STATEMENT FOR THE RECORD

FASTENER QUALITY ACT

HOUSE SUBCOMMITTEE ON TECHNOLOGY

HOUSE COMMITTEE ON SCIENCE AND TECHNOLOGY

WASHINGTON, DC

OCTOBER 6, 1998

Caterpillar Inc. appreciates this opportunity to comment on the

Fastener Quality Act and the subsequent regulations proposed by the

National Institute of Standards and Technology (NIST).

Caterpillar Inc. is the world's leading manufacturer of construction

and mining equipment, diesel and natural gas engines and industrial

gas turbines. Headquartered in Peoria, Illinois, the company posted

record sales and revenues in 1997 of more than $18.9 billion.

Caterpillar is a worldwide distributor of over 15,000 fasteners used

in the manufacture and servicing of machines and engine products. As

a private-label distributor, Caterpillar provides fasteners made to

our specifications and bearing the Caterpillar trademark. We are also

an importer of fasteners used in our manufacturing and service

operations and supplied by non-Caterpillar manufacturers. Lastly,

Caterpillar provides world-wide fastener distribution services for

non-Caterpillar customers.

Caterpillar is a recognized leader in providing global parts and

service support for our dealers and customers. Machine down-time is

lost revenue. Therefore, to meet our customers' needs, Caterpillar

has developed logistics systems that balance world-wide demand for

parts by redistributing fasteners among dealers and distribution

centers around the world.

In preparation for these hearings, we reviewed the 1988 report of the

Commerce Subcommittee on Oversight and Investigations entitled "Is

America Losing Its Grip?" The report made a compelling argument for

federal intervention to limit the threat to the public and the obvious

economic damage from counterfeit, mismarked and substandard fasteners.

Caterpillar fully supported the intent of the Fastener Quality Act to

assure that products entering the marketplace meet manufacturers'

specifications.

However, Caterpillar also supported the passage of legislation earlier

this year to delay implementing the FQA regulations while a review of

the industry was undertaken by the Department of Commerce and the

ability of other laws to combat fastener fraud was evaluated.

Caterpillar is concerned that the proposed implementation of the

Fastener Quality Assurance Act over-reaches the original intent of

Congress and places undue administrative and cost burdens on fastener

users. For example, by applying the record keeping requirements for

traceability down to the retail level, the Act could impose on

Caterpillar an additional $20 million in compliance and administrative

costs alone. This expenditure would have to be made regardless of

the fact

that Caterpillar has not experienced any problems with bogus fasteners

entering our system because we buy to specific part numbers and/or

specifications, rather than to a consensus standard. In doing so, we

assure that parts we purchase to manufacture and service our

products consistently meet our design and engineering requirements.

Another concern is that the pending regulations fail to recognize the

widespread use of quality assurance programs, such as ISO 9000, QS

9000, and internal company programs to satisfy the testing and

certification intent of the Act. Despite repeated input from

industry, the regulations continue to focus on lot-by-lot

certification and identification.

Finally, as a global supplier of equipment operating primarily from a

U.S. manufacturing base, Caterpillar is concerned that implementation

of the FQA regulations will place U.S. manufacturers and distributors

at a competitive disadvantage with non-U.S. fastener suppliers selling

to non-U.S. customers who are not required to meet the same

regulations for testing and lot control.

We urge Congress to keep in mind that the problems outlined in the

1988 report were virtually all the result of outright fastener fraud

and counterfeiting perpetrated by unscrupulous trading companies.

Caterpillar believes that the vigorous, timely enforcement of existing

fraud laws by our judicial system with the assistance of federal

agencies and departments can be a significant deterrent to the

introduction of bogus fasteners into U.S. commerce.

With the confusions and uncertainties associated with implementing the

existing FQA, Caterpillar supports a comprehensive review of the

fastener industry, its practices and quality assurance processes to

determine if the level of regulation and traceability outlined in the

pending regulations is warranted and cost effective.

We believe the Department of Commerce report to Congress is an

important first step in that process. We would urge Congress to

direct the Department to undertake a comprehensive, open-minded review

of the current state of fastener manufacture, distribution and use.

Caterpillar Inc. looks forward to working with the Committee in its

evaluation of the industry and determination of what statutory changes

are necessary to reflect the current state of the fastener industry,

the risks to the public and the costs to our economy.