Even FTC Not Sure What’s ‘Made in USA’ : Regulation: Agency puts off hearing on New Balance athletic shoes labeling while it explores the issue.

Caught in an awkward dispute with a New England shoe company over its use of the “Made in USA” label, the Federal Trade Commission conceded Tuesday that it is not entirely sure what an American product is anymore.

The FTC put off a court hearing that would have tested its earlier finding that New Balance Athletic Shoes Inc. must quit using a “Made in USA” label on its shoes and drop its All-American ad campaign, even though it makes most of its shoes in Massachusetts and Maine.

The FTC’s reasoning was that New Balance shoes are not made from 100% U.S. components and that nearly a third of the shoes it sells are imported. But the FTC decided to postpone a scheduled Monday hearing while it rethinks what has become a muddled issue.

“The commission intends to review, among other things, whether its longstanding standard that a product must be wholly domestic before a marketer can make an unqualified ‘Made in the USA’ claim is appropriate in today’s global economy,” the FTC said.

Indeed, the globalization of the U.S. manufacturing base has made it increasingly difficult to define an American company or an American product. Is an airplane manufactured by Douglas Aircraft Co. in Long Beach, which is produced from parts manufactured in dozens of countries, an American product? How about a Toyota assembled by union workers at the Toyota-General Motors joint venture plant in Fremont, with engines from Japan and tires from Tennessee?

Jim Davis, chairman and chief executive officer of the Boston-based shoe company, says most of the New Balance shoes sold here--and nearly all of the company’s popular American Classic line--are produced by the 750 people employed in his four factories in New England. He says he imports the rubber soles from China only because there are no domestic suppliers.

Davis, who has parlayed his company’s role as one of America’s last athletic shoe manufacturers into a $310-million-a-year operation, argues this dispute is about more than profits. He says the FTC’s efforts to limit the “Made in USA” label to goods produced solely in this country threatens all U.S. industries trying to survive in an increasingly global economy.

He said the Clinton Administration should be rewarding those companies struggling to keep jobs in this country rather than following the migration to low-wage countries in Latin America and Asia. Nike, Adidas and Reebok, the top U.S. athletic shoe companies, make most of their shoes in Asia.

“Instead of developing a working relationship with companies like ours who are trying to manufacture here, the government is almost working against us,” said Davis, who bought the company in 1972.

New Balance shoes already meet the domestic content requirements established by the North American Free Trade Agreement and the U.S. Customs Service, according to Davis. Under NAFTA, at least 55% of the components and labor must come from the United States, Canada or Mexico to carry the “Made in USA” label. Customs requires that more than 50% of the shoe’s components be made in the United States and the product must be “substantially transformed” in this country to carry the “Made in USA” label for sale abroad.

Davis argues that most Americans are savvy enough to recognize that few products manufactured in this country are 100% home-grown anymore.

“As far as we’re concerned, nothing out there is 100% made in the U.S.A. anymore,” he said.

The FTC disagrees. Steve Baker, the regional director of the FTC’s Chicago office, said studies have shown that Americans believe the “Made in USA” label means “all American parts and labor.”

Baker argues that the internationalization of the U.S. economy increases the pressure on the FTC to make sure only products that are “wholly domestic” carry a “Made in USA” label. He said New Balance’s advertising and sales campaign “clearly overstates” the company’s position.

“If you’re a consumer or a union member or somebody who cares about these things, then you need accurate information,” he said. “The consumer is really powerless on these kinds of things. They can’t tell if ‘Made in the USA’ means 1% or 100%.”

But Tuesday’s announcement indicates the FTC is having second thoughts. It said it will conduct a “comprehensive review” of consumer perceptions of the “Made in USA” label and nullify a proposed settlement with Hyde Athletic Industries Inc., another U.S. athletic shoemaker, in a similar case filed by the FTC.

Free trade advocates argue that such labeling requirements are meaningless in an economy where capital, goods and people flow across borders like water. Jim Langlois, executive director of the National Apparel and Textile Assn., a group of West Coast importers, said the U.S. textile and apparel labeling requirements are a costly and time-consuming burden that amount to an invisible trade barrier.

He argues that an American product should be defined as something made or sold by a U.S.-based company.

“Take a company like Levi Strauss,” he said. “Most people would consider Levi Strauss to be an American company. But within the same department store, you’ll find Levi jeans made exclusively in the U.S. versus Levi jeans made exclusively in other countries. Do consumers really care?”

But Robert Swift, executive director of the Crafted With Pride in USA Council, a marketing group created to promote U.S. manufacturing, said strict labeling laws are one way to reward companies, U.S. or foreign, that create jobs in this country.

The New York-based council created a Crafted With Pride label that can only be used on apparel and textile products that are manufactured in the United States with fabric produced from U.S.-made fiber. The only exceptions are textiles made from natural fibers such as wool, cotton and silk.

“The issue is, are you interested in maintaining a healthy U.S. manufacturing base?” Swift asked. “The ownership of the company is not the criteria.”

American jobs could be at stake in New Balance’s battle with the FTC, which has asked for a change in the company’s labels and advertising. Davis said a loss in court would force him to rethink plans for a $25-million infusion that would significantly boost U.S. production over the next three years.

“It’s a heck of a lot easier for us to close our plants and go to China where we would pay two bucks a day [in wages] versus 10 or 12 bucks an hour here,” he said.