Federal Trade Commission Received Documents Jan 22 1996 B18354900069 Secretary BALLUFF Inc. Manufacturers of Electronic Control 8125 Holton Drive Equipment for Industrial Automation Florence, Kentucky 41042 U.S.A. (606) 727-2200 - FAX (606) 727-4823 January 16, 1996 Office of the Secretary Federal Trade Commission Room 159 Sixth and Pennsylvania, N.W. Washington, D.C. 20580 RE: "Made in USA Policy Comment," FTC File No. P 894219 Balluff is a world wide manufacturing company specializing in industrial electronic products. Over 1,000 employees manufacture and market a wide range of electronic and electromechanical sensors, transducers and identification systems. Balluff products are used successfully in many areas of automation. Balluff has manufacturing facilities in USA, Germany, Hungary, Japan, and Brazil. Each location will import subassemblies from other locations to produce different market specific products. The complexity of maintaining different labeling standards based on a percent content would be both difficult and costly. The U.S. Custom's test of substantial transformation is the least costly and most consistent. The attached are documents compiled by Balluff, Inc. Florence Ky. in response to a notice submitted by the Federal Trade Commission concerning the regulations for labeling products "Made in America" (USA). 1. When consumers see product advertisements or labels stating or implying that products are "Made in USA", what amount of U.S. parts and labor do they assume are in the products.? The 100% domestic content would not allow any electronics manufacture to label their product "Made in USA". This would single out one type of industry with unfair labeling practices. The basic components represent very minor cost compared to the research and development, assembly, and testing of the final product. 2. What are the costs and benefits of "all or virtually all" threshold for Made in USA claims versus a lower threshold? (a.) The virtually all threshold would not provide the customer with a better product or help in his/her decision making process. This only hinders the manufacture from labeling their product appropriately. If the product is transformed with labor and development then it should be labeled accordingly. Lowering the amount of US content to <50% would be most helpful. (b.) The difficulty would be the base line measurement and how far back does the company go back if they manufacture parts from raw material. Balluff sends parts to Japan who then manufactures subassemblies and returns them to the US. Do the first components become part of the overall calculation or do we ignore them? The complexity of the calculation becomes overwhelming. (c.) There would be no additional costs since most products are labeled for shipment or identification. But the best advantage would be to label the products "Made in USA". (d.) There would be no additional costs to consumers for lower than expected content as long as they purchase a quality product. (e.) If space limitations is a concern Underwriters Laboratory and other agencies have stated that the smallest possible labelable package that is practical or on instruction documentation. (f.) "Assembled in USA" means that the product has foreign components and US operators have assembled the final product. Assembled is implied as meaning "put together". 3. What are the costs and benefits of using the same tests for "Made in USA" claims as those imposed by U.S. Customs requirements ("substantial transformation"), the Buy America Act (50% cost), and other domestic content statutes or rules. The same test would clarify any misunderstanding by the international companies may have on labeling products. This would provide a consistent requirement that all companies can review and understand. 4. Do foreign customs officials prohibit the addition of qualifying phrases on "Made in USA" labels? Foreign customs only require place of "origin" not content. By changing the phrases the foreign customs officials would have to be educated on the labeling practices of the USA which would be a monumental undertaking. If the foreign countries not do require the labeling why require American companies to do so. The European Community countries have removed the requirement for identifying their countries of origin. They only have to identify the products if they are exporting them to non EC countries and only require this on the package not the product. 5. How should the proportion of domestic content be measured with respect to "Made in USA" claims? (a.) As mentioned previously the subassemblies may be transported to other countries for further assembly so the calculation would be impossible. There are standard electrical components that are produced world wide by many different companies. The electronic distributors will purchase the same "part number" from many different companies. If the final assembler had to maintain records and calculate the material content for each product it would again be impossible. (b.) The raw material is normally thought of as being the material that is extracted from the earth (ie iron, carbon, water, hydrogen, etc.). Raw material would have to be used in determining the calculation as in any subassembly, if the only product the company was producing was from raw material (ie steel manufactures, oil refineries, diamonds). (c.) The costs of determining the content of each material would practically double the cost of any purchasing department and add to the accounting staff. The documentation and calculations that would have to be analyzed would be tremendous. (d.) What would be the definition of "one step back"? One step back in the process of the same company or in the previous company if no transformation was performed. (e.) The overhead should be added if the requirement is made to qualify the "Made in USA" statement by content. The overhead of development, purchasing, engineering and other related costs associated with high-technology products. The overhead to maintain the made in the USA status should also be included. (f.) The profit should be added to determine the domestic content since it is included in the purchase price of the components from suppliers. (g.) Any company can adhere to guidelines if they are consistent and clear. The problem exist today because there are more than one set of guide lines and no two are similar (CE, US Customs, FTC, NAFTA, Buy American, etc.) 6. What form of guidance should the Commission offer with respect to "Made in USA" claims? (a,b) The FTC should establish the guidelines by which each company could be their own administrator. Most firms will adhere to any set of rules that are clear and precise. If the domestic content is determined by a numerical calculation then the FTC should establish the value. If it is determined to be nonnumerical then the Commission should provide the safe-harbors. P.A. Hughes Engineering Manager Balluff, Inc.