Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
The push for fraudulent 'manufacturing' statistics continues -- "Factoryless Goods Producers"
The reclassification in the trade statistics is merely the first step in the effort to massively (and fraudulently I would argue) reclassify companies that manufacturing NOTHING in the United States as US manufacturers, with their manufacturing 'production' attributed to their locations in the United States. For an excellent blog post about the currently open comment window on the next stages of this regulatory fraud see the EPI blog.
The key step now is to take action to block this by generating negative comments. The Ideal Taxes Association will be drafting a letter as part of this comment period. Here is the information on how to register a comment.
DATES: To ensure consideration of your
ADDRESSES: Correspondence concerning
I have already called and left a message for John Murphy who is the contact person for this comment period. His secretary indicated that he is not in the office today, but that he will be back in the office on Monday.
Here are some key points to note about this revision.
1. The revision will likely open the federal government up to substantial new demands that any tax advantages and other subsidies available to firms that manufacture in the United States be made available for "factoryless goods producers" (FGPs). Such subsidies would provide no benefit for U.S. manufacturing workers, and would further harm the federal government budget.
2. The revision would likely produce distorted statistics that would claim production taking place in China, Vietnam, Mexico, Canada, and other non-US locations as U.S. production. If Walmart assumes the production risk of contracting to have products produced abroad, is it therefore a U.S. manufacturer? Hardly.
3. The revisions are in direct contradiction with international norms. The International Monetary Fund's Balance of Payments Manual directly advises against this treatment. https://www.imf.org/external/pubs/ft/bopman/bopman.pdf.
"When goods are acquired from one
4. The proposal contradicts the Federal Trade Commission's definition of U.S. manufactured goods.
A product that is all or virtually all made in the United States will ordinarily be one in which all significant parts 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 minimus, or negligible, amount of foreign content… 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.
The proposed revision to classify as manufacturers companies that have no factories and that manufacture nothing is an unnecessary blurring of the lines between wholesale merchandising, and manufacturing activity. It serves no positive purpose, but will potentially do significant harm to the U.S. budget while distorting trade statistics, and moving contrary to international norms.
Comment by Hugh J Campbell Jr., CPA, 6/9/2014:
The proposed changes in the North American Industry Classification System (NAICS) for 2017, reminded me of the following measurement quotes:
“It is impossible to escape the impression that people commonly use false standards of measurement — that they seek power, success and wealth for themselves and admire them in others, and that they underestimate what is of true value in life.” ― Sigmund Freud
“Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it.” ― H. James Harrington, Process Improvement Guru
Response to this comment by Hugh J Campbell Jr., CPA, 6/10/2014:
Comment by Hugh J Campbell Jr., CPA, 6/10/2014:
Globalizationgate: Fudging the Data to Fit the Philosophy that Free-Trade is a Silver Bullet
“Data is of course important in manufacturing, but I place the greatest emphasis on facts.” -Taiichi Ohno - Father of the Toyota Production System
Journal of Economic Literature:
Atlantic Economic Journal: