The impact of California’s rules for a “Made in USA” label

An article in the Wall Street Journal (October 1, 2014) titled “‘Made in USA” Spurs Lawsuits” describes the California Law that even one rivet in a product with such a label that is not made in the USA constitutes false advertising.  Basketball hoops with just a few bolts and net imported, USA made helium tanks shipped with imported balloons, rubber rings and light bulbs in Maglite flashlights – are all termed a violation in California even when the Federal Trade Commission (FTC) permits the label on all products that are “virtually all” made in the USA.  Is California’s 100% requirement a reasonable requirement to ensure that the intent of the label is satisfied and the benefits accrued only to manufacturers who comply? Will the impact of California’s stringent requirement be a decrease in the number of US manufacturers if they cannot get the market benefit of such labels ? Should states be required to generate consistent requirements for labeling so as to eliminate the ambiguity in Federal labeling laws ?

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4 Responses to The impact of California’s rules for a “Made in USA” label

  1. Ramesh Pudhucode says:

    I think given the high unemployment in the nation, there is no harm in forcing such rules. China has such restrictions and with the result there is hardly any unemployment there. Simiarly, Japan and S Korea encourages local industry with the result that Japan’s unemployment (3.8) is less than a very “advanced” state like Minnesota (4.1%).

  2. vijay raisinghani says:

    I think Made in USA label as described by California law is an extreme definition and hard to support in the global manufacturing industry as of today. I would consider a definition based on percentage of components/bill of material approach or the manufacturing plant location as possibilities to consider as alternate approaches. The reality we know that if anything was manufactured 100% in USA the price would not be competitive so companies would either put the other country’s name or choose not to make it. Alternately Apple’s branding strategy of “designed in California” serves as a good one to have people be proud of what they have designed but I am not sure if anybody else can use it as this might be trade marked.

  3. Freddy Horn says:

    I was not aware that requirements for labeling can differ to such an extent within the US. In my opinion, this confuses consumers in the US as well as importers from around the world. If the goal is to establish “Made in USA” as a recognizable label for consumers, the requirements should be consistent in all states.

    Furthermore, the definition of California’s “Made in USA” is too strict and impractical. It makes me wonder where to draw the line. What about a US tire manufacturer that uses crude oil from Saudi Arabia? Or a US tire manufacturer that uses crude oil from the US, but parts of the offshore oil rig that captured the crude oil were manufactured in other countries? In today’s globalized world, a real 100% requirement is almost impossible. I like Vijay’s idea of a definition based on the location of the final assembly, the percentage of components, the value of the components, or a combination of them all.

  4. April King says:

    The law has been slightly relaxed with the following amendment:

    The California law, SB 633, takes effect Jan. 1, 2016. Consumer Product Matters, a product safety and consumer-related regulation and litigation blog, says, “CA SB 633 allows merchandise made, manufactured, or produced in the United States to carry a ‘Made in USA’ label if the merchandise has one or more articles, units, or parts from outside the United States if they do not constitute more than 5% of the final wholesale value of the product or if the manufacturer makes a specified showing regarding the articles, units, or parts from outside the United States and they do not constitute more than 10% of the final wholesale value of the product.”

    This amendment adds the percentage of components / product value that Vijay and Freddy mentioned. I agree that the “Made in USA” requirements are too prescriptive, even with last year’s amendment. I have noticed manufacturers using other language such as “Assembled in USA” in lieu of “Made in USA”. I believe the typical US consumer cares more about the cost and quality of a product, than whether it meets the requirements to be labeled as “Made in USA”, therefore I don’t think there will be a significant impact to US manufacturers. This does, however, give some benefit to products or industries where there is a prevalence of US manufacturers for the raw materials and subcomponents. Food and clothing industries come to mind, and wine and liquors, as well as niche handmade goods. These types of consumer products make up a small portion of the US economy. A majority of the manufacturing in the US involves petroleum and chemical manufacturing and processing, automobiles, aerospace, electronics, telecommunications, mining and lumber, which aren’t even impacted by these laws.

    States should not be required to have their own laws regarding labeling, and the federal laws need to be clear and specific. Having different laws in different states within the US would be a nightmare for manufacturers as they would need to control which labeling could go to which state if they wanted to take advantage of the “Made in USA” labeling. At that point, it would probably be too cumbersome and costly to bother with.

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