windsor Pen Corp., 64 F.T.C. 454

(1964); Vulcan Lamp Works, Inc., 32 F.T.C. 7

(1940).

2This language was first used in the cases of Hyde

Athletic Industries, File No. 922–3236 (consent

agreement accepted subject to public comment

Sept. 20, 1994) and New Balance Athletic Shoes,

Inc., Docket No. 9268 (complaint issued Sept. 20,

1994). In light of the decision to review the

standard for U.S. origin claims, the Commission

later modified the complaints in these cases to

eliminate the allegations based on the ‘‘all or

virtually all’’ standard. Consent agreements based

on these revised complaints were issued on

December 2, 1996 (New Balance) and December 4,

1996 (Hyde).

3 In this notice, the Commission refers to its

traditional standard as the ‘‘all or virtually all’’

standard.

4The Commission initiated its review in part

because of comments from the public on the

consent agreement the Commission had accepted

(subject to final action) with Hyde, and letters from

more than 40 members of Congress who wrote to

the Commission or Chairman Robert Pitofsky urging

that the Commission review and revise its standard.

5A follow-up notice published on December 19,

1995 announced that the public workshop would be

held on March 26 and 27, 1996, and stated that the

record would be held open for post-workshop

public comments until April 30, 1996. 60 FR 65327

(1995).

FEDERAL TRADE COMMISSION

‘‘Made in USA’’ and Other U.S. Origin

Claims

AGENCY: Federal Trade Commission.

TITLE: Enforcement Policy Statement on

U.S. Origin Claims.

ACTION: Notice of Issuance of

Enforcement Policy Statement on U.S.

Origin claims.

SUMMARY: The Federal Trade

Commission (‘‘FTC’’ or ‘‘Commission’’)

has conducted a comprehensive review

of ‘‘Made in USA’’ and other U.S. origin

claims in product advertising and

labeling. Historically, the Commission

has held that a product must be wholly

domestic or all or virtually all made in

the United States to substantiate an

unqualified ‘‘Made in USA’’ claim. As

part of its review, which began in 1995,

the Commission sought public comment

and conducted a two-day public

workshop.

On May 7, 1997, the Commission

solicited public comment on Proposed

Guides for the Use of U.S. Origin Claims

(‘‘Proposed Guides’’). Under the

Proposed Guides, a marketer making an

unqualified U.S. origin claim would

have been required to have a reasonable

basis substantiating that the product

was substantially all made in the United

States. To give further guidance as to

what constitutes a reasonable basis for

making a ‘‘Made in USA’’ claim, the

Proposed Guides set forth two ‘‘safe

harbors’’ under which an unqualified

U.S. origin claim would not be

considered deceptive.

The Proposed Guides also addressed

qualified claims, claims regarding

specific processes and parts, multipleitem sets, and changes in cost and

sourcing. They also would have

authorized specific origin claims for

certain products that are both sold

domestically and exported.

After extensively reviewing comments

received regarding the Proposed Guides,

the Commission has determined not to

adopt the Proposed Guides. Instead, the

Commission will continue to enforce

the Commission’s current ‘‘all or

virtually all’’ standard. The Enforcement

Policy Statement on U.S. Origin Claims

that appears at the end of this notice

outlines the Commission’s enforcement

policy in this area and provides

additional guidance to marketers

wishing to make an unqualified ‘‘Made

in USA’’ claim under the ‘‘all or

virtually all’’ standard. The statement

also provides guidance on the use of

qualified claims.

EFFECTIVE DATE: December 1, 1997.

FOR FURTHER INFORMATION CONTACT: Beth

M. Grossman, Attorney, Division of

Advertising Practices, Bureau of

Consumer Protection, Federal Trade

Commission, Washington, DC 20580,

telephone 202–326–3019, or Kent C.

Howerton, Attorney, Division of

Enforcement, Bureau of Consumer

Protection, Federal Trade Commission,

Washington, DC 20580, telephone 202–

326–3013.

SUPPLEMENTARY INFORMATION:

I. Introduction

The Commission regulates claims of

U.S. origin, such as ‘‘Made in USA,’’

pursuant to its statutory authority under

section 5 of the Federal Trade

Commission Act, which prohibits

‘‘unfair or deceptive acts or practices.’’

Cases brought by the Commission

beginning over 50 years ago established

the principle that it was deceptive for a

marketer to promote a product with an

unqualified ‘‘Made in USA’’ claim

unless that product was wholly of

domestic origin.1 In two 1994 cases, the

Commission rearticulated this standard

to require that a product advertised as

‘‘Made in USA’’ be ‘‘all or virtually all’’

made in the United States.2 Whether the

standard was called ‘‘wholly domestic’’

or ‘‘all or virtually all,’’ however,

unqualified claims of domestic origin

have been treated as claims that the

product was in all but de minimis

amounts made in the United States.3

In a July 11, 1995 press release, the

Commission announced that it would

undertake a comprehensive review of

U.S. origin claims and examine whether

the Commission’s traditional standard

for evaluating such claims remained

consistent with consumer perceptions

and continued to be appropriate in

today’s global economy.4 On October 18,

1995, the Commission published a

notice in the Federal Register soliciting

public comment on various issues

related to this review, and announcing

that Commission staff would conduct a

public workshop on this topic. 60 FR

53922 (1995).5 Contemporaneous with

the solicitation of public comment, the

Commission commissioned a two-part

study to examine consumer

understandings of U.S. origin claims.

On March 26 and 27, 1996,

representatives of industry, consumer

groups, unions, government agencies,

and others participated in the public

workshop, which focused on consumer

perception of U.S. origin claims and a

discussion of the costs and benefits of

various alternative standards for

evaluating such claims. Following the

workshop, the Commission, in a notice

published on April 26, 1996, extended

the period for clarifying or rebuttal

comments until June 30, 1996, and set

forth additional questions for comment.

61 FR 18600 (1996).

After reviewing the consumer

perception evidence, the public

comments, and the workshop

proceedings, the Commission proposed,

in a notice published on May 7, 1997,

to adopt Guides for the Use of U.S.

Origin Claims and sought public

comment on the Proposed Guides until

August 11, 1997. 62 FR 25020. Under

the Proposed Guides, a marketer making

an unqualified claim of U.S. origin, at

the time it makes the claim, would have

to possess and rely upon a reasonable

basis that the product is substantially all

made in the United States. To assist

manufacturers in complying with this

standard, the Proposed Guides also set

forth two alternative ‘‘safe harbors’’

under which an unqualified U.S. origin

claim would not be considered

deceptive. The first safe harbor

encompassed products that were last

substantially transformed in the United

States and whose U.S. manufacturing

costs constituted 75% of total

manufacturing costs (‘‘75% U.S. content

safe harbor’’). The second safe harbor

applied to products that have undergone

two levels of substantial transformation

in the United States: i.e., the product’s

last substantial transformation took

place in the United States, and the last

substantial transformation of each of it

significant inputs took place in the

United States (‘‘two levels of substantial
Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 / Notices 63757

6 ‘‘Substantial transformation’’ is a U.S. Customs

Service term that refers to a manufacturing or other

process that results in a new and different article

of commerce, having a new name, character, and

use that is different from that which existed prior

to the processing. See 59 FR 141 (1994).

7This number reflects those comments received

at the time this notice was prepared; additional

comments on this matter continue to be submitted

to the Commission. The comments have been filed

on the Commission’s public record as Document

Nos. B21902700001, B21902700002, etc. The

comments are cited in this notice by the name of

the commenter, a shortened version of the comment

number, and the relevant page(s) of the comment,

e.g., AGs, #462, at 2. All written comments

submitted (including those received after the

preparation of this notice), as well as a list of

commenters (through #1057), are available for

public inspection on normal business days between

the hours of 8:30 a.m. to 5:00 p.m. at the Public

Reference Room, Room 130, Federal Trade

Commission, 6th and Pennsylvania Ave., N.W.,

Washington, DC 20580. In addition, the comments

received, and other materials relevant to this

review, are available to the public through the

Commission’s World Wide Web site (http://

www.ftc.gov).

8This comment was submitted by the Attorneys

General of Connecticut, California, Florida, Iowa,

Illinois, Michigan, Missouri, North Carolina, New

Jersey, Nevada, New York, Pennsylvania, Rhode

Island, Tennessee, Washington, and Wisconsin

(‘‘AGs’’), #462. In addition, Jeremiah Nixon,

Attorney General of Missouri (‘‘Nixon’’) submitted

a separate comment, #63.

9U.S. Sen. Dale Bumpers (‘‘Bumpers’’), #74; U.S.

Rep. Mark W. Neumann and U.S. Rep. Tom Latham

(‘‘Neumann/Latham’’), #75; U.S. Rep. James A.

Traficant, Jr. (‘‘Traficant’’), #231; U.S. Rep. Peter J.

Visclosky (‘‘Visclosky’’), #236; U.S. Rep. Earl F.

Hilliard (‘‘Hilliard’’), #242; U.S. Sen. Carl Levin

(‘‘Levin’’), #254; U.S. Rep. Virgil H. Goode, Jr.

(‘‘Goode’’), #24; U.S. Rep. Sherrod Brown

(‘‘Brown’’), #599; U.S. Rep. Bob Franks and U.S.

Rep. John D. Dingell (‘‘Franks/Dingell’’), #670,

(‘‘Dingell’’), #694 (noting his past opposition to

weakening the all or virtually all standard and

requesting that the Commission respond to specific

questions about the Proposed Guides; with attached

response from the Commission’s staff); U.S. Rep.

John Olver (‘‘Olver’’), #671A; U.S. Rep. Bruce F.

Vento (‘‘Vento’’), #735. U.S. Rep. Tom Campbell

(‘‘Campbell’’) submitted a comment conveying the

concerns of constituents, but did not take a position

himself. Campbell, #283. A number of other

members of Congress forwarded comments from

their constituents.

10North Carolina Rep. William S. Hiatt (‘‘Hiatt’’),

#196; North Carolina Sen. Fountain Odom

(‘‘Odom’’), #290; Illinois Rep. Michael J. Boland

(‘‘Boland’’), #468; North Carolina Rep. Wayne

Goodwin (‘‘Goodwin’’), #508; Pennsylvania Rep.

Richard D. Olasz (‘‘Olasz’’), #623.

11New Jersey General Assembly (‘‘NJ Assembly’’),

#740.

12City of Titusville, FL (‘‘Titusville’’), #1047.

13American Export Ass’n (‘‘American Export’’),

#201; The American Hand Tool Coalition

(‘‘American Hand Tool’’), #622; American Iron &

Steel Institute (‘‘AISI’’), #636; Tile Council of

America, Inc. (‘‘TCA’’), #618; American Textile

Manufacturers Institute (‘‘ATMI’’), #615; Crafted

with Pride in USA Council, Inc. (‘‘Crafted With

Pride’’), #469. Despite the exclusion of textile

products from the Proposed Guides, four additional

trade associations filed comments urging the

Commission to maintain the existing standards

under the Textile Products Identification Act, 15

U.S.C. 70, for ‘‘Made in USA’’ claims for garments

and other textile products. American Apparel

Manufacturers Ass’n (‘‘AAMA’’), #697; Clothing

Manufacturers Ass’n of USA (‘‘CMA’’), #624;

Garment Contractors Ass’n of Southern California

(‘‘GCASC’’), #895; Knitted Textile Ass’n (‘‘KTA’’),

#634.

14National Consumers League (‘‘NCL’’), #640;

Wisconsin Citizen Action (‘‘WI Citizen Action’’),

#991.

15Alabama AFL–CIO (‘‘Alabama AFL–CIO’’),

#242; Connecticut Employees Union Independent,

Local 511, AFL–CIO (‘‘CEUI Local 511’’), #870; East

Central Ohio Building & Construction Trades

Council, AFL–CIO (‘‘Construction Trades’’), #687;

Food & Allied Service Trades Dept., AFL–CIO

(‘‘FAST’’), #545; Hotel Employees & Restaurant

Employees Local 74, AFL–CIO (‘‘HERE Local 74’’),

#255; Int’l Ass’n of Firefighters, West Hartford Fire

Fighters Ass’n, Local 1241 (‘‘Firefighters Local

1241’’), #742; Int’l Ass’n of Machinists & Aerospace

Workers, Air Transport Lodge 1056 (‘‘Machinists

Lodge 1056’’), #558; Int’l Brotherhood of

Boilermakers, Iron Ship Builders, Blacksmiths,

Forgers & Helpers, AFL–CIO (‘‘Boilermakers’’),

#514; Int’l Brotherhood of Electrical Workers, Local

1040, AFL–CIO (‘‘IBEW Local 1040’’), #745; Int’l

Brotherhood of Electrical Workers, Local 540, AFL–

CIO (‘‘IBEW Local 540’’), #686; Int’l Union, United

Automobile, Aerospace & Agriculture Implement

Workers of America—UAW (‘‘UAW’’), #615;

Montana State AFL–CIO (‘‘MT AFL–CIO’’), #459;

Permian Basin Central Labor Union, AFL–CIO

(‘‘PBCLU’’), #388, #418; Seattle Professional

Engineering Employees Ass’n (‘‘SPEEA’’), #830,

#944; UAW—Region 9A (‘‘UAW Region 9A’’), #682;

Union Label & Service Trade Department, Plumbers

& Steamfitters Local 565, AFL–CIO (‘‘Plumbers &

Steamfitters Local 565’’), #209; Union Label &

Service Trades Department, AFL–CIO (‘‘AFL–CIO/

ULSTD’’), #608; Union of Needletrades, Industrial

& Textile Employees, AFL–CIO, CLC (‘‘UNITE’’),

#696; United Food & Commercial Workers, Local

26, AFL–CIO (‘‘UFCW Local 26’’), #897; United

Paperworkers Int’l Union, AFL–CIO, CLC

(‘‘Paperworkers’’), #255; Communications Workers

of America, Local 3104, AFL–CIO (‘‘CWA Local

3104’’), #688; Hartford Federation of School

Secretaries (‘‘School Secretaries’’), #843; Int’l Union

of Electronic, Electrical, Salaried, Machine and

Furniture Workers, Furniture Workers Division,

AFL–CIO (‘‘Furniture Workers’’), #506; UAW Local

977, Buy American Committee (‘‘UAW Local 977’’),

#651; UAW, Amalgamated Local 644 (‘‘UAW Local

644’’), #54; UAW, Local 145 (‘‘UAW Local 145’’),

#913; United Steelworkers of America, Local 9189,

AFL–CIO (‘‘Steelworkers Local 9189’’), #995;

United Steelworkers of America, Rubber/Plastic

Industry Conference, Local 2, District 1, AFL–CIO,

CLC (‘‘Steelworkers Local 2’’), #1017; Brewery and

Soft Drink Workers, Liquor Drivers, and New and

Used Car Workers, Teamsters Local Union 1040

(‘‘Teamsters Local 1040’’), #1052.

16A&E Manufacturing Co. (‘‘A&E’’), #991; ABCO

Industries, Inc. (‘‘ABCO’’), #743; American Sigma

(‘‘American Sigma’’), #661; Ben Forman & Sons, Inc.

(‘‘Forman’’), #159; BOYT (‘‘BOYT’’), #959; Calibre,

Inc. (‘‘Calibre’’), #991; Centerville Lumber Co.

(‘‘Centerville’’), #152, #734; Cheraw Yarn Mills, Inc.

(‘‘Cheraw’’), #716; Danaher Tool Group

(‘‘Danaher’’), #991; D.E. Williams Co. (‘‘Williams’’),

#1031; Duchess Industries (‘‘Duchess’’), #512;

Durand Int’l (‘‘Durand’’), #471; Dyersburg Corp.

