Federal Trade Commission Received Documents June 28, 1996 P894219 B18354900176 CRAFTED WITH PRIDE IN U.S.A COUNCIL, INC. June 27, 1996 Office of the Secretary Federal Trade Commission Room 159 Sixth and Pennsylvania Avenue, N.W. Washington, D.C. 20580 Re: Response To Federal Trade Commission MADE IN USA POLICY COMMENT, FTC File No. P894219 The Crafted with Pride in U.S.A. Council would like to begin by thanking the commission for the opportunities for input on the "Made in U.S.A." issue at both the March 26-27 Workshop and in this follow-up statement. In "III. Supplemental Questions for Comment" issued following the Workshop, the Commission asks for input on a number of issues related to each of the possible standards. The Crafted with Pride in U.S.A. Council's comments will focus on question 1.A. - definition of the All/Virtually All standard. An array of apparel and home textiles with clear labeling as either "Made in U.S.A." or "Imported" can be found in the consumer marketplace today. In a very real sense, these items are labeled using an "All/Virtually All" standard. This standard for labeling is established in the current textile and apparel Federal legislation under the Wool and Textile Fiber Products Identification Acts -- and the implementing regulations. We believe that these standards for labeling are in consumers' best interests and that the law, as well as the FTC's implementing regulations, should remain as they are today. Appropriate labeling of apparel and home textiles has not produced confusion in the industry nor has it proven to be unduly burdensome. In other words, THE "ALL/VIRTUALLY ALL" STANDARD HAS PROVEN QUITE WORKABLE FOR THE DOMESTIC TEXTILE AND APPAREL INDUSTRIES, AS WELL AS FOR IMPORTERS, DESPITE SOME COMPLAINING. The most important side of the issue, utility of current labeling for consumers, was the primary issue in the Workshop. The Workshop produced a great deal of evidence that country-of-origin represents important and desired information for consumers across most product categories. The desire for country-of-origin information was particularly strong for clothing -- 40% - 50% looked for country-of-origin during recent shopping. The argument that country-of-origin is simply unimportant or low on a list of factors is simply misleading. Certainly, 40% represents a significant minority. A group this size is surely not unimportant. Additionally, arguing that country-of-origin is rated less important in the buying decision than other factors such as price, fit, or style does not address the issue of labeling country-of-origin. Consumers simply cannot spend more than their budget or wear clothes that would fit a person of an entirely different build or buy clothing in a style not suitable for their needs. High ratings for the importance of price, fit, or fashion simply do not argue against the importance of the country-of-origin or the desirability of supplying such information to consumers. One could argue that consumers are just saying these things about country-of-origin but not really acting on country-of-origin. It is not clear why such an argument would alter the current "All/Virtually All" standards. However, properly designed sales experiments show that consumer spending does follow their reported use of country-of-origin information. Two test-control experiments were conducted in Mercantile Department Stores in two markets. These experiments showed sizable net sales increases during an experimental period with prominent labeling of "Made in U.S.A." versus pre- and post-control periods without prominent labeling of country-of-origin -- +26% at McAlpin's in Cincinnati and +39% at Castner, Knotts in Nashville. These experiments certainly show that consumers do make buying decisions based on "Made in U.S.A." labeling. These experiments in which consumers' buying favored "Made in U.S.A." goods make clear that consumers stand to lose economically by allowing changes in standards for country-of-origin identification. The study conducted for the FTC by Gallup & Robinson underscores this possibility. The study does not "prove" how many, if any, would be deceived by a less rigorous standard than "All/Virtually All". HOWEVER, THE STUDY DOES SUGGEST THAT THE POTENTIAL FOR MISLEADING CONSUMERS WITH A STANDARD LOWER THAN "ALL/VIRTUALLY ALL" IS SUBSTANTIAL. In reporting the study at the Workshop, the example was used, "... 67 percent of participants indicated that they were willing to accept a made-in-the-USA label where the product was assembled in the U.S. and contained 70 percent U.S. cost...(3-26-96 transcript, page 38)" by subtraction, about one-third did not "accept" a Made in U.S.A. label based on a 70/30 cost loading. One-third, while a minority, is a sizable group of consumers. Over the short-term, a change in standards could easily lead to substantial numbers of consumers buying products that would have been less acceptable under the "All/Virtually All" standard. Over the long-term, a change that would permit imported components in items identified as domestically made will confuse consumers on the real country-of-origin, undermine consumers' current positive perceptions of U.S.A.-made clothing and home fashions, and weaken "Made in U.S.A." labeling a consumer marketing tool. Thus, the "losers" from a change in current policy are both consumers and the domestic textile and apparel industries. The "winners" from a change in current policy are firms who, without making the accompanying investment in the U.S., would reap the economic benefits of labeling "Made in U.S.A." while diluting the competitiveness of the label over the long-term. Returning to the issue of defining "All/Virtually All", the current policy and practice for textiles and apparel provides a foundation for developing tighter definitions of "All/Virtually All". Current textile/apparel policy on country-of-origin labeling has provided consumers with useful information for their buying decisions, while providing the domestic industry with a simple tool, "Made in U.S.A." to signal its quality and value. Again, thank you for considering our inputs and position on this very important consumer marketing issue. And also thank you for making information and comments so readily available through your Web site. Sincerely, Robert E. Swift Executive Director RES/dm