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Labeling & National Currencies

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1) A garment manufacturer produces sports apparel at its facility in the Merianas Island in order to take advantage of lower labor cost. Can these garments labeled "Made in USA"? Why or Why not ?

2) A company produces propane barbecue grills at a plant in Nevada. The products' major components includes the gas valve,burner and aluminum housing, each of which made in the U.S. The grill's knobs and tubing are imported from Mexico. Can this product be labeled "Made in USA" why or why not? If not, what what should the label be.

3) It seems that free, unrestricted international trade, in which each nation produces and exports for which it has a comparative advantages, will enable everyone to have a higher level of living, why, then, does every country, including us(US), have import duty restrictions? Please explain.

5) The Euro replaced 12 national currencies. What are the resulting advantages and savings for the EU members?

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Let's take a closer look at these interesting questions. I also attached the report for labeling standards by the Federal Trades Commission (FDA).

RESPONSE:

1) A garment manufacturer produces sports apparel at its facility in the Merianas Island in order to take advantage of lower labor cost. Can these garments labeled "Made in USA"? Why or Why not?

The Textile Fiber Products Identification Act and Wool Products Labeling Act require a Made in USA label on most clothing and other textile or wool household products if the final product is manufactured in the U.S. of fabric that is manufactured in the U.S., regardless of where materials earlier in the manufacturing process (for example, the yarn and fiber) came from. However, these garments are NOT made on American soil, Textile products that are imported must be labeled as required by the Customs Service. A textile or wool product partially manufactured in the U.S. and partially manufactured in another country must be labeled to show both foreign and domestic processing.

Therefore this scenario, where 100% of the garments are made on Merianas Island), does NOT meet the FTC standard for being labeled "Made in the USA". Rather, in order to be labeled Made in USA, it needs to meet the "all or virtually all" standard being made on American soil/ In other words, Merianas Island would need to be American soil. (http://www.ftc.gov/opp/madeusa2/62fr63755.pdf)

2) A company produces propane barbecue grills at a plant in Nevada. The products' major components include the gas valve, burner and aluminum housing, each of which made in the U.S. The grill's knobs and tubing are imported from Mexico. Can this product be labeled "Made in USA" why or why not? If not, what should the label be?

ISSUES: Does this producer meet the "all or virtually all" standard set by the Federal Trades Commission? What are the importer regulations?

Labeling is regulated by the the Federal Trade Commission. In 1996 (FTC) proposed that the requirement be stated as:

It will not be considered a deceptive practice for a marketer to make an unqualified U.S. origin claim if, at the time it makes the claim, the marketer possesses and relies upon competent and reliable evidence that: (1) U.S. manufacturing costs constitute 75% of the total manufacturing costs for the product; and (2) the product was last substantially transformed in the United States.( http://www.ftc.gov/opp/madeusa2/62fr63755.pdf)

However, considering feedback regarding the proposal, it never became part of the final guidelines which were published in the Federal Register in 1997. Instead, the FTC reported that it "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. (See http://www.ftc.gov/opp/madeusa2/62fr63755.pdf, which is attached for convenience).

Does this producer meet the "all or virtually all" ...

Solution Summary

This solution responds to the five questions in detail, which are related to international business and laws regarding the labeling of garments, import duty restrictions and the impact of the Euro replacing 12 national currencies.

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See Also This Related BrainMass Solution

Private Label Brands and National Brand Companies

Private label brands are products that are manufactured by one company and sold under another company's brand. Often positioned as lower cost alternatives to national brands, they have been increasing in popularity over the past several years. Store brands such as Wal-Mart's Equate or Target's Archer Farms are examples of private label brands.

According to a recent study by the Nielsen Company (Wong, 2008), 72% of respondents surveyed viewed private label brands as equivalent in quality to name brands. Rising commodity prices and consumer desire to get the best value for their money are driving the growth of private labels. As a result, some national brands have adopted a strategy of "if you can't beat them, join them," by making products for these private labels. For example, national brands such as Ralston-Purina, ConAgra, and Borden have all admitted to supplying products to various retailers to be used as private brands. Supporters of this strategy contend that it creates volume sales and profitability for national brands. Furthermore, businesses contend that if they do not supply retailers, someone else will, causing national brands to lose volume from private label sales and thereby jeopardizing a national brand company's profit position.

Other marketing experts disagree. They argue that consumers may become confused about the quality of the national brands. Opponents suggest that consumers may decide that national and private brands are essentially the same and hence, over time, private label brands may become as powerful as national brands. These critics contend that the long-term prognosis for national brand companies is not good if those companies continue with this strategy of supplying private labels.

Respond to the following:

* Do you think national brand companies should sell their products to private brands, or should national brands stay clear of the private brands and not get involved with the supply of products to these private labels?

* How does this play out in the international marketplace? What is the importance of national brands versus private labels internationally?

* Defend your answer with specific examples.

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