(‘‘Dyersburg’’), #720; Dynacraft Industries, Inc.

(‘‘Dynacraft’’), #646; Elco Textron (‘‘Elco’’), #970;

Equity Services of Connecticut, Inc. (‘‘Equity

Services’’), #1001; Exidyne Instrumentation

Technologies, Inc. (‘‘Exidyne’’), #731; Federal

Forging Tools (‘‘Federal’’), #654; Friend Laboratory

(‘‘Friend’’), #34; GBW Manufacturing, Inc. (‘‘GBW’’),

#1014; Gee Kay—Knit Products (‘‘Gee Kay’’), #1034;

Herker Industries (‘‘Herker’’), #991; Inman Mills

(‘‘Inman’’), #981; Jackson Products (‘‘Jackson’’),

#880; Joshua L. Baily & Co., Inc., (‘‘Baily’’), #53;

Kenosha Leatherette & Display Co. (‘‘Kenosha’’),

#991; Kern Special Tools Co., Inc. (‘‘Kern’’), #739;

Madewell Machine Works Co., Inc. (‘‘Madewell’’),

#958; March Instruments, Inc. (‘‘March’’), #46;

Matco Tools (‘‘Matco’’), #600; Merit Abrasives

(‘‘Merit’’), #628; Murphy & Co.(’’Murphy’’), #64;

Newco Valves (‘‘Newco’’), #198; NTP-Republic

(‘‘NTP’’), #699; Nucor Steel (‘‘Nucor’’), #992;

Piedmont Clarklift, Inc. (‘‘Piedmont’’), #741;

Protexall, Inc. (‘‘Protexall’’), #917; Regal-Beloit

Corp. (‘‘Regal-Beloit’’), #614; Richland Mills

(‘‘Richland’’), #626; Schofield (‘‘Schofield’’), #51;

SGS Tool Co. (‘‘SGS’’), #221; Sharpe Manufacturing

Co. (‘‘Sharpe’’), #630; Sheffield Steel Corp.

(‘‘Sheffield’’), #935; SidaMerica LLC

(‘‘SidaMerica’’), #246; Snap-on Tools (‘‘Snap-on’’),

#685, #732, #733, #991; Spectronics Corp.

Continued

transformation safe harbor’’).6 The

Proposed Guides also addressed various

qualified claims, claims regarding

specific processes and parts, multipleitem sets, and the effects of changes in

costs and sourcing. They further

provided for an alternative origin claim

for certain products that are both sold

domestically and exported.

In response to the Proposed Guides,

the Commission received 1,057 written

comments.7 After reviewing the public

comments, the Commission has decided

that it will not adopt the Proposed

Guides, but instead will continue to

enforce the Commission’s current ‘‘all or

virtually all’’ standard. In conjunction

with this decision, the Commission is

issuing an Enforcement Policy

Statement on U.S. Origin Claims which

provides additional guidance to

marketers seeking to make ‘‘Made in

USA’’ and similar claims. The

Enforcement Policy Statement appears

at the end of this notice.

II. Summary of Comments On Proposed

Guides

A. General Information

The total of 1,057 comments

represented 1,165 commenters,

including 963 individual consumers, 24

members of Congress, 2 consumer

organizations, 1 non-profit organization,

90 manufacturers or other corporations,

29 trade associations, 29 labor unions

and union representatives, 23 state and

local government representatives

(including a coalition of 16 state

Attorneys General), and 4 others.

B. Comments Supporting the All or

Virtually All Standard

The vast majority of the individual

consumers as well as 130 other

commenters opposed the Proposed

Guides as setting too low a standard

and/or expressly supported the current

‘‘all or virtually all’’ standard. These

included a coalition of 16 Attorneys

General,8 13 members of Congress,9 5

state legislators,10 1 state General

Assembly,11 1 City Council,12 6 trade

associations,13 2 consumer groups,14 29

labor unions or union representatives,15

58 manufacturers and other

corporations,16 and 3 other
63758 Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 / Notices

(‘‘Spectronics’’), #631; Spray Cotton Mills (‘‘Spray

Cotton’’), #672; Sterling Handling Equipment, Inc.

(‘‘Sterling’’), #625; Taytronics Corp. (‘‘Taytronics’’),

#744; Vaughn & Bushnell Manufacturing Co.

(‘‘Vaughn & Bushnell’’), #151, #616; Victoria Vogue,

Inc. (‘‘Victoria’’), #1045; The Warren Featherbone

Co. (‘‘Featherbone’’), #1015; Waukesha Industrial

Supply (‘‘Waukesha’’), #991; Weldbend Corp.

(‘‘Weldbend’’), #597; Wolfe Dye & Bleach Works,

Inc. (‘‘Wolfe’’), #1057. Wright Tool Co. (‘‘Wright’’),

#262, #652; Yeoman’s Chicago Corp. (‘‘Yeoman’s’’),

#216. See also Eastman Kodak Co. (‘‘Kodak’’), #619

(supporting 85% standard).

17Made in USA Coalition (‘‘MUSA Coalition’’),

#596; Donald P. Selkirk (submitted as Executive

Producer, The Donald P. Selkirk Show, WPON

Radio, Bloomfield Hills, MI) (‘‘Selkirk’’), #186;

Women V.I.P.s (‘‘WVIP’’), #1042.

18Brown, #599 (petition containing

approximately 9,300 signatures submitted by U.S.

Rep. Sherrod Brown); John Moore (‘‘John Moore’’),

#195 (petition signed by 26 individuals); UAW

Local 977, #651 (petition containing approximately

2,000 signatures submitted by a union

representative); Ellen Sofranski (‘‘Sofranski’’), #703

(petition signed by 28 individuals); Employees of

Danaher Tool Group (‘‘Danaher Employees’’), #829

(petition containing 181 names submitted by

employees of Danaher Tool Group); David Micola

(‘‘Micola’’), #966 (petition containing 151 names

submitted by an individual who is a sheet metal

worker); Richard Moran, Jr. (‘‘Moran’’), #1029

(petition signed by 28 individuals).

19These telephone calls have not been

memorialized or codified on the record because

many of them were phone mail messages without

the name, telephone number, or address of the

caller.

20This number includes at least 13 members of

Congress who were among those who had earlier

written to the Commission or submitted public

comments asking the Commission to lower the ‘‘all

or virtually all’’ standard. See supra note 4. The

Resolution was submitted to the Commission by

U.S. Representatives Bob Franks and John D.

Dingell. Franks/Dingell, #670.

21MUSA Coalition, #596.

22NJ Assembly, #740 (Assembly Resolution No.

163); Titusville, #1047 (Resolution No. 39–1997).

23 Kenneth Fletcher (‘‘Fletcher’’), #178, at 1.

24Margaret A. Stem (‘‘Stem’’), #203, at 1.

25Edwin and Beverly Emmons (‘‘Emmons’’),

#288, at 1.

26See, e.g., Baily, #53; Nixon, #63; Traficant,

#231; Crafted With Pride, #469; ATMI, #613;

Vaughan & Bushnell, #616; Weldbend, #597;

Exidyne, #731; UAW, #615.

27See, e.g., American Hand Tool, #622; UAW,

#615; Dynacraft, #646; AGs, #462; Weldbend, #597;

Bumpers, #74.

28See, e.g., Vento, #735 at 1 (‘‘The decline of

America’s manufacturing base and the difficulty of

ascertaining a product’s origin in the global

marketplace, has in fact rendered the Made in USA

claim more valuable and significant to American

consumers wishing to buy American.’’); AISI, #636,

at 1 (It is ‘‘highly likely that the vast majority of U.S.

consumers would be unaware of a change in the

standard, and would continue to believe that items

labeled ‘Made in USA’ were held to the current

standard.’’); NCL, #640, at 3 (the fact that the

economy is increasingly globalized may cause

consumers to place even a greater value on

unqualified ‘Made in USA’ claims); Bumpers, #74,

at 1–2 (‘‘Even if fewer products are wholly ‘Made

in the USA,’ it does not follow that the meaning of

the phrase has changed—rather, that fewer products

may meet the standard.’’); UNITE, #696, at 3 (‘‘no

credible evidence * * * that American consumers

expect the ‘Made in USA’ label to mean that

products were produced somewhere else’’).

29E.g., SGS, #221, at 1 (U.S. jobs will be in

jeopardy if Commission adopts proposed standard);

Alabama, #242, at 1 (American workers are already

badly injured by unfair exportation of jobs by their

employers); Boilermakers, #514; Plumbers &

Steamfitters Local 565, #209, at 1 (‘‘purchasing

products displaying the ‘Made in U.S.A.’ label is

the first line of defense for American workers to

protect their jobs’’). See also PBCLU, #418; AFL–

CIO/ULSTD, #608; Vaughan & Bushnell, #616; AISI,

#636; UAW Region 9A, #682; Cheraw, #716;

Bumpers, #74; Yeomans, #216; Odom, #290.

commenters.17 In addition to the

individual consumer comments, 7

individual commenters or groups

submitted petitions urging the

Commission to retain the ‘‘all or

virtually all’’ standard that were signed

by a total of more than 11,000

individuals.18 Last, the Commission

received over 200 telephone calls from

individual consumers who stated their

opposition to the Proposed Guides.19

In addition, over 200 members of the

House of Representatives have

cosponsored House Concurrent

Resolution 80 (‘‘Resolution’’), opposing

the Proposed Guides and urging the

Commission to retain the ‘‘all or

virtually all’’ standard.20 The Resolution

states that lowering the current standard

‘‘will be a misrepresentation to

consumers in the United States who

presently believe products bearing the

‘Made in USA’ label were all or virtually

all made in the United States,’’ and that

American consumers are ‘‘entitled to

purchase products with the

understanding that the labels on these

products reflect consistent definitions.’’

Accordingly, the Resolution ‘‘urges the

Federal Trade Commission to refrain

from lowering this standard at the

expense of consumers and jobs in the

United States.’’ The Made in USA

Coalition, comprised of 3 consumer

groups, 32 labor unions, 15 businesses,

and 11 agriculture organizations, and a

primary backer of the House Resolution,

submitted a comment expressly

supporting it.21 In addition, members of

the Senate recently introduced Senate

Concurrent Resolution 52, which also

supports the retention of the ‘‘all or

virtually all’’ standard. Similarly, the

New Jersey General Assembly and the

Titusville (Florida) City Council

adopted resolutions that ask the

Commission to maintain the traditional

standard.22

The consumer commenters

overwhelmingly opposed the Proposed

Guides and generally supported an ‘‘all

or virtually all’’ standard or advocated

a specific percentage, usually 90% or,

more often, 100%. Many commenters

stated that ‘‘ ‘Made in USA’ means what

it says’’ or expressed similar sentiments.

Several commenters asserted that

changing the current standard would

confuse consumers who wish to buy

American products, leaving them

unable to determine whether a product

was truly made in the United States.

Individual consumers also stated that

they buy American products to support

fellow Americans and expressed

concern that lowering the standard

would lead to a loss in American jobs.

The following comments exemplify the

individual consumer comments:

The concept of ‘‘Made in the USA’’ has

been specific and definite for the last 50

years. Please leave it as it is. If manufacturers

want to say an item is ‘‘Made in the USA’’;

then, make sure it is exactly that. ‘‘Made in

the USA’’ should mean that an item is 100%

manufactured in the United States of

America and not in another country.23

If a product is only partially made in our

Country, I want to know. I do not wish to

purchase items made in other countries and

falsely labeled ‘‘Made in America.’’ I want

the entire truth on the label. I don’t want to

be tricked into buying an item I think is made

here when in fact it is not.24

We are opposed to any change that would

increase the percentage of foreign labor or

materials in those goods or products bearing

the ‘‘Made in the USA’’ label. The American

people recognize goods or products bearing

this label as being superior in workmanship

and quality. These goods and products are

produced by American workers * * * Any

action by the FTC to modify the ‘‘Made in

USA’’ label standard will lead to the loss of

American jobs.25

Other commenters echoed the

consumers’ concerns and cited

additional reasons for keeping the ‘‘all

or virtually all’’ standard. Several

opponents of the Proposed Guides

expressed concern that altering the

current standard would deceive, or at

least confuse, consumers.26 Some of

these commenters argued that the

consumer perception evidence before

the Commission does not support

lowering the standard.27 Some

commenters additionally asserted that

consumer attitudes and preferences

towards ‘‘Made in USA’’ products have

not been altered by a change in the

economy, or, if anything, have been

made stronger.28

Other advocates of the ‘‘all or

virtually all’’ standard warned that

changing the standard in the way

proposed by the Commission would

harm the American manufacturing base,

because companies would have less

incentive to use U.S. labor and U.S.

product components. These commenters

concluded that American jobs would be

jeopardized as companies increasingly

would rely on less expensive foreign

sources.29 Many commenters also stated

that weakening the standard would
Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 / Notices 63759

30E.g., Weldbend, #597, at 1 (the Proposed Guides

‘‘would force most of Weldbend’s fittings and

flanges—made all or virtually all of American

materials by American workers—to share their

hard-earned ‘Made in USA’ labels with competitors’

products having less than 50-percent U.S. content

value’’). See also Vento, #735; Matco, #600;

Duchess, #512; Merit, #628; Sharpe, #630;

Spectronics, #631; Federal, #654; Exidyne, #731;

NTP, #699; Forman, #159; Traficant, #231.

31See, e.g., NCL, #640; Visclosky, #236; Traficant,

#231; Boilermakers, #514; FAST, #545; UNITE,

#696; Schofield, #51; AFL–CIO/ULSTD, #608. In

addition, a few individual consumers also

suggested that marketers can make qualified claims

for their products. See, e.g., Matthew Fogarty

(‘‘Fogarty’’), #997 (for products with less than 100%

U.S. content, should specify percentage of U.S.

content, such as ‘‘Materials 50% Made in USA,

Assembled in Guam’’); Anthony J. Jordan

(‘‘Jordan’’), #160 (supports disclosing the specific

percentages of U.S. and foreign materials and labor);

Lawrence P. Kosel (‘‘Kosel’’), #207 (supports

disclosing on labels the percentage of the product

made in America, such as ‘‘70% made in

America’’); Arthur Lazur (‘‘Lazur’’), #119 (should

state percentage or exact materials made in USA; or

that assembled, but not manufactured, in USA);

R.W. and Susan Marchand (‘‘Marchand’’), #107 (for

products partially produced in USA, should

identify percentage made in USA); Debra Newman

(‘‘Debra Newman’’), #123 (supports qualified claims

such as ‘‘Made in USA of imported parts’’ or

‘‘Assembled in [name of country] from US parts’’);

Alan D. Shrom (‘‘Shrom’’), #141 (should state on the

product if it is assembled in USA of foreign

materials); Robert Lebensold (‘‘Lebensold’’), #942

(‘‘Made in U.S.A. of imported materials’’ might be

okay).

33AGs, #462; AFL–CIO/ULSTD, #608; UAW,

#615; Durand, #471; Vaughan & Bushnell, #616;

American Hand Tool, #622. See also Matco, #600,

American Sigma, #611; Sharpe, #630, Federal, #654;

Exidyne, #731, and NTP, #699 (all submitting

comments nearly identical to the American Hand

Tool Coalition’s comment).

