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 Richmans' Trade and Taxes Blog

The push for fraudulent 'manufacturing' statistics continues -- "Factoryless Goods Producers"
Jesse Richman, 6/6/2014

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
comments or proposals related to the
potential revision of NAICS for 2017 as
detailed in this notice, comments must
be in writing and received no later than
July 21, 2014. Please be aware of delays
in mail processing at Federal facilities
due to tightened security. Respondents
are encouraged to send both a hard copy
and a second copy via fax or email
(discussed in ADDRESSES below).

ADDRESSES: Correspondence concerning
the ECPC’s intent to review and possibly
revise NAICS for 2017, comments on the
business organization clarifications, and
all proposals for new industries in
NAICS for 2017 should be sent to John
Murphy, Chair, Economic Classification
Policy Committee, Census Bureau,
Room 8K157, Washington, DC 20233–
6500. Because of delays in the receipt of
regular mail related to security
screening, respondents are encouraged
to also submit comments by email to or by
fax at (301) 763–8744. Mr. Murphy can
be reached at (301) 763–5172.
Comments may also be sent via http://—a Federal
E-Government Web site that allows the
public to find, review, and submit
comments on documents that agencies
have published in the Federal Register
and that are open for comment. Simply
type ‘‘NAICS for 2017’’ (in quotes) in
the Rules, Comments, Adjudications or
Supporting Documents search box, click
Search, click Comment Now!, and
follow the instructions for submitting

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.

"When goods are acquired from one
economy, relinquished again to that or some other
economy, and do not cross the frontier of the economy
in which the temporary owner is a resident, the activity
is considered a merchanting transaction rather than an
import and re-export of the goods. It is recommended
that the country of the temporary owner exclude such
goods from the goods component." (p. 63 emphasis added.)

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.

Your Name:

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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:
Based on the first quote, the proposed change will enable the Administration to artificially inflate U.S. export and fraudulently achieve its export goal. The proposed change, in light of the second quote, will corrupt the measurement, thereby eliminate any possibility of improving the U.S. Trade Deficit.

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

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