34For example, UAW pointed out that ‘‘[t]he

difference in rates of worker compensation between

the U.S. and countries such as China allows for the

possibility that 75 percent of the manufacturing

costs could be U.S. value, but that the product

would be ‘substantially’ made abroad.’’ UAW, #615,

at 2. See also Durand, #471, at 1 (stating that the

percentage content safe harbor would seriously

harm its business because ‘‘[c]heap labor imports of

stems and bowls to be fused in the U.S. can easily

be estimated to meet the 75% manufacturing cost

requirement * * *’’); AFL–CIO/ULSTD, #608, at 1–

2 (under the 75% content safe harbor, products can

be labeled ‘‘Made in USA,’’ even though major

components were produced abroad, if those

components were imported from countries with

lower wages); AGs, #462, at 5 (the Commission’s

approach of measuring foreign content by

comparing the percentage of costs attributable to

foreign parts and labor to those attributable to U.S.

parts and labor ‘‘fails to compensate for the

disparity in costs between the United States and

many developing countries’’).

A related point was made by the American Hand

Tool Coalition, which argued that varying labor

costs in certain countries would lead to inconsistent

labeling results for similar products, e.g., if one

manufacturer sources parts from China and a

second manufacturers sources the same parts from

Germany, the percentage U.S. content will differ

even if the manufacturers perform the same U.S.

processing at the same cost, because China is a

much lower cost market than Germany. American

Hand Tool, #622, at 22.

35American Hand Tool, #622, at 16–19.

36See, e.g., AFL–CIO/ULSTD, #608; UAW, #615;

American Hand Tool Coalition, #622; Durand, #471.

37AFL–CIO/ULSTD, #608, at 2 (under the second

safe harbor, a product ‘‘could be assembled in the

U.S. of components put together in the U.S. of parts

made overseas that account for more than 25% of

the product’s value’’); American Hand Tool, #622,

at 26; AGs, #462, at 6. See also UAW, #615, at 3

(citing Example 1 under the second safe harbor in

the Proposed Guides as an example of when a

product can be labeled ‘‘Made in USA’’ even if

imported components accounted for 80% or 90% of

the value of the final product); Weldbend, #597, at

1–2 (for products such as pipe fittings and flanges,

the two levels of substantial transformation safe

harbor would allow products with 100% foreign

materials and one-half to two-thirds of their value

of foreign origin to be marketed as ‘‘Made in USA’’).

38UAW, #615, at 3.

39American Hand Tool, #622, at 25.

40AGs, #462, at 1,7. See also Sterling, #625, at 1

(supporting a 90% standard); March, #46, at 1

(supporting a 90% standard).

41 Kodak, #619, at 2–3 (consumer perception

evidence justifies lowering the U.S. content

requirement to 85%; this standard, along with last

Continued

deny manufacturers whose products

were, in fact, ‘‘all or virtually all’’ made

in the United States the marketing

advantage attributable to labeling

products ‘‘Made in USA.’’ 30

A number of commenters opposed to

the Proposed Guides also contended

that it is not necessary to change the

standard in order to permit sellers of

products made with some foreign parts

or labor to inform consumers of their

products’ U.S. content. These

commenters argued that the current

standard allows marketers to make

qualified claims for products that are

made with some foreign parts or labor

as long as those claims are truthful and

substantiated.31

In addition, some of the commenters

supporting the ‘‘all or virtually all’’

standard specifically criticized the

particular safe harbors proposed by the

Commission, arguing that neither

proposed safe harbor would ensure that

a product complies with the proposed

‘‘substantially all’’ standard and with

consumer expectations regarding ‘‘Made

in USA’’ claims.33

Specifically, several commenters

argued that the 75% U.S. content safe

harbor (expressed as a percent of total

manufacturing costs), in addition to

being too low to meet consumer

expectations, would allow a ‘‘Made in

USA’’ claim for products with far less

than even 75% U.S. content (in terms of,

for example, the percentage of

components). UAW, for example,

contended that lower foreign labor costs

would lead to underestimating the

actual amount of foreign content in a

product.34 In addition, the American

Hand Tool Coalition argued that,

because the Proposed Guides do not

necessarily require marketers to take

into account materials several steps

back in the manufacturing process or to

take into account foreign content that is

not ‘‘significant’’ (which is left

undefined), marketers may fail to

account for all foreign costs.35

A number of commenters also

specifically criticized the two levels of

substantial transformation safe harbor,

arguing that this safe harbor does not

guarantee that ‘‘substantially all’’ of the

labor and value of the product is of

domestic origin.36 A few of these

commenters expressed concern that,

because this safe harbor does not take

into account the cost of U.S. processing

or inputs, products could be labeled

‘‘Made in USA’’ even though foreign

content accounted for a significant

percentage of their value.37 Two

commenters additionally argued that

consumers would be misled by the two

levels of substantial transformation safe

harbor, because it is too imprecise to

ensure that ‘‘substantially all’’ the value

of a product is of U.S. origin. UAW

stated that ‘‘[t]he variation from product

to product in the impact of the double

transformation test would prevent

consumers from having a real sense of

the U.S. content of the product that is

being presented as ‘Made in USA.’ ’’ 38

Similarly, the American Hand Tool

Coalition contended that this safe

harbor leads to conflicting or

unpredictable results, in part, because

the Proposed Guides define substantial

transformation to include two tests that

are not consistent for all products—the

case-by-case analysis that Customs

applies to products from most countries

and the tariff shift regulations that

Customs applies to products from

NAFTA countries.39

Finally, some commenters supported

a percentage content standard greater

than the 75% safe harbor proposed by

the Commission, but less than 100%.

For example, a coalition of 16 state

Attorneys General, as well as a few

manufacturers, who were generally

supportive of an ‘‘all or virtually all’’

standard, recommended that the

Commission require that a product have

at least 90% actual U.S. content in order

to bear an unqualified ‘‘Made in USA’’

label.40 Another commenter, Eastman

Kodak, favored an 85% standard, stating

that although the ‘‘all or virtually all’’

standard affords the best guarantee

against consumer deception or

confusion, ‘‘legitimate disadvantages

[may be placed] on businesses who are

very heavily committed to maintaining

manufacturing processes here but

cannot ignore the economic realities of

using at least some foreign components’’

or who must import items which are not

made, or raw materials which are not

found, in the United States.41 According
63760 Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 / Notices

substantial transformation in the United States,

would serve consumers’ interests).

42U.S. Rep. Susan M. Collins, U.S. Rep. John F.

Kerry, U.S. Rep. Joseph I. Leiberman, and U.S. Rep.

Olympia J. Snowe (‘‘Collins/Kerry/Leiberman/

Snowe’’), #606; U.S. Rep. Joseph Moakley, U.S. Rep.

William Delahunt; U.S. Rep. Martin Meehan; U.S.

Rep. Joseph Kennedy, U.S. Rep. Barney Frank

(‘‘Moakley/Delahunt/Meehan/Kennedy/Frank’’),

#671; U.S. Rep. Michael G. Oxley (‘‘Oxley’’), #955.

The comment from Rep. Moakley et al. was also

signed by U.S. Rep. John Olver. In a subsequent

letter, however, Rep. Olver stated that his signature

was ‘‘inadvertently attached’’ to this comment and

that he did not believe that the FTC’s traditional

standard for ‘‘Made in USA’’ labels should be

altered. Olver, #671A.

43Franzus Co., Inc. (‘‘Franzus’’), #301; Converse,

Inc. (‘‘Converse’’), #363, #470; Genfoot America,

Inc. (‘‘Genfoot’’), #463; DeBon Leather (‘‘DeBon’’),

#472; Carter Footwear, Inc. (‘‘Carter’’), #595; The

Leather Specialty Co. (‘‘Leather Specialty’’), #598;

Detroit Edge Tool Co. (‘‘Detroit Edge’’), #601; Belair

Time Corp. (‘‘Belair’’), #602; Maytag Corp.

(‘‘Maytag’’), #605; Oneida Ltd. (‘‘Onedia’’), #607;

Jules Jurgensen Watches (‘‘Jurgensen’’), #609;

Toyota Motor Sales, USA (‘‘Toyota’’), #610; Timex

Corp. (‘‘Timex’’), #612; Wolverine Worldwide, Inc.

(‘‘Wolverine’’), Inc., #621; Jameslee Corp.

(‘‘Jameslee’’), #627; Central Tools, Inc., (‘‘Central’’),

#629; Ronda Watch Corp. and Progress Watch Corp.

(‘‘Ronda/Progress’’), #632; Benrus Watch Co.

(‘‘Benrus’’), #633; New Balance Athletic Shoe Co.,

Inc. (‘‘New Balance’’), #635; The Stanley Works

(‘‘Stanley’’), #647; The Timken (‘‘Timken’’), #648;

The Gates Corp. (‘‘Gates’’), #649; Allegiance

Healthcare Int’l, Inc. (‘‘Allegiance’’), #653;

Minnesota Mining & Manufacturing (‘‘3M’’), #700;

Imation Corp. (‘‘Imation’’), #643; Gary’s Leather

Creations (‘‘Gary’s’’), #678; Sacoche Int’l, Inc.

(‘‘Sacoche’’), #701; NIBCO Inc. (‘‘NIBCO’’), #738;

Samsonite Corp. (‘‘Samsonite’’), #828; Whirlpool

Corp. (‘‘Whirlpool’’), #957.; Hartmann Luggage &

Leather Goods Group (‘‘Hartmann’’), #1013,

Savannah Luggage Works (‘‘Savannah’’), #1039.

44Writing Instrument Manufacturers Ass’n, Inc.

(‘‘WIMA’’), #187; Rubber & Plastic Footwear

Manufacturers Ass’n (‘‘RPFMA’’), #264; Luggage

and Leather Goods Manufacturers of America, Inc.

(‘‘LLGMA’’), #464; Ass’n of Home Applicance

Manufacturers (‘‘AHAM’’), #473; Int’l Mass Retail

Ass’n (‘‘IMRA’’), #594; Footwear Distributors and

Retailers of America (‘‘FDRA’’), #603; Int’l

Electronics Manufacturers and Consumers of

America (‘‘IEMCA’’), #604; Footwear Industries of

America, Inc. (‘‘FIA’’), #617; National Food

Processors Ass’n (‘‘NFPA’’), #620; The National

Council on Int’l Trade Development (‘‘NCITD’’),

#638; Joint Industry Group (‘‘JIG’’), #639;

Electronics Industries Ass’n (‘‘EIA’’), #641; Japan

Machinery Exporters’ Ass’n (‘‘JMEA’’), #642;

Committee of Domestic Steel Wire Rope and

Specialty Cable Manufacturers (‘‘Domestic Steel

Wire Rope’’), #644; The Specialty Cable

Manufacturers Subcommittee (‘‘Specialty Cable

Subcommittee’’), #645; Ass’n of Int’l Automobile

Manufacturers (‘‘AIAM’’), #650; Consumer

Electronics Manufacturers Association (‘‘CEMA’’),

#1041 (attaching a letter to members of Congress

signed by officers of EIA, LLGMA, IMRA, FIA, the

Automotive Parts and Accessories Association, and

the American Association of Exporters and

Importers urging the members not to cosponsor H.

Con. Res. 80 and supporting the FTC’s proposed

guidelines as offering a ‘‘realistic approach’’ to

‘‘Made in USA’’ labeling).

45Made in the USA Foundation (‘‘MUSA

Foundation’’), #730.

46 JBC International (a consulting firm) (‘‘JBC’’),

#637.

47See, e.g., Carter, #595, at 1; see also Stanley,

#647; Jurgensen, #609; AIAM, #650; Wolverine,

#621; AHAM, #473; AIAM, #650; JBC, #637; EIA,

#641; Belair, #602; FIA, #617.

48See, e.g., NCITD, #638; Carter, #595; New

Balance, #635; LLGMA, #464; FIA, #617.

49See e.g., AHAM, #473, at 2 (although consumer

perception studies indicate that consumers are still

interested in whether a product is ‘‘Made in USA,’’

this ‘‘rarely signifies to the consumer that the

product is 100 percent or ‘all or virtually all’

composed of U.S. made parts and assembled in the

U.S.’’); Timken, #648, at 1 (‘‘Global sourcing of

components is by now so well-known that

consumers recognize the fact that ‘USA’

merchandise may contain a small foreign content’’);

AIAM, #650, at 3 (‘‘Given the fact that consumer

perception data is consistent with the global

marketplace, it would seem arbitrary to ignore it in

fashioning Guides to prevent consumer

deception.’’) See also Maytag, #605; FIA, #617;

Converse, #363; WIMA, #187; Allegiance, #653.

50See, e.g., Belair, #602; AHAM, #473; Jules

Jurgensen, #609; New Balance, #635.

51See, e.g., LLGMA #464, at 2–3 (‘‘Foreign goods

dominate the market and thousands of U.S. jobs

have been lost to imports. This is because the cost

structure of major foreign suppliers of luggage and

leather goods is far below our own * * * Foreign

suppliers in these countries utilize very cheap labor

and have minimal environmental and workplace

standards * * * It is crucial that the remaining

luggage and leather goods manufacturers be able to

market the unique ‘Made in USA’ label to have any

hope of competing with low labor cost countries.’’);

New Balance, #635, at 4–6 (it has become

increasingly difficult to keep and expand U.S.

manufacturing facilities in the face of competition

from cheap imports, and the impossibility of

obtaining needed components within the United

States); Converse, #470; DeBon, #472; Leather

Specialty, #598. Belair, #602; Jules Jurgensen. #609;

Ronda/Progress, #632; Sacoche, #701.

52See, e.g., AHAM, #473 at 1; New Balance, #635,

at 2.

53See, e.g., Collins/Kerry/Leiberman/Snowe,

#606, at 1 (‘‘To impose a standard which [numerous

manufacturers] cannot meet is one more

encouragement for businesses to abandon U.S.

manufacturing for cheap overseas labor.’’); LLGMA,

#464, at 3 (‘‘If the FTC continues to impose

unrealistic country of origin marking requirements,

the decline of the U.S. luggage and leather goods

industry and its migration off shore will be

hastened.’’); Moakley/Delahunt/Meehan/Kennedy/

Frank/Olver, #671, at 2 (‘‘If the standard is so high

that it cannot be met, manufacturers will have no

incentive even to try.’’)

54New Balance, #635, at 2–3.

to this commenter, changing the

standard might benefit consumers,

because American companies would be

motivated ‘‘to offer the best quality at

the best price without sacrificing the

‘American’ identity of their goods.’’

C. Comments Supporting The Proposed

Guides and/or Other Standards

A few individual consumers and 62

additional commenters favored

modifying the ‘‘all or virtually all’’

standard, including 10 members of

Congress,42 32 manufacturers and other

corporations,43 17 trade associations,44 1

nonprofit organization,45 and 1 other

commenter.46 Many of these

commenters asserted that the vast

changes in the international economy

since the Commission first applied the

‘‘all or virtually all’’ standard

necessitate that the standard be altered.

Thus, several commenters asserted that

the Proposed Guides ‘‘better reflect[ed]

the practical realities of U.S.-

manufactured products in today’s global

economy’’ 47 and provided U.S.

manufacturers with greater flexibility in

making ‘‘Made in USA’’ claims in light

of these realities.48 Several of these

commenters stated that consumers’

expectations have kept pace with the

change in the economy. According to

these commenters, a lower standard is

therefore consistent with consumer

perception.49

A number of commenters disputed

the claim by supporters of the all or

virtually all standard that lowering the

standard would lead to fewer jobs in the

United States, arguing that, on the

contrary, the strictness of the ‘‘all or

virtually all’’ standard deprives

American manufacturers of a selling

tool that could help preserve American

jobs.50 These commenters contended

that American manufacturers are at a

competitive disadvantage compared to

manufacturers in countries where labor

rates and other production costs fall

below U.S. standards.51 Although being

able to promote their products as ‘‘Made

in USA’’ would help to even out this

disadvantage, they argued, many

manufacturers’ products cannot meet

the current standard, either because of

cost reasons or because some materials

and components are no longer available

from domestic sources.52 According to

these commenters, if domestic

manufacturers cannot claim that their

products are ‘‘Made in USA,’’ American

jobs would be jeopardized, because

these companies would have little

incentive to stay in the United States.53

For example, New Balance Athletic

Shoes, Inc. stated:

New Balance agrees with the sentiment,

expressed in many of the public comments

filed to date, that the FTC ought to take

action to preserve the ‘‘Made in USA’’ label,

support U.S. jobs, and encourage

manufacturers to maintain their

manufacturing facilities in this country, as

well as help to level the playing field for

domestic manufacturers. The ‘‘patriotic’’

response, however, is not to enforce an ‘‘all,

or virtually all’’ standard that is unreachable

for the vast majority of U.S. manufacturers,

but to articulate a standard that those

manufacturers—the companies who are

providing jobs for U.S. workers—can meet so

that they can compete more fairly with

imports that have tremendous advantages.54

Other commenters asserted that,

because the proposed standard would

make the ‘‘Made in USA’’ claim more

attainable, manufacturers would be

encouraged to strive to maintain or

increase domestic content in their

products in order to make the ‘‘Made in
Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 / Notices 63761

55See, e.g., Allegiance, #653, at 1 (the ability to

capitalize on consumer preference for ‘‘Made in

USA’’ products favorably influences a company’s

decision to continue producing in the United

States); Maytag, #605; NIBCO, #738.

56Wolverine, #621, at 2. See also Detroit, #601;

Imation, #643; Benrus, #633; Ronda/Progress, #632;

NIBCO, #738.

57Collins/Kerry/Leiberman/Snowe, #606;

Moakley/Delahunt/Meehan/Kennedy/Frank/Olver,

#671, Oxley, #955; Allegiance, #653, Belair, #602;

Benrus, #633; Carter, #595; Detroit, #601; Gary’s,

#678; Gates, #649; Genfoot, #463; Hartman, #1013;

Imation, #643; Jurgensen, #609; Maytag, #605; New

Balance, #635; NIBCO, #738; Oneida, #607; Timex,

#612; Timken, #648; IMRA, #594; WIMA, #187.

58Converse, #363, #470; DeBon, #472; Jameslee,

#627; Rhonda/Progress, #632; Sacoche, #701;

Samsonite, #823; Whirlpool, #957; Wolverine, #621;

JBC, #637; AHAM, #473; AIAM, #650; FDRA, #603;

LLGMA, #464; RPFMA, #264; IEMCA, #604; JIG,

#639; NCITD, #638; EIA, #641.

59Some commenters objected to the percentage

content safe harbor and argued that the Commission

should only apply to two levels of substantial

transformation safe harbor. See, e.g., JBC, #637, at

1 (percentage content rules can be ‘‘consciously

manipulated, affected by exchange rates, and

otherwise made administratively impossible to

enforce.’’); JIG, #639; AIAM, #650. In contract, two

commenters supported the percentage content safe

harbor, but not the two levels of substantial

transformation safe harbor. MUSA Foundation,

#730, at 2 (the two levels of substantial

transformation safe harbor ‘‘opens up a very wide

loophole’’); Central Tools, #629.

60LLGMA, #464, at 2. See also FIA, #617, at 3 (a

product that contains more than 50% U.S. content

clearly qaualifies as ‘‘substantially all’’ made in the

United States); RPFMA, #264; at 2 (70% justified by

consumer perception evidence); Converse, #363, at

1 (preferring a 70% standard); Leather Specialty,

#598, at 2 (supporting a 50% standard); Wolverine,

#621, at 5 (supporting a majority U.S. content safe

harbor or, at least no higher than 70%); AIAM,

#650, at 1 (favoring substantial transformation

standard or lowering U.S. content safe harbor at

least to 70%); Savannah, #1039 (supporting a 50%

standard). Cf. DeBon, #472, at 1, Jameslee, #627, at

1, and Sacoche, #701, at 1 (all three asserting that

the 75% standard would be relatively difficult for

many U.S. manufacturers to meet, but not

recommending a specific percentage).

61See, e.g., LLGMA #464, at 3–4 (the NAFTA

regional content net cost formula should be used to

calculate domestic content); Stanley, #647, at 6–9

(the Commission should not adopt ‘‘arbitrary’’

percentage for U.S. content, but if it does, it should

make clear that the percentage of total

manufacturing costs relates to cost of fabrication

only); Dynacraft, #646, at 7–8 (opposes lowering the

standard, but if the Commission adopts the

Proposed Guides, the Commission should base the

percentage content standard on actual

manufacturing costs); EIA, #641, at 2 (the

percentage cost safe harbor should only look one

step back in the manufacturing process); AHAM,

#473, at 2 (the Commission should provide the

option of using Generally Accepted Accounting

Principles of cost accounting as an alternative

method for calculating percentage content).

62See, e.g., NCITD, #638, at 2 (favoring the use

of the NAFTA marking rules for single substantial

transformation as the second safe harbor, rather

than requiring two levels of substantial

transformation); Stanley, #647, at 9–11 (favoring

only one level of substantial transformation for

products involving processes other than assembly);

3M, #700, at 1–2 (arguing that two levels of

substantial transformation creates too great an

administrative cost for U.S. corporations); EIA,

#641, at 7 (this safe harbor may be unduly

restrictive, depending upon the meaning of term

‘‘significant;’’ Commission should modify the

concept of ‘‘all significant components’’ with a

requirement that the final components transformed

in the United States constitute most of the total

component value). But see Timex, #612, at 4 (the

Commission may want to consider adding a cost

threshold, such as 51% U.S. costs, to the two levels

of substantial transformation safe harbor, to guard

against consumer deception).

63See, e.g., AHAM, #473 (NAFTA Preference

Rules); IEMCA, #604 (substantial transformation);

Maytag, #605 (NAFTA Preference Rules); NFPA,

#620 (substantial transformation); Ronda/Progress,

#632 (substantial transformation); Domestic Steel

Wire Rope, #644 (substantial transformation);

Speciality Cable Subcommittee, #645 (substantial

transformation); National Electrical Manufacturers

Ass’n (‘‘NEA’’), #702 (substantial transformation);

NFPA, #620, at 2 (substantial transformation);

JMEA, #662, at 2–3 (standards of the World Trade

Organization and U.S. Customs); see also JIG, #639

and NCITD, #638 (supporting the Proposed Guides,

but preferring a substantial transformation

standard); NEMA, #702 (urging substantial

transformation standard for industrial products).

64Toyota, #610.

65For example, one commenter requested that the

Commission amend the Guides to specifically

permit manufacturers rebuilding or

remanufacturing automotive parts in the United

States to designate their products ‘‘Made in USA’’

if the products originally were used in the United

States, regardless of where the products originally

were manufactured. Automotive Parts Rebuilders

Ass’n (‘‘APRA’’), #698, at 1–3. See also NFPA, #620,

at 2 (if Proposed Guides apply to processed foods,

Proposed Guides should include references to raw

agricultural products and processed or

manufactured food products in cost and other

definitions and include processed food product

examples); Wolverine, #621, at 6–8 (Commission

should authorize ‘‘Made in USA’’ claims for

products assembled or processed in accordance

with subheading 9802.00.8040, HTSUS); Carter,

#595, at 1–2 (asking the Commission to explain how

it will treat certain qualified claims under the

Proposed Guides, e.g., when a qualified claim

indicates that some or all of the parts are of U.S.

origin, do those parts have to meet the standard for

an unqualified ‘‘Made in USA’’ claim?).

66Two commenters asked the Commission to

apply the Proposed Guides only to consumer goods,

not to industrial products, arguing that industrial

products are produced to the specifications

(including country of origin) of a sophisticated

Continued

USA’’ claim.55 Several commenters

noted that the proposed standard would

allow them to make unqualified ‘‘Made

in USA’’ claims for their products,

although they cannot make such claims

under the current standard. According

to Wolverine, for example: ‘‘As

currently proposed, the FTC’s guides

would, for the first time, afford the

opportunity for hundreds of thousands

of American workers to see their

contributions in factories throughout the

United States create products which

will appropriately carry the unqualified

designation as having been ‘Made in

America.’ ’’ 56

Some of the commenters favoring a

change in the standard expressed their

support for the safe harbors for

unqualified U.S. origin claims set forth

in the Proposed Guides.57 Other

commenters, however, while expressing

general support for the Proposed

Guides, asked the Commission to revise

one or both of the proposed safe harbors

and offered specific advice as to how

this should be done.58 For example, a

few commenters expressly supported

one proposed safe harbor, but urged the

Commission to eliminate the other.59

Several other commenters stated that,

although the Commission’s 75% U.S.

content safe harbor is an improvement

over the current ‘‘all or virtually all’’

standard, the Commission should lower

the U.S. content percentage even

further. The Luggage & Leather Goods

Manufacturers of America, for example,

asked the Commission to lower the

standard to 50%, because the luggage

and leather goods industry ‘‘has been

forced to increase its reliance on foreign

materials and components. As domestic

industry has grown smaller, so has its

supplier base. Therefore, domestic

producers often have no choice but to

source certain components off shore

* * *.60 In addition, a few commenters

suggested alternative ways to calculate

domestic content.61

A number of commenters argued that

the Commission’s proposed second safe

harbor, which would have allowed an

unqualified U.S. origin claim where a

product undergoes two levels of

substantial transformation in the United

States (the product’s last substantial

transformation took place in the United

States, and the last substantial

transformation of each of its significant

inputs took place in the United States),

is too burdensome. Several, for example,

urged the Commission to apply only one

level of substantial transformation (i.e.,

requiring that only the final substantial

transformation of the product be

performed in the United States) rather

than two, or suggested other

modifications to this safe harbor.62

In addition, a number of commenters

urged the Commission to replace the

Proposed Guides altogether with a lower

standard. As was the case during the

Commission’s earlier public comment

period on this issue, many commenters,

for example, asked the Commission to

replace the ‘‘all or virtually all’’

standard with a substantial

transformation standard or with the

NAFTA Preference Rules.63 One

commenter recommended that the

Commission apply a case-by-case,

reasonable basis approach to all

country-of-origin claims.64

Finally, several commenters asked the

Commission to modify the Proposed

Guides to specifically address certain

situations not expressly discussed in the

Proposed Guides 65 or to exempt certain

types of products.66
63762 Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 / Notices

customer. JIG, #639; NEMA, #702. But see Kern,

#739, at 2 (the ‘‘ ‘creative’ use of the ‘Made in the

USA’ designation has caused considerable

confusion in my [tool] company’s local and national

marketplace of normally well informed industrial

customers and has had a negative financial impact

on my company and its employees’’).

67See Gates, #649, at 2–3 (‘‘Assembled in USA’’

claim should identify country of origin of major

component parts); Timken, #648, at 3–4 (because of

similarity between ‘‘Made’’ and ‘‘Assembled’’ and

the importance of assembly to respondents in

Commission’s survey, unqualified ‘‘Assembled in

USA’’ mark is inappropriate); IMRA, #594; FDRA,

#603; Timex, #612.

68AGs, #462, at 5.

69 Id., #462, at 4–5 (treating terms differently

would allow manufacturers to market their

products effectively, using easily understood

unqualified claims that would not sacrifice truth in

advertising); AIAM, #650, at 1–2, 5–6. See also

Toyota, #610, at 6–7 (if Commission concludes that

a bright line test is necessary for ‘‘Made in USA’’

claims, it should allow ‘‘assembled in’’ or ‘‘built in’’

claims based only on substantial transformation).

70AGs, #462, at 6; Toyota, #610, at 6–7.

71 Gates, #649, at 2–3.

72Seven commenters supported use of a ‘‘lesser

mark.’’ LLGMA, #464, at 4; IMRA, #594, at 4–5

(strongly supports as a short-term solution until

WTO adopts origin-marking requirements; the

Commission should prohibit use of the ‘‘Origin:

USA’’ claim in advertising, because the issue faced

by exporters is purely a labeling issue, and could

be abused in advertising); FIA, #617, at 8–9;

Wolverine, #621, at 8; JBC, #637, at 3–4; JIG, #639,

at 4; NEMA, #702, at 1–3. Seven commenters

opposed the use of such a mark. FDRA, #603, at 2–

4; Timex, #612, at 1, 5–6; NFPA, #620, at 3–4;

American Hand Tool, #622, at 29–31; Timken, #648,

at 4–5; Gates, #649, at 3–4; Wright, #262, at 2.

73 JBC, #637, at 3–4; JIG, #639, at 4 (cost of

maintaining separate packaging facilities in foreign

markets for sole purpose of complying with

conflicting country-of-origin markings and

Commission’s ‘‘all or virtually all’’ standard for U.S.

origin claims adds 10% to 30% per product; cost

of special labels and/or relabeling U.S. product in

United States for export adds 10% to 15% per

product); NEMA, #702, at 2–3.

74 JIG, #639, at 4.

75 Id., #639, at 6.

76 JBC, #637, at 3–4.

77FIA, #617, at 8–9 (suggesting lesser mark

‘‘Origin: USA (for export)’’ to allow manufacturers

to avoid burden and expense of additional labeling

while alerting consumers that the article is labeled

for export; alternatively, lesser mark ‘‘Origin: USA

(with non-U.S. content)’’ to provide U.S. consumers

with relevant information while eliminating

additional labeling requirements).

78See, e.g., Timken, #648; American Hand Tool,

#622; Gates. #649; Timex, #612.

D. Commenters’ Discussion of Other

Issues

Several commenters discussed

additional issues raised in the Federal

Register notice soliciting comments on

the Proposed Guides. These issues

included whether the Commission

should treat unqualified ‘‘Assembled in

USA’’ claims the same as unqualified

‘‘Made in USA’’ claims, whether the

Commission should recognize a separate

‘‘Origin: USA’’ claim in limited

instances for domestically-sold products

that also are exported for sale, and

whether the Commission should

eliminate its traditional presumption

that products that do not bear any

country-of-origin marking are

understood by consumers to be made in

the United States. These comments are

discussed below.

1. ‘‘Assembled in USA’’ Claims

In the Federal Register notice

announcing the Proposed Guides, the

Commission solicited comment on

whether a product that does not meet

the standard for unqualified U.S. origin

claims should nonetheless be permitted

to be labeled or advertised as

‘‘Assembled in USA’’ without further

qualification; and if so, under what

circumstances, i.e., what processing

should it undergo in the United States

to support the unqualified claim. Five

commenters contended that the claim

should be interpreted similarly to an

unqualified ‘‘Made in USA’’ claim, and

must therefore be qualified (e.g.,

‘‘Assembled in USA from imported

parts’’) if it does not meet the standard

for unqualified ‘‘Made in USA’’ claims.

According to these commenters,

consumers understand ‘‘Assembled in

USA’’ to mean the same thing as ‘‘Made

in USA.’’ 67 Two commenters, on the

other hand, contended that consumers

perceive the two claims differently. The

coalition of state Attorneys General, for

example, suggested that ‘‘while the term

‘make’ connotes a process of creation

the term ‘assemble’ is generally

understood to mean the final process of

fitting or joining together pre-existing

parts.’’ 68 These commenters favored

permitting an unqualified ‘‘Assembled

in USA’’ claim where a ‘‘Made in USA’’

claim would be inappropriate. 69

In addition, three of these

commenters addressed the

circumstances under which they

believed an ‘‘Assembled in USA’’ claim

should be permitted. Two commenters

favored authorizing the use of

unqualified ‘‘Assembled in USA’’

claims for products that have been last

substantially transformed in the United

States.70 Another commenter supported

requiring at least 50% U.S. content to

ensure more than minimal or simple

assembly operations; even at that level,

however, the commenter recommended

requiring that the claim be qualified to

disclose whether foreign components

were used.71

2. ‘‘Origin: USA’’ Claims

In the Proposed Guides, the

Commission proposed allowing

marketers to use a ‘‘lesser mark’’—

‘‘Origin: USA’’—in certain, limited

circumstances. Such a mark would have

allowed manufacturers to uniformly

label products for sale in both the

United States and abroad, when a

foreign country may require that a

product exported from the United States

be marked with an indication of U.S.

origin, while that same product would

not be permitted to bear an unqualified

U.S. origin claim when sold in the

United States. Use of the lesser mark

would have been subject to certain

restrictions, including that consumer

products sold in the United States

would have to include, in some manner,

an additional disclosure of the existence

of any substantial foreign content. The

commenters addressing this issue were

evenly divided as to whether marketers

should be allowed to use a ‘‘lesser

mark’’ or specific claim such as ‘‘Origin:

USA.’’ 72

A number of commenters supporting

the option of using an ‘‘Origin: USA’’

label argued that such a claim would

benefit manufacturers who export U.S.

products, as well as consumers, for

example, by eliminating the need to

separately label domestic and exported

products and to maintain packaging

plants in foreign countries for the sole

purpose of meeting conflicting countryof-origin labeling standards; 73 by

encouraging U.S. manufacturers to

manufacture and sell more U.S.

products if they can export the products

for sale in foreign markets without the

added costs associated with the

Commission’s historic restrictions on

U.S. origin statements; 74 and by

reducing the price of consumer goods

sold in the United States, because of the

cost savings to U.S. manufacturers.75 At

least one commenter who supported the

use of the lesser mark asserted that

additional disclosure requirements for

consumer goods sold in the United

States would not be necessary to

prevent consumer deception.76 Another

commenter suggested alternative lesser

marks to avoid the burden and expense

of additional labeling for U.S. sales

while providing additional information

to U.S. consumers.77

On the other hand, other commenters

argued that whatever benefits an

‘‘Origin: USA’’ mark would provide

would not justify the potential

confusion caused by the lesser mark, as

consumers were likely to confuse

‘‘Origin: USA’’ labels with ‘‘Made in

USA’’ labels.78 Even the additional

disclosures required on consumer goods

sold in the United States, some of these

commenters stated, would not be

sufficient to prevent consumer

deception or might even increase
Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 / Notices 63763

79FDRA, #603, at 2–3 (‘‘Origin: USA’’ label likely

would prove deceptive even if appropriate

qualifying language appears on a hangtag or

packaging because consumers would not locate or

read the qualifying language); Timex, #612, at 5

(consumer likely would decide to purchase a watch

without seeing package containing additional

disclosures because watches are frequently

displayed without packaging, and packaging

products are pulled from a cabinet or shelf once the

consumer has made purchasing decision);

American Hand Tool, #622, at 29 (strongly opposed

the ‘‘Origin: USA’’ label); Gates, #649, at 4 (the

meaning of a lesser mark, even where qualified by

the phrase ‘‘substantial foreign content,’’ would be

uncertain to consumers).

80Wright, #262, at 2 (marking is the last or near

to last operation performed; it is practical to run

large lots and carry most inventory in an unmarked

condition, involving only a relatively small cost

penalty); American Hand Tool, #622, at 29–31 (little

need for lesser mark; Commission found little

evidence that companies routinely face conflicting

labeling requirements or that ‘‘Made in USA’’ claim

causes such conflicts); Gates, #649.

81 Gates, #649, at 3–4. See also Timex, #612, at 5

(a qualified marking such as ‘‘Assembled in USA;

Philippines movement’’ for watches would satisfy

the marking requirements of almost every other

country—most of which identify the place of origin

of a watch as the place of final assembly; this

qualified claim would therefore resolve—for

watches—the concerns that prompted the

Commission to consider an ‘‘Origin: USA’’

marking).

82NFPA, #620, at 4 (economic burden of sticker

labeling or hangtags similar to creation of additional

labeling inventory, and handling requirements

might be even more burdensome).

83See, e.g., NEMA, #702, at 2 (a number of

countries have indicated either that they would not

accept an ‘‘Origin: USA’’ mark or that they are not

sure); JIG, #639, at 5 (‘‘Origin: USA’’ likely would

not be acceptable to customs officials in at least

Australia, New Zealand, and Canada).

84 62 FR at 25047.

85The Commission’s determination on this point

was not part of the Proposed Guides, but was

included in the Federal Register notice

accompanying the Guides because it addressed a

related topic that had been raised at the public

workshop.

86Timken, #648, at 5–6; Gates, #649, at 4 (also

asserting that the presumption is a valuable remedy

to counter the incentive for foreign producers to

import unmarked products, e.g., the producers of

automotive belts, who may have the incentive to

import unmarked belts contrary to antidumping

duty orders and U.S. Customs marking regulations).

See also Oneida, #607, at 1–2 (arguing that the

presumption is particular necessary in catalog sales

where the consumer cannot inspect the item prior

to purchase, and expressing its concern that

without the presumption, attempting to show that

a significant minority of consumers believes an

unmarked product is domestic would be

unworkable).

87 IMRA, #594, at 5–6.

88To the extent they are not inconsistent with

consumer understanding, other considerations,

such as the compliance burdens placed on

businesses, have been considered by the

Commission as part of its general obligation to act

in the public interest.

89This study is available as Document No.

B212883 on the Commission’s public record.

90 Document No. B213001 on the Commission’s

public record.

consumer confusion.79 Some

commenters also asserted that a lesser

mark is unnecessary,80 arguing that if a

foreign country’s marking rules require

the origin of a product to be ‘‘USA,’’

then the manufacturer can identify the

United States as the assembly point and

further qualify the origin, e.g.,

‘‘Assembled in USA from Components

of U.S. and Foreign Origin,’’ or apply

separate labels or marks, depending

upon the destination of the goods.81 In

addition, one commenter who

supported a substantial transformation

standard for unqualified ‘‘Made in

USA’’ claims found the alternative of

using an ‘‘Origin: USA’’ claim to be

inadequate. This commenter contended

that the lesser mark would provide little

or no benefit because the additional

disclosure requirements for U.S. sales of

consumer products would create a dual

marking requirement.82 Last, even some

commenters supporting use of a lesser

mark were unsure whether the lesser

mark ‘‘Origin: USA’’ would be an

acceptable marking to foreign customs

officials.83

3. Rebuttable Presumption for

Unmarked Products

As explained in the prior Federal

Register notice, the Commission has

historically employed a rebuttable

presumption that goods not labeled with

any country of origin are understood by

consumers to be made in the United

States. As a result, the Commission

required that foreign origin be disclosed

if unmarked goods contained a

significant amount of foreign content.

Based on the facts that manufacturing

and the sourcing of components have

become increasingly global in nature

and that consumers appear to be

increasingly aware that goods they buy

are produced throughout the world, the

Commission announced in the Federal

Register notice that it no longer was

appropriate to presume that reasonable

consumers will interpret the absence of

a foreign country-of-origin mark, by

itself, as a representation that the

product was made in the United States.

The Commission, therefore, determined

to cease using this presumption, but

instead explained that it would require

disclosure of foreign origin on

unmarked goods only if there is some

evidence that, with respect to the

particular type of product at issue, a

significant minority of consumers views

country of origin as material and

believes that the goods in question,

when unlabeled, are domestic.84

Although the Commission did not

specifically solicit comments on this

determination,85 four commenters

submitted their views concerning the

current need for the presumption. Three

commenters urged the Commission not

to eliminate the presumption, arguing,

among other reasons, that it was

appropriate for the producer of an

unmarked product to have the burden of

proving that the lack of a country-oforigin indication was not deceptive.86

The other commenter agreed with the

Commission that the presumption

should be eliminated, and, indeed,

urged the Commission to go further and

clearly indicate that an unmarked good,

in and of itself, would not be considered

deceptive simply for the fact of being

unmarked.87

III. Analysis

Section 5 of the Federal Trade

Commission Act, 15 U.S.C. 45,

proscribes ‘‘unfair or deceptive acts or

practices’’ in or affecting commerce. An

advertisement, label or other

promotional material will be found to be

deceptive if it contains a representation

or omission that is likely to mislead

consumers acting reasonably and that

representation or omission is material.

In applying the principles of Section 5

and the Commission’s traditional

deception analysis to U.S. origin claims,

the Commission has, throughout its

review, focused first and foremost on

consumers’ understanding of such

claims.88

The considerable evidence available

to the Commission concerning

consumer understanding of ‘‘Made in

USA’’ claims was discussed at length in

the Commission’s May 7, 1997 Federal

Register notice. As explained in that

notice, the Commission itself, as part of

its overall review of U.S. origin claims,

commissioned a two-part study in 1995

(referred to as the ‘‘1995 Copy Test’’ and

‘‘1995 Attitude Survey,’’ respectively) to

look at consumer perception of such

claims.89 In addition, the Commission

had previously conducted a more

limited study of these issues in 1991 as

part of a subsequently closed

investigation (‘‘1991 Copy Test’’).90 The

results of these studies indicated that

many consumers expected that a

product advertised or labeled as ‘‘Made

in USA’’ had a high amount of U.S.

content, but that a significant number of

these were willing to accept a product

with at least some foreign content and

that, as a result, there was a range of

values at which most consumers would

find a ‘‘Made in USA’’ claim

appropriate. In addition, the studies

suggested that many consumers

appeared to have only a general sense of

what ‘‘Made in USA’’ means and did

not necessarily have in mind a highly
63764 Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 / Notices

91There was no attempt in this survey to

breakdown these categories further—i.e., to look at

whether the respondents who said that ‘‘Made in

USA’’ referred to parts also thought that it referred

to the materials that went into those parts; or

whether those who said ‘‘Made in USA’’ referred to

labor meant only final assembly labor or also any

labor that went into making the parts.

92 During the Commission’s earlier comment

period on this matter, a number of commenters

suggested that the fact that many consumers said

that ‘‘Made in USA’’ means ‘‘Made in USA’’

showed that consumers understood ‘‘Made in USA’’

claims as referring only to where a product ‘‘came

into being,’’ i.e., where it underwent its final

assembly or processing. See 62 FR at 25037. By

contrast, in response to the Commission’s May

notice, some commenters suggested that the

response that ‘‘Made in USA’’ means ‘‘Made in

USA’’ showed that consumers expected a product

labeled ‘‘Made in USA’’ to be 100% ‘‘Made in

USA.’’ The Commission continues to believe,

however, that there is inadequate evidence upon

which to infer either meaning from this tautological

definition.

detailed conception of what it meant for

a product to be ‘‘Made in USA.’’

In the 1995 Attitude Survey,

participants were presented with a

series of scenarios and asked whether

they agreed or disagreed with a ‘‘Made

in USA’’ label on a product in those

circumstances. In the scenarios, the

percentage of the product’s cost that was

U.S. in origin varied from 10% to 90%;

in addition, participants were either

told that the product was assembled in

the United States, told that it was

assembled abroad, or not told the site of

assembly. The Attitude Survey

indicated that a ‘‘Made in USA’’ label

would likely be misleading to most

consumers when a product contained

50% or less U.S. content or was

assembled abroad. However, where a

product was assembled in the United

States, a significant majority of

consumers agreed that a ‘‘Made in USA’’

claim would be appropriate if the

product contained either 70% U.S.

content (67% of respondents) or 90%

U.S. content (75% of respondents),

suggesting that there is a range of

standards likely to be considered

acceptable and nonmisleading by most

consumers.

As in the 1995 Attitude Survey, in the

1991 Copy Test, the Commission had

also found evidence that many

consumers expected a product called

‘‘Made in USA’’ to have a high amount

of U.S. content. In that study, of the

participants who were asked ‘‘when you

see the phrase ‘Made in USA’ on a

product or in an ad, how much of the

product was made in the United

States?’’ approximately 77% said that

all or almost all of the product so

labeled was made in the United States.

Nonetheless, the answers to a follow-up

question attenuated this result

somewhat. When asked whether they

meant parts or labor or both parts and

labor, only 77% of the respondents

(82% of those who answered ‘‘all or

almost all’’) said both parts and labor,

while 14% said labor only, and 9% said

only parts.91

The 1995 Copy Test attempted to

explore further issues of what

consumers included in their definitions

of Made in USA, but the results were

less than definitive. For example, in the

1995 FTC Copy Test, when respondents

were shown a ‘‘Made in USA’’ claim

and asked an open-ended question

about what the claim meant, 63.5% said

simply that the claim meant ‘‘Made in

USA.’’ 92 Moreover, when asked

specifically whether the claim suggested

or implied anything about where the

product was assembled, only 49% said

that it did (almost all of whom said it

meant the product was assembled in the

United States); only 28% of those asked

about an unqualified ‘‘Made in USA’’

claim said it suggested or implied

anything about where the parts were

made; and only 11% said it implied

anything about how much of the parts

were made in the United States. Indeed,

a total of 34% of respondents stated that

a ‘‘Made in USA’’ claim did not suggest

or imply anything about any of these

factors—assembly, parts, or how much

of the total cost of the product was

incurred in the United States. This

suggests that many consumers may not

have in mind a highly developed

definition of ‘‘Made in USA’’; in any

event, the data are not definitive. In

addition, the available consumer

perception evidence suggests that, to the

extent that consumers do define Made

in USA, they may do so in a variety of

different ways. For example, in each of

the Commission-sponsored surveys,

there is evidence, albeit inconclusive, of

a minority of consumers who, rather

than expecting a high amount of both

U.S. parts and labor, view ‘‘Made in

USA’’ claims as referring only to where

a product was put together. Thus, 28.5%

of respondents to the 1995 Copy Test

answered that ‘‘Made in USA’’ implied

that a product was assembled in the

United States but that it did not imply

that a product’s parts were necessarily

U.S. made; 20% of respondents in the

1995 Attitude Survey agreed that a

‘‘Made in USA’’ label would be

appropriate for a product that was

assembled in the United States but

whose costs were only 10% U.S.; and

14% of those asked in the 1991 copy

test indicated that ‘‘Made in USA’’

referred only to labor, not parts.

The Commission has thus been

presented with evidence that suggests

that many consumers expect that ‘‘Made

in USA’’ labels connote a high amount

of U.S. content, as well as that many of

these consumers do not have a detailed

conception of what it means for a

product to be ‘‘Made in USA.’’

Moreover, the evidence suggests that no

single standard is likely to correspond

to the views of all consumers, and that

there is a range of points along the

spectrum that would likely satisfy a

significant majority of consumers. Based

on this evidence, the Commission

initially proposed a ‘‘substantially all’’

standard. Although this was not the

only possible standard consistent with

the data, it was, the Commission

believed, a high threshold for ‘‘Made in

USA’’ claims that would at the same

time provide some flexibility to U.S.

manufacturers operating in an

increasingly global economy. Moreover,

although nominally less stringent than

the existing standard, the proposed

‘‘substantially all’’ standard and the

associated guides provided strict

constraints with respect to the sort of

details that the consumer perception

studies were unable to address but that

can have a great deal of practical effect

in determining whether a product can

meet the standard for ‘‘Made in USA’’

claims (however that standard is

denominated)—e.g., how far back in the

manufacturing process marketers were

required to look, or what sorts of costs

should be included in the calculation of

U.S. content.

Nonetheless, the record currently

before the Commission does not support

adoption of the ‘‘substantially all’’

standard and the accompanying guides

proposed in May. The vast majority of

those commenting, including,

significantly, a large number of

individual consumers as well as a

number of U.S. manufacturers, opposed

the proposed standard, perceiving it,

contrary to the Commission’s intent, as

significantly weakening the standard for

‘‘Made in USA’’ claims. The

submissions of these commenters

suggest that the Commission may have

underestimated the benefits such

individuals or corporations derive from

the current standard and the costs they

believe they will incur if the standard is

changed. An overwhelming number of

consumers told the Commission,

through written comments, telephone

calls, and petitions, that they prefer

buying U.S.-made goods; they want to

be able to rely on a simple and clear

standard; and, they feel very strongly

that the current standard should be

retained. The comments also underscore

the fact, noted as well in the

Commission’s May Federal Register

notice, that consumer awareness of the
Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 / Notices 63765

93For example, in some cases, the percentage of

manufacturing costs attributable to foreign parts

and process may not reflect the true extent of

foreign content. Where only a small amount of

domestic processing takes place and the bulk of the

work on the product is performed abroad, or a

significant component is manufactured abroad, it

may be possible that, because of lower costs for

foreign parts and labor, foreign costs may be

disproportionately low relative to the amount of

foreign production. Similarly, as the American

Hand Tool Coalition noted, a product made with

inputs from a high-cost country (such as Germany)

will reflect a higher degree of foreign content (in

terms of cost) than would a product made with

identical inputs supplied from a low-cost country

(such as China). In such circumstances, it may be

preferable to look more generally at the significance

of the foreign inputs rather than evaluate their

extent entirely in terms of cost.

globalization of the economy has not

necessarily changed consumers’ beliefs

about those products actually labeled

‘‘Made in USA.’’ Thus, the Commission

concludes that the better course, and

one equally consistent with the

consumer perception evidence, is to

retain and continue to enforce the

Commission’s traditional all or virtually

all standard.

IV. Enforcement Policy Statement

The ‘‘all or virtually all’’ standard—

and its earlier equivalent, the ‘‘wholly

domestic’’ standard—was developed

through case law and advisory opinions

that were largely limited to discussions

of single products, and the standard has

never been more generally defined.

Indeed, throughout this review process,

commenters, particularly those

businesses that must comply with the

requirements for ‘‘Made in USA’’

claims, have entreated the Commission

to provide more guidance on what this

standard (or any other standard the

Commission were to adopt) requires.

For that reason, the Commission in

retaining the ‘‘all or virtually all’’

standard, is at the same time issuing an

Enforcement Policy Statement on U.S.

Origin Claims. The Enforcement Policy

Statement sets forth the general

principles to which the Commission

will adhere in enforcing the requirement

that goods promoted as ‘‘Made in USA’’

must be all or virtually all made in the

United States. The Enforcement Policy

Statement is intended to give general

guidance on making and substantiating

U.S. origin claims. It is not designed,

however, to answer all questions that

may arise on this topic. Given the

complex and varied factual scenarios

that present themselves in this area, and

the wide range of products for which

U.S. origin claims may be made, there

are necessarily issues that will continue

to be more appropriately resolved on a

case-by-case basis.

The Enforcement Policy Statement

addresses a range of basic issues related

to U.S. origin claims. It includes

introductory information on the scope

of the products and claims to which the

Statement applies and of the respective

responsibilities of the FTC and the U.S.

Customs Service in regulating countryof-origin claims; an explanation of the

Commission’s authority to act against

deceptive practices and how the

Commission is likely to interpret

express and implied U.S. origin claims;

a discussion of unqualified U.S. origin

claims and the factors that the

Commission will consider in

determining whether such a claim is

substantiated, i.e., whether a product is

‘‘all or virtually all’’ made in the United

States; and guidance on using qualified

claims where a product does not meet

the ‘‘all or virtually all’’ standard. The

Enforcement Policy Statement is

intended to be self-explanatory;

nonetheless, a few matters that may be

of particular interest are highlighted

below.

Substantiating U.S. Origin Claims:

The All or Virtually All Standard. The

Enforcement Policy Statement sets forth

the requirement that where a product is

labeled or advertised as ‘‘Made in

USA,’’ the marketer should possess and

rely upon a reasonable basis that the

product is all, or virtually all, made in

the United States. A product that is ‘‘all

or virtually all’’ made in the United

States is described typically as one in

which all significant parts and

processing that go into the product are

of U.S. origin, i.e., where there is only

a de minimis, or negligible, amount of

foreign content. In order to provide

further guidance, the Enforcement

Policy Statement discusses three factors

that the Commission will likely

consider in evaluating whether a

product is all or virtually all made in

the United States: whether the final

assembly or processing of the product

took place in the United States; the

portion of the total manufacturing cost

of the product that is attributable to U.S.

parts and processing; and how far

removed from the finished product any

foreign content is.

There was widespread agreement

among commenters who addressed the

issue (both in response to the May 7,

1997 Federal Register notice and to the

Commission’s earlier requests for public

comment), whatever standard they

otherwise supported, that a product

should have to undergo its final

processing in the United States in order

to be called ‘‘Made in USA.’’ This view

is confirmed by the consumer

perception evidence, which indicates

that the country of final assembly is

highly significant to consumers in

evaluating where a product is ‘‘made.’’

Accordingly, the Enforcement Policy

Statement indicates that a product

promoted as ‘‘Made in USA’’ must have

undergone its final assembly or

processing in the United States; in

particular, the product must, at

minimum, have been last substantially

transformed in the United States (this

also ensures that no product required to

be labeled with a foreign country-oforigin under the Customs Service’s rules

would be permitted to make a ‘‘Made in

USA’’ claim).

The Enforcement Policy Statement

also indicates that, in determining

whether a product is appropriately

represented to be ‘‘Made in USA,’’ the

Commission will consider what portion

of the total cost of manufacturing the

product is attributable to U.S. parts and

processing. Obviously, the greater the

percentage of U.S. costs, the more likely

the product will be considered all or

virtually all made in the United States.

As discussed above, there were a great

many commenters who criticized the

75% safe harbor put forth as part of the

Commission’s earlier proposal as overly

lax and likely to deceive many

consumers, and the Commission agrees

that the record as a whole does not

support adoption of such a safe harbor.

The Commission, however, believes

that, as a matter of enforcement policy,

it is appropriate to allow for some small

but reasonable amount of tolerance in

enforcing the ‘‘all or virtually all’’

standard. Some commenters have called

for the Commission to define this

tolerance level with a bright line

percentage standard so as to provide

greater certainty to marketers.

Nonetheless, the Commission has

concluded that any such certainty is

likely to be illusory and no single

percentage standard will be appropriate

for all products in all circumstances.93

Instead, the Commission will look at

U.S. manufacturing costs in the context

of the other factors outlined here and in

light of the nature of the product and

consumers’ expectations. In general, the

Commission concludes that it will not

be in the public interest to bring a law

enforcement action where the

proportion of U.S. costs of the product

is extremely high.

Finally, the Enforcement Policy

Statement indicates that, in evaluating

whether any foreign content is

significant enough to prevent a product

from being considered all or virtually all

made in the United States, the

Commission will also examine how far

removed the foreign content is from the

finished product. In other words,

foreign parts or materials that are

incorporated several steps back in the

manufacturing process are generally less
63766 Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 / Notices

94AGs, #462, Attachment at 10.

95See, e.g., Weldbend, #597; Vaughan & Bushnell,

#616; American Iron & Steel Institute, #636.

96TCA, #618, p. 3.

97See, e.g., American Hand Tool, #622; Traficant,

#231 Visclosky, #236; NCL, #640; Matco, #600.

98AGs, #462, at 4–5.

likely to be significant than are parts or

materials that are immediate inputs into

the final product.

Many commenters implicitly

recognized this point. The Attorneys

General, for example, suggested that raw

materials be excluded from the

calculation of foreign content,

suggesting that ‘‘a company that designs

and manufacturers a plastic product

entirely within the U.S.A. but uses

petroleum from a foreign county, could

fairly claim that the product was made

in the U.S.A. with no foreign

component parts.’’ 94 Some other

supporters of the ‘‘all or virtually all’’

standard, even those who supported

including all basic materials in the

analysis, also appeared to acknowledge

that there should be limits as to how far

back a manufacturer must go in

accounting for foreign materials. For

example, a number of commenters,

arguing that steel must be included in

the evaluation of a product’s origin, did

not also suggest that a manufacturer

should be required to go as far back as

the iron ore used in the steel.95 On the

other hand, commenters also recognized

that raw materials can sometimes be

relevant to the determination as to

whether a product is all or virtually all

made in the United States, especially

when the raw materials are only one

step back from the finished product and

are integral components of that article.

For example, the Tile Council of

America, arguing that the Commission

must include raw materials in the

evaluation of whether a product is made

in the United States, stated that ‘‘the

quality and reliability benefits of tile

‘Made in the USA’ are the result of both

the domestic sourcing of raw materials

and the domestic manufacturing

process. Tile manufactured in the

United States of clay dug in Mexico

* * * clearly [does] not meet the ‘Made

in USA’ expectations of U.S.

consumers.’’ 96

Thus, the Enforcement Policy

Statement indicates that raw materials,

per se, will be neither automatically

included nor excluded from the

Commission’s evaluation of whether a

product is all or virtually all made in

the United States. Instead, here, too, the

Commission’s analysis will depend on

the percentage of the cost of the product

the raw materials constitute and how far

removed from the finished product the

raw materials are, and, because, some

raw materials are naturally

nonoccurring in this country, whether

the raw material is indigenous (and

available in commercial quantities) in

the United States.

Qualified U.S. Origin Claims and

‘‘Assembled in USA’’. Few commenters

directly addressed the use of qualified

U.S. origin claims, although those that

did commented favorably, suggesting

that qualified claims can provide

valuable information to consumers.97

The Commission has always permitted

marketers to use appropriately qualified

claims where their products would not

meet the standard for an unqualified

‘‘Made in USA’’ claim, and that

continues to be the case. The

Enforcement Policy Statement addresses

various types of qualified claims,

including claims about the U.S. origin of

specific processes or parts and

comparative U.S. origin claims, and

indicates that all such claims must be

truthful and substantiated and that

qualifications and disclosures should be

clear, prominent and understandable.

Comparative U.S. origin claims may be

a particularly useful vehicle for those

manufacturers who wish to draw a

distinction between the domestic

content of their products and those of

competitors who engage in less

domestic manufacturing or use fewer

U.S. made parts.

As discussed above, the Commission

specifically solicited comment in its

May 7, 1997 Federal Register notice on

one particular alternative claim,

‘‘Assembled in USA.’’ The Commission

asked for comment on whether a

product that does not meet the standard

for an unqualified U.S. origin claims

should nonetheless be permitted to be

promoted as ‘‘Assembled in USA,’’ and,

if so, under what circumstances. Upon

review of the responses and further

reflection, the Commission has

concluded that ‘‘assembled’’ has a

common meaning sufficiently distinct

from ‘‘made’’ so that in many instances

it will be appropriate for marketers to

promote a product as ‘‘Assembled in

USA’’ without further qualification.98

Specifically, the Enforcement Policy

Statement states that such a claim may

be used where a product has undergone

its principal assembly in the United

States and that assembly is substantial;

it also indicates that a product should

have been last substantially transformed

in the United States if it is to be labeled

or advertised as ‘‘Assembled in USA.’’

V. Issues Not Addressed by the

Enforcement Policy Statement

A. Origin: USA

As explained above, in the Proposed

Guides, the Commission sought

comment on the use of a separate

‘‘lesser mark’’ for products that faced

conflicting marking requirements when

sold domestically and exported. Several

commenters praised the proposal as

likely to save U.S. businesses, and

consumers, money while others

contended that such a mark was

unnecessary and likely to confuse

consumers. Upon reviewing the record,

the Commission finds that, at the

present time, there is inadequate

evidence of the extent of both the

problems purportedly caused by

conflicting labeling requirements (e.g.,

to what extent conflicting marking

requirements actually occur, how

frequently multiple labeling is actually

required) as well as of the degree to

which a lesser mark such as ‘‘Origin:

USA’’ is likely to alleviate these

problems (e.g., whether relabeling

would have been required in any event

because of language differences,

whether foreign customs services will

accept this mark). As a result, the

Commission has concluded that the

benefits to be gained through

establishment of this mark are as yet too

speculative to outweigh the more

obvious costs in potential confusion

between such a mark and ‘‘Made in

USA.’’ Accordingly, the Commission

has not adopted ‘‘Origin: USA’’ (or any

other lesser mark) in the Enforcement

Policy Statement.

B. Goods With No Country-of-Origin

Marking

In the May 7, 1997 Federal Register,

the Commission indicated that it would

no longer employ its historical rebuttal

presumption that unmarked goods will

be understood by reasonable consumers

to have been made in the United States,

but instead would look at an array of

factors on a case-by-case basis. Although

a few commenters disagreed with this

change in policy, the Commission

continues to believe that this course is

appropriate and more in keeping with

the Commission’s traditional deception

analysis that is widely applied to other

representations and omissions.

ENFORCEMENT POLICY STATEMENT

ON U.S. ORIGIN CLAIMS

I. Introduction

The Federal Trade Commission

(‘‘FTC’’ or ‘‘Commission’’) is issuing this

statement to provide guidance regarding

its enforcement policy with respect to
Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 / Notices 63767

99 15 U.S.C. 70.

100 15 U.S.C. 68.

101 15 U.S.C. 69.

102 49 U.S.C. 32304.

103For goods from NAFTA countries,

determinations are codified in ‘‘tariff shift’’

regulations. 19 CFR 102.

104For a limited number of goods, such as textile,

wool, and fur products, there are, however,

statutory requirements that the U.S. processing or

manufacturing that occurred be disclosed. See, e.g.,

Textile Fiber Products Identification Act, 15 U.S.C.

70(b).

105Letter from the Commission to the Honorable

John D. Dingell, Chairman, Committee on Energy

and Commerce, U.S. House of Representatives (Oct.

14, 1983); reprinted in Cliffdale Associates, Inc.,

103 F.T.C. 110, appendix (1984).

106 49 FR 30,999 (1984); reprinted in Thompson

Medical Co., 104 F.T.C. 648, appendix (1984).

the use of ‘‘Made in USA’’ and other

U.S. origin claims in advertising and

labeling. The Commission has

determined, as explained below, that

unqualified U.S. origin claims should be

substantiated by evidence that the

product is all or virtually all made in

the United States. This statement is

intended to elaborate on principles set

out in individual cases and advisory

opinions previously issued over the

course of many years by the

Commission. This statement,

furthermore, is the culmination of a

comprehensive process in which the

Commission has reviewed its standard

for evaluating U.S. origin claims.

Throughout this process, the

Commission has solicited, and received,

substantial public input on relevant

issues. The Commission anticipates that

from time to time, it may be in the

public interest to solicit further public

comment on these issues and to assess

whether the views expressed in this

statement continue to be appropriate

and reflect consumer perception and

opinion, and to determine whether there

are areas on which the Commission

could provide additional guidance.

The principles set forth in this

enforcement policy statement apply to

U.S. origin claims included in labeling,

advertising, other promotional

materials, and all other forms of

marketing, including marketing through

digital or electronic means such as the

Internet or electronic mail. The

statement, moreover, articulates the

Commission’s enforcement policy with

respect to U.S. origin claims for all

products advertised or sold in the

United States, with the exception of

those products specifically subject to

the country-of-origin labeling

requirements of the Textile Fiber

Products Identification Act,99 the Wool

Products Labeling Act,100 or the Fur

Products Labeling Act.101 With respect

to automobiles or other passenger motor

vehicles, nothing in this enforcement

policy statement is intended to affect or

alter a marketer’s obligation to comply

with the requirements of the American

Automobile Labeling Act 102 or

regulations issued pursuant thereto, and

any representation required by that Act

to appear on automobile labeling will

not be considered a deceptive act or

practice for purposes of this

enforcement policy statement,

regardless of whether the representation

appears in labeling, advertising or in

other promotional material. Claims

about the U.S. origin of passenger motor

vehicles other than those

representations required by the

American Automobile Labeling Act,

however, will be governed by the

principles set forth in this statement.

II. Background

Both the FTC and the U.S. Customs

Service have responsibilities related to

the use of country-of-origin claims.

While the FTC regulates claims of U.S.

origin under its general authority to act

against deceptive acts and practices,

foreign-origin markings on products

(e.g., ‘‘Made in Japan’’) are regulated

primarily by the U.S. Customs Service

(‘‘Customs’’ or ‘‘the Customs Service’’)

under the Tariff Act of 1930.

Specifically, Section 304 of the Tariff

Act, 19 U.S.C. 1304, administered by the

Secretary of the Treasury and the

Customs Service, requires that all

products of foreign origin imported into

the United States be marked with the

name of a foreign country of origin.

Where an imported product

incorporates materials and/or

processing from more than one country,

Customs considers the country of origin

to be the last country in which a

‘‘substantial transformation’’ took place.

A substantial transformation is a

manufacturing or other process that

results in a new and different article of

commerce, having a new name,

character and use that is different from

that which existed prior to the

processing. Country-of-origin

determinations using the substantial

transformation test are made on a caseby-case basis through administrative

determinations by the Customs

Service.103

The FTC also has jurisdiction over

foreign origin claims in packaging

insofar as they go beyond the

disclosures required by the Customs

Service (e.g., claims that supplement a

required foreign origin marking, so as to

represent where additional processing

or finishing of a product occurred). In

addition, the Commission has

jurisdiction over foreign-origin claims in

advertising, which the U.S. Customs

Service does not regulate.

Where Customs determines that a

good is not of foreign origin (i.e., the

good undergoes its last substantial

transformation in the United States),

there is generally no requirement that it

be marked with any country of origin.

For most goods, neither the Customs

Service nor the FTC requires that goods

made partially or wholly in the United

States be labeled with ‘‘Made in USA’’

or any other indication of U.S. origin.104

The fact that a product is not required

to be marked with a foreign country of

origin does not mean that it is

permissible to promote that product as

‘‘Made in USA.’’ The FTC will consider

additional factors, beyond those

considered by the Customs Service in

determining whether a product is of

foreign origin, in determining whether a

product may properly be represented as

‘‘Made in USA.’’

This statement is intended to address

only those issues related to U.S. origin

claims. In developing appropriate

country-of-origin labeling for their

products, marketers are urged also to

consult the U.S. Customs Service’s

marking regulations.

III. Interpreting U.S. Origin Claims: The

FTC’s Deception Analysis

The Commission’s authority to

regulate U.S. origin claims derives from

Section 5 of the Federal Trade

Commission Act (‘‘FTC Act’’), 15 U.S.C.

45, which prohibits ‘‘unfair or deceptive

acts or practices.’’ The Commission has

set forth its interpretations of its Section

5 authority in its Deception Policy

Statement,105 and its Policy Statement

Regarding Advertising Substantiation

Doctrine.106 As set out in the Deception

Policy Statement, the Commission will

find an advertisement or label deceptive

under Section 5, and therefore unlawful,

if it contains a representation or

omission of fact that is likely to mislead

consumers acting reasonably under the

circumstances, and that representation

or omission is material. In addition,

objective claims carry with them the

implication that they are supported by

valid evidence. It is deceptive, therefore,

to make a claim unless, at the time the

claim is made, the marketer possesses

and relies upon a reasonable basis

substantiating the claim. Thus, a ‘‘Made

in USA’’ claim, like any other objective

advertising claim, must be truthful and

substantiated.

A representation may be made by

either express or implied claims. ‘‘Made

in USA’’ and ‘‘Our products are

American made’’ would be examples of

express U.S. origin claims. In
63768 Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 / Notices

107This assumes that the brand name does not

specifically denote U.S. origin, e.g., the brand name

is not ‘‘Made in America, Inc.’’

108For example, a legal trademark consisting of,

or incorporating, a stylized mark suggestive of a

U.S. flag will not, by itself, be considered to

constitute a U.S. origin claim.

109 15 U.S.C. 1451 et seq.

110For purposes of this Enforcement Policy

Statement, ‘‘United States’’ refers to the several

states, the District of Columbia, and the territories

and possessions of the United States. In other

words, an unqualified ‘‘Made in USA’’ claim may

be made for a product that is all or virtually all

manufactured in U.S. territories or possessions as

well as in the 50 states.

111 In addition, marketers should not represent,

either expressly or by implication, that a whole

product line is of U.S. origin (e.g., ‘‘Our products

are Made in USA’’) when only some products in the

product line are, in fact, made in the United States.

Although not the focus of this Enforcement Policy

Statement, this is a principle that has been

addressed in Commission cases both within and

outside the U.S. origin context. See, e.g., Hyde

Athletic Industries, FTC Docket No. C–3695

(consent order December 4, 1996) (complaint

alleged that respondent represented that all of its

footwear was made in the United States, when a

substantial amount of its footwear was made wholly

in foreign countries); New Balance Athletic Shoes,

Inc., FTC Docket No. 9268 (consent order December

2, 1996) (same); Uno Restaurant Corp., FTC Docket

No. C–3730 (consent order April 4, 1997)

(complaint alleged that restaurant chain represented

that its whole line of thin crust pizzas were low fat,

when only two of eight pizzas met acceptable limits

for low fat claims); Ha ̈agen-Dazs Company, Inc.,

FTC Docket No. C–3582 (consent order June 7,

1995) (complaint alleged that respondent

represented that its entire line of frozen yogurt was

98% fat free when only certain flavors were 98%

fat free).

112The word ‘‘parts’’ is used in its general sense

throughout this enforcement policy statement to

refer to all physical inputs into a product, including

but not limited to subassemblies, components,

parts, or materials.

113 It is conceivable, for example, that

occasionally a product imported into the United

States could have a very high proportion of its

manufacturing costs be U.S. costs, but is

nonetheless not considered by the U.S. Customs

Service to have been last substantially transformed

in the United States. In such cases, the product

would be required to be marked with a foreign

country of origin and an unqualified U.S. origin

claim could not appropriately be made for the

product.

114 In calculating manufacturing costs,

manufacturers should ordinarily use as their

measure the cost of goods sold or finished goods

inventory cost, as those terms are used in

accordance with generally accepted accounting

principles. Such costs will generally include (and

be limited to) the cost of manufacturing materials,

direct manufacturing labor, and manufacturing

overhead. Marketers should also note the

admonishment below that, in determining the

percentage of U.S. content, they should look far

enough back in the manufacturing process that a

reasonable marketer would expect that it had

accounted for any significant foreign content.

identifying implied claims, the

Commission focuses on the overall net

impression of an advertisement, label,

or other promotional material. This

requires an examination of both the

representation and the overall context,

including the juxtaposition of phrases

and images, and the nature of the

transaction. Depending on the context,

U.S. symbols or geographic references,

such as U.S. flags, outlines of U.S. maps,

or references to U.S. locations of

headquarters or factories, may, by

themselves or in conjunction with other

phrases or images, convey a claim of

U.S. origin. For example, assume that a

company advertises its product in an

advertisement that features pictures of

employees at work at what is identified

as the company’s U.S. factory, these

pictures are superimposed on an image

of a U.S. flag, and the advertisement

bears the headline ‘‘American Quality.’’

Although there is no express

representation that the company’s

product is ‘‘Made in USA,’’ the net

impression of the advertisement is

likely to convey to consumers a claim

that the product is of U.S. origin. Whether any particular symbol or

phrase, including an American flag,

conveys an implied U.S. origin claim,

will depend upon the circumstances in

which the symbol or phrase is used.

Ordinarily, however, the Commission

will not consider a marketer’s use of an

American brand name 107 or

trademark,108 without more, to

constitute a U.S. origin claim, even

though some consumers may believe, in

some cases mistakenly, that a product

made by a U.S.-based manufacturer is

made in the United States. Similarly,

the mere listing of a company’s U.S.

address on a package label, in a

nonprominent manner, such as would

be required under the Fair Packaging

and Labeling Act,109 is unlikely, without

more, to constitute a ‘‘Made in USA’’

claim.

IV. Substantiating U.S. Origin Claims:

The ‘‘All or Virtually All’’ Standard

Based on its review of the traditional

use of the term ‘‘Made in USA,’’ and the

record as a whole, the Commission

concludes that consumers are likely to

understand an unqualified U.S. origin

claim to mean that the advertised

product is ‘‘all or virtually all’’ made in

the United States. Therefore, when a

marketer makes an unqualified claim

that a product is ‘‘Made in USA,’’ it

should, at the time the representation is

made, possess and rely upon a

reasonable basis that the product is in

fact all or virtually all made in the

United States.110, 111

A product that is all or virtually all

made in the United States will

ordinarily be one in which all

significant parts 112 and processing that

go into the product are of U.S. origin. In

other words, where a product is labeled

or otherwise advertised with an

unqualified ‘‘Made in USA’’ claim, it

should contain only a de minimis, or

negligible, amount of foreign content.

Although there is no single ‘‘bright line’’

to establish when a product is or is not

‘‘all or virtually all’’ made in the United

States, there are a number of factors that

the Commission will look to in making

this determination. To begin with, in

order for a product to be considered ‘‘all

or virtually all’’ made in the United

States, the final assembly or processing

of the product must take place in the

United States. Beyond this minimum

threshold, the Commission will

consider other factors, including but not

limited to the portion of the product’s

total manufacturing costs that are

attributable to U.S. parts and processing;

and how far removed from the finished

product any foreign content is.

A. Site of Final Assembly or Processing

The consumer perception evidence

available to the Commission indicates

that the country in which a product is

put together or completed is highly

significant to consumers in evaluating

where the product is ‘‘made.’’ Thus,

regardless of the extent of a product’s

other U.S. parts or processing, in order

to be considered all or virtually all made

in the United States, it is a prerequisite

that the product have been last

‘‘substantially transformed’’ in the

United States, as that term is used by

the U.S. Customs Service ‘‘ i.e., the

product should not be required to be

marked ‘‘made in [foreign country]’’

under 19 U.S.C. 1304.113 Furthermore,

even where a product is last

substantially transformed in the United

States, if the product is thereafter

assembled or processed (beyond de

minimis finishing processes) outside the

United States, the Commission is

unlikely to consider that product to be

all or virtually all made in the United

States. For example, were a product to

be manufactured primarily in the

United States (and last substantially

transformed there) but sent to Canada or

Mexico for final assembly, any U.S.

origin claim should be qualified to

disclose the assembly that took place

outside the United States.

B. Proportion of U.S. Manufacturing

Costs

Assuming the product is put together

or otherwise completed in the United

States, the Commission will also

examine the percentage of the total cost

of manufacturing the product that is

attributable to U.S. costs (i.e., U.S. parts

and processing) and to foreign costs.114

Where the percentage of foreign content

is very low, of course, it is more likely

that the Commission will consider the
Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 / Notices 63769

115For example, assume that a company

manufactures lawn mowers in its U.S. plant,

making most of the parts (housing, blade, handle,

etc.) itself from U.S. materials. The engine, which

constitutes 50% of the total cost of manufacturing

the lawn mower, is bought from a U.S. supplier,

which, the lawn mower manufacturer knows,

assembles the engine in a U.S. factory. Although

most of the parts and the final assembly of the lawn

mower are of U.S. origin and the engine is

assembled in the United States, the lawn mower

will not necessarily be considered all or virtually

all made in the United States. This is because the

engine itself is made up of various parts that may

be imported and that may constitute a significant

percentage of the total cost of manufacturing the

lawn mower. Thus, before labeling its lawn mower

‘‘Made in USA,’’ the manufacturer should look to

its engine supplier for more specific information as

to the engine’s origin. For instance, were foreign

parts to constitute 60% of the cost of producing the

engine, then the lawn mower would contain a total

of at least 30% foreign content, and an unqualified

‘‘Made in USA’’ label would be inappropriate.

116For purposes of this Enforcement Policy

Statement, the Commission considers raw materials

to be products such as minerals, plants or animals

that are processed no more than necessary for

ordinary transportation.

117 In addition, because raw materials, unlike

manufactured inputs, may be inherently

unavailable in the United States, the Commission

will also look at whether or not the raw material

is indigenous to the United States, or available in

commercially significant quantities. In cases where

the material is not found or grown in the United

States, consumers are likely to understand that a

‘‘Made in USA’’ claim on a product that

incorporates such materials (e.g., vanilla ice cream

that uses vanilla beans, which, the Commission

understands, are not grown in the United States)

means that all or virtually all of the product, except

for those materials not available here, originated in

the United States. Nonetheless, even where a raw

material is nonindigenous to the United States, if

that imported material constitutes the whole or

essence of the finished product (e.g., the rubber in

a rubber ball or the coffee beans in ground coffee),

it would likely mislead consumers to label the final

product with an unqualified ‘‘Made in USA’’ claim.

118Nonetheless, in these examples, other,

qualified claims could be used to identify truthfully

the domestic processing that took place. For

example, if the gold ring was designed and

fabricated in the United States, the manufacturer

could say that (e.g., ‘‘designed and fabricated in

U.S. with 14K imported gold’’). Similarly, if the

ceramic tile were manufactured in the United States

from imported clay, the manufacturer could

indicate that as well.

product all or virtually all made in the

United States. Nonetheless, there is not

a fixed point for all products at which

they suddenly become ‘‘all or virtually

all’’ made in the United States. Rather,

the Commission will conduct this

inquiry on a case-by-case basis,

balancing the proportion of U.S.

manufacturing costs along with the

other factors discussed herein, and

taking into account the nature of the

product and consumers’ expectations in

determining whether an enforcement

action is warranted. Where, for example,

a product has an extremely high amount

of U.S. content, any potential deception

resulting from an unqualified ‘‘Made in

USA’’ claim is likely to be very limited,

and therefore the costs of bringing an

enforcement action challenging such a

claim are likely to substantially

outweigh any benefit that might accrue

to consumers and competition.

C. Remoteness of Foreign Content

Finally, in evaluating whether any

foreign content is significant enough to

prevent a product from being

considered all or virtually all made in

the United States, the Commission will

look not only to the percentage of the

cost of the product that the foreign

content represents, but will also

consider how far removed from the

finished product the foreign content is.

As a general rule, in determining the

percentage of U.S. content in its

product, a marketer should look far

enough back in the manufacturing

process that a reasonable marketer

would expect that it had accounted for

any significant foreign content. In other

words, a manufacturer who buys a

component from a U.S. supplier, which

component is in turn made up of other

parts or materials, may not simply

assume that the component is 100%

U.S. made, but should inquire of the

supplier as to the percentage of U.S.

content in the component.115 Foreign

content that is incorporated further back

in the manufacturing process, however,

will often be less significant to

consumers than that which constitutes a

direct input into the finished product.

For example, in the context of a

complex product, such as a computer, it

is likely to be insignificant that

imported steel is used in making one

part of a single component (e.g., the

frame of the floppy drive). This is

because the steel in such a case is likely

to constitute a very small portion of the

total cost of the computer, and because

consumers purchasing a computer are

likely, if they are concerned about the

origin of the product, to be concerned

with the origin of the more immediate

inputs (floppy drive, hard drive, CPU,

keyboard, etc.) and perhaps the parts

that, in turn, make up those inputs.

Consumers are less likely to have in

mind materials, such as the steel, that

are several steps back in the

manufacturing process. By contrast, in

the context of a product such as a pipe

or a wrench for which steel constitutes

a more direct and significant input, the

fact that the steel is imported is likely

to be a significant factor in evaluating

whether the finished product is all or

virtually all made in the United States.

Thus, in some circumstances, there may

be inputs one or two steps back in the

manufacturing process that are foreign

and there may be other foreign inputs

that are much further back in the

manufacturing process. Those foreign

inputs far removed from the finished

product, if not significant, are unlikely

to be as important to consumers and

change the nature of what otherwise

would be considered a domestic

product.

In this analysis, raw materials 116 are

neither automatically included nor

automatically excluded in the

evaluation of whether a product is all or

virtually all made in the United States.

Instead, whether a product whose other

parts and processing are of U.S. origin

would not be considered all or virtually

all made in the United States because

the product incorporated imported raw

materials depends (as would be the case

with any other input) on what

percentage of the cost of the product the

raw materials constitute and how far

removed from the finished product the

raw materials are.117 Thus, were the

gold in a gold ring, or the clay used to

make a ceramic tile, imported, an

unqualified ‘‘Made in USA’’ claim for

the ring or tile would likely be

inappropriate.118 This is both because of

the significant value the gold and the

clay are likely to represent relative to

the finished product and because the

gold and the clay are only one step back

from the finished articles and are

integral components of those articles. By

contrast were the plastic in the plastic

case of a clock radio that was otherwise

all or virtually all made in the United

States found to have been made from

imported petroleum, the petroleum is

far enough removed from, and an

insignificant enough input into, the

finished product that it would

nonetheless likely be appropriate to

label the clock radio with an

unqualified U.S. origin claim.

V. Qualifying U.S. Origin Claims

A. Qualified U.S. Origin Claims

Generally

Where a product is not all or virtually

all made in the United States, any claim

of U.S. origin should be adequately

qualified to avoid consumer deception

about the presence or amount of foreign

content. In order to be effective, any

qualifications or disclosures should be

sufficiently clear, prominent, and

understandable to prevent deception.

Clarity of language, prominence of type

size and style, proximity to the claim

being qualified, and an absence of

contrary claims that could undercut the

effectiveness of the qualification will

maximize the likelihood that the

qualifications and disclosures are

appropriately clear and prominent.
63770 Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 / Notices

119These examples are intended to be illustrative,

not exhaustive; they do not represent the only

claims or disclosures that would be permissible

under Section 5 of the FTC Act. As indicated,

however, qualified claims, like any claim, should be

truthful and substantiated and should not overstate

the U.S. content of a product. For example, it would

be inappropriate for a marketer to represent that a

product was ‘‘Made in U.S. of U.S. and imported

parts’’ if the overwhelming majority of the parts

were imported and only a single, insignificant part

was manufactured in the United States; a more

appropriate claim would be ‘‘Made in U.S. of

imported parts.’’

120On the other hand, that the last substantial

transformation of the product takes place in the

United States may not alone be sufficient to

substantiate such a claim. For example, under the

rulings of the U.S. Customs Service, a disposable

razor is considered to have been last substantially

transformed where its blade is made, even if it is

thereafter assembled in another country. Thus, a

disposable razor that is assembled in Mexico with

a U.S.-made blade and other parts of various origins

would be considered to have been last substantially

transformed in the United States and would not

have to bear a foreign country-of-origin marking.

Nonetheless, because the final assembly of the razor

occurs abroad, it would be inappropriate to label

the razor ‘‘Made in U.S. of U.S. and imported

parts.’’ It would, however, likely be appropriate to

label the razor ‘‘Assembled in Mexico with U.S.-

made blade,’’ ‘‘Blade made in United States, razor

assembled in Mexico’’ or ‘‘Assembled in Mexico

with U.S. and imported parts.’’

Within these guidelines, the form the

qualified claim takes is up to the

marketer. A marketer may make any

qualified claim about the U.S. content of

its products as long as the claim is

truthful and substantiated. Qualified

claims, for example, may be general,

indicating simply the existence of

unspecified foreign content (e.g., ‘‘Made

in USA of U.S. and imported parts’’) or

they may be specific, indicating the

amount of U.S. content (e.g., ‘‘60% U.S.

content’’), the parts or materials that are

imported (e.g., ‘‘Made in USA from

imported leather’’), or the particular

foreign country from which the parts

come (‘‘Made in USA from French

components’’).119

Where a qualified claim takes the

form of a general U.S. origin claim

accompanied by qualifying information

about foreign content (e.g., ‘‘Made in

USA of U.S. and imported parts’’ or

‘‘Manufactured in U.S. with Indonesian

materials’’), the Commission believes

that consumers are likely to understand

such a claim to mean that, whatever

foreign materials or parts the product

contains, the last assembly, processing,

or finishing of the product occurred in

the United States. Marketers therefore

should avoid using such claims unless

they can substantiate that this is the

case for their products. In particular,

such claims should only be made where

the product was last substantially

transformed in the United States. Where

a product was last substantially

transformed abroad, and is therefore

required by the U.S. Customs Service to

be labeled ‘‘Made in [foreign country],’’

it would be inappropriate, and

confusing, to use a claim such as ‘‘Made

in USA of U.S. and imported parts.’’ 120

B. Claims About Specific Processes or

Parts

Regardless of whether a product as a

whole is all or virtually all made in the

United States, a marketer may make a

claim that a particular manufacturing or

other process was performed in the

United States, or that a particular part

was manufactured in the United States,

provided that the claim is truthful and

substantiated and that reasonable

consumers would understand the claim

to refer to a specific process or part and

not to the general manufacture of the

product. This category would include

claims such as that a product is

‘‘designed’’ or ‘‘painted’’ or ‘‘written’’ in

the United States or that a specific part,

e.g., the picture tube in a television, is

made in the United States (even if the

other parts of the television are not).

Although such claims do not expressly

disclose that the products contain

foreign content, the Commission

believes that they are normally likely to

be specific enough so as not to convey

a general claim of U.S. origin. More

general terms, however, such as that a

product is, for example, ‘‘produced,’’ or

‘‘manufactured’’ in the United States,

are likely to require further qualification

where they are used to describe a

product that is not all or virtually all

made in the United States. Such terms

are unlikely to convey to consumers a

message limited to a particular process

performed, or part manufactured, in the

United States. Rather, they are likely to

be understood by consumers as

synonymous with ‘‘Made in USA’’ and

therefore as unqualified U.S. origin

claims.

The Commission further concludes

that, in many instances, it will be

appropriate for marketers to label or

advertise a product as ‘‘Assembled in

the United States’’ without further

qualification. Because ‘‘assembly’’

potentially describes a wide range of

processes, however, from simple

‘‘screwdriver’’ operations at the very

end of the manufacturing process to the

construction of a complex, finished item

from basic materials, the use of this term

may, in some circumstances, be

confusing or misleading to consumers.

To avoid possible deception,

‘‘Assembled in USA’’ claims should be

limited to those instances where the

product has undergone its principal

assembly in the United States and that

assembly is substantial. In addition, a

product should be last substantially

transformed in the United States to

properly use an ‘‘Assembled in USA’’

claim. This requirement ensures against

potentially contradictory claims, i.e., a

product claiming to be ‘‘Assembled in

USA’’ while simultaneously being

marked as ‘‘Made in [foreign country].’’

In many instances, this requirement will

also be a minimum guarantee that the

U.S. assembly operations are

substantial.

C. Comparative Claims

U.S. origin claims that contain a

comparative statement (e.g., ‘‘More U.S.

content than our competitor’’) may be

made as long as the claims are truthful

and substantiated. Where this is so, the

Commission believes that comparative

U.S. origin claims are unlikely to be

deceptive even where an unqualified

U.S. origin claim would be

inappropriate. Comparative claims,

however, should be presented in a

manner that makes the basis for the

comparison clear (e.g., whether the

comparison is being made to another

leading brand or to a previous version

of the same product). Moreover,

comparative claims should not be used

in a manner that, directly or by

implication, exaggerates the amount of

U.S. content in the product, and should

be based on a meaningful difference in

U.S. content between the compared

products. Thus, a comparative U.S.

origin claim is likely to be deceptive if

it is made for a product that does not

have a significant amount of U.S.

content or does not have significantly

more U.S. content than the product to

which it is being compared.

D. U.S. Customs Rules and Qualified

and Comparative U.S. Origin Claims

It is possible, in some circumstances,

for marketers to make certain qualified

or comparative U.S. origin claims

(including claims such as that the

product contains a particular amount of

U.S. content, certain claims about the

U.S. origin of specific processes or parts,

and certain comparative claims) even

for products that are last substantially

transformed abroad and which therefore

must be marked with a foreign country

of origin. In making such claims,

however, marketers are advised to take

care to follow the requirements set forth

by the U.S. Customs Service and to

ensure, for purposes of section 5 of the

FTC Act, that the claim does not

deceptively suggest that the product is

made with a greater amount of U.S.

parts or processing than is in fact the

case.

In looking at the interaction between

the requirements for qualified and
Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 / Notices 63771

121 19 CFR 134.46. Specifically, this provision

provides that:

‘‘In any case in which the words ‘United States,’

or ‘American,’ the letters U.S.A., any variation of

such words or letters, or the name of any city or

locality in the United States, or the name of any

foreign country or locality other than the country

or locality in which the article was manufactured

or produced appear on an imported article or its

container, and those words, letters or names may

mislead or deceive the ultimate purchaser as to the

actual country of origin of the article, there shall

appear, legibly and permanently, in close proximity

to such words, letters or name, and in at least a

comparable size, the name of the country of origin

preceded by ‘Made in,’ ‘Product of,’ or other words

of similar meaning.’’

In a Federal Register notice announcing

amendments to this provision, the Customs Service

indicated that, where a product has a foreign origin,

any references to the United States made in the

context of a statement relating to any aspect of the

production or distribution of the product (e.g.,

‘‘Designed in USA,’’ ‘‘Made for XYZ Corporation,

California, U.S.A.,’’ or ‘‘Distributed by ABC, Inc.,

Colorado, USA’’) would be considered misleading

to the ultimate purchaser and would require foreign

country-of-origin marking in accordance with the

above provision. 62 FR 44211, 442213 (Aug. 20,

1997).

comparative U.S. origin claims and

those for foreign origin marking, the

analysis is slightly different for

advertising and for labeling. This is a

result of the fact that the Tariff Act

requires foreign origin markings on

articles or their containers, but does not

govern claims in advertising or other

promotional materials.

Thus, on a product label, where the

Tariff Act requires that the product be

marked with a foreign country of origin,

Customs regulations permit indications

of U.S. origin only when the foreign

country of origin appears in close

proximity and is at least of comparable

size.121 As a result, under Customs

regulations, a product may, for example,

be properly marked ‘‘Made in

Switzerland, finished in U.S.’’ or ‘‘Made

in France with U.S. parts,’’ but it may

not simply be labeled ‘‘Finished in

U.S.’’ or ‘‘Made with U.S. parts’’ if it is

deemed to be of foreign origin.

In advertising or other promotional

materials, the Tariff Act does not require

that foreign origin be indicated. The

Commission recognizes that it may be

possible to make a U.S. origin claim in

advertising or promotional materials

that is sufficiently specific or limited

that it does not require an

accompanying statement of foreign

manufacture in order to avoid

conveying a broader and

unsubstantiated meaning to consumers.

Whether a nominally specific or limited

claim will in fact be interpreted by

consumers in a limited matter is likely

to depend on the connotations of the

particular representation being made

(e.g., ‘‘finished’’ may be perceived as

having a more general meaning than

‘‘painted’’) and the context in which it

appears. Marketers who wish to make

U.S. origin claims in advertising or

other promotional materials without an

express disclosure of foreign

manufacture for products that are

required by Customs to be marked with

a foreign country of origin should be

aware that consumers may believe the

literal U.S. origin statement is implying

a broader meaning and a larger amount

of U.S. content than expressly

represented. Marketers are required to

substantiate implied, as well express,

material claims that consumers acting

reasonably in the circumstances take

from the representations. Therefore, the

Commission encourages marketers,

where a foreign-origin marking is

required by Customs on the product

itself, to include in any qualified or

comparative U.S. origin claim a clear,

conspicuous, and understandable

disclosure of foreign manufacture.

By direction of the Commission.

Donald S. Clark,

Secretary.

Concurring Statement of Commissioner

Roscoe B. Starek, III, Regarding

Enforcement Policy Statement on U.S.

Origin Claims

File No. P89–4219

Today the Commission restores the

‘‘Made in USA’’ standard to the highly

demanding level that we affirmed in

1994. The Commission’s action

reinstates the longstanding principle

that an unqualified U.S. origin claim is

a claim that the product is made entirely

in the United States except for a de

minimis or negligible amount of foreign

content. By explaining the factors that

the Commission will consider in

assessing whether an unqualified ‘‘Made

in USA’’ claim is deceptive, and

whether the public interest warrants

enforcement action, the Policy

Statement provides guidance that

should reduce the costs of making

‘‘Made in USA’’ claims that comply

with Section 5 of the FTC Act. The

current state of consumer perception

and the benefits and costs of various

‘‘Made in USA’’ standards have been

exhaustively investigated. With the

issuance of this Policy Statement, I

expect to see the traditional ‘‘Made in

USA’’ standard enforced, now that we

no longer labor under the self-imposed

moratorium that consumed several years

while we explored various policy

options.

The broad review initiated by a

majority of the Commission in 1995

produced a reasonable alternative

approach based on copy test evidence

showing that significant minorities of

consumers took contradictory meanings

from unqualified ‘‘Made in USA’’

claims. As I stated when we proposed

the Guides for comment, the

‘‘substantially all’’ standard created by

the Guides appeared to strike the correct

balance between contradictory

consumer understandings of ‘‘Made in

USA’’ so as to minimize overall

consumer injury from deception.

Today’s action illustrates the value of

seeking public comment when the

Commission elects to fashion a

compromise through an expansive

review similar to a rulemaking, rather

than base its findings of deception on

evidence and interpretations tested

during litigation and the pursuit of

negotiated orders.

Intense public interest in ‘‘Made in

USA’’ claims inspired more individual

consumer comments than we have

received in almost any other comment

period during my tenure at the

Commission. These comments—which

demonstrate that consumers who

believe that ‘‘Made in USA’’ means all

or virtually all made in the United

States are highly motivated to act on

their belief—justify redrawing the

balance that the proposed Guides

attempted to strike. These consumers

want to be able to rely on a simple and

clear standard, and their awareness of

the globalization of the economy

evidently has not changed their beliefs

about domestic origin claims. The

Policy Statement also wisely confines

the Commission’s guidance to general

principles and, as I clearly prefer, leaves

for case-by-case resolution more

complex issues that may turn on

variations in claims and products.

[FR Doc. 97–31531 Filed 12–1–97; 8:45 am]

BILLING CODE 6750–01–P