February 12, 2013

A Reminder for Those Eager to Jump on the "Made in U.S.A." Bandwagon

Consumer Advertising Law Blog,

"Made in USA" is back in the news and on the minds of consumers and manufacturers alike. Whether it is a desire to support American manufacturing jobs, a perception that the quality is superior, or just plain patriotism, Americans love "Made in USA" products. A recent USAToday article reports on these consumer sentiments and highlights the trend of manufacturers and retailers using "Made in USA" in their marketing efforts in hopes of turning that love of America into dollars. The article reports the findings of a Boston Consulting Group survey which found that over 80% of US consumers would pay more for "Made in USA products." 93% of those who are willing to pay more cite the desire to support American jobs. With everyone from Wal-Mart to Caterpillar and 3M recognizing the marketing value of "Made in USA," we think it is a perfect time to remind our readers of the potential bumps in the road for those who jump on this bandwagon.

Companies who want to make an unqualified "Made in USA" claim -- whether on packaging or in advertising -- must be careful to comply with relevant federal and state standards, particularly California's. As we have previously blogged, the FTC' s "Made in USA" standard, while seemingly straightforward, is very stringent and can be challenging to meet for many manufacturers. The FTC's "all or virtually all" made in the United States standard requires that "the final assembly or processing of the product must take place in the United States" as a minimum threshold. But satisfying this threshold alone is not enough. The FTC also considers the "portion of the product's total manufacturing costs that are attributable to US parts and processing." While the FTC makes this determination on a case-by-case basis, the percentage of the manufacturing costs that that must be attributable to US parts and processing is very high--often 90% or more. And, companies cannot just buy a component from a US supplier and "simply assume that the component is 100% US made."

The standard considers that remoteness of any foreign content in the finished product, and the FTC's guidance suggests that the company should at least find out how much of the component is US made. While the FTC last filed a "Made in USA" complaint in 2009, that does not mean that the FTC has been inactive. As the USA Today article notes, FTC staff report receiving "several complaints each month."

However, companies whose marketing or products reach California -- and given the size of California's market, as a practical matter that means just about any business that sells to American consumers -- must contend with an even more stringent standard. As we have blogged, the California standard, as interpreted by California courts, goes well beyond the FTC standard and prohibits "Made in USA" claims if the product "or any article, unit, or part thereof," is "entirely or substantially made, manufactured, or produced outside of the United States." In practice, this has meant that "Made in USA" labels are prohibited if any part of the product--even a small component such as a light bulb or O-ring in a flashlight that cannot be sourced domestically-- is "substantially" made overseas. The impact of this standard, which effectively prevents many products that otherwise meet the FTC standard from being marketed in California as "Made in USA," has not escaped the attention of the business community and legislators. Last year, a bill to amend the California law to bring it in line with the FTC standards passed the California Assembly unanimously. But, faced with what has been described as "heavyweight opposition from consumer groups and personal injury attorneys," the bill was defeated in the California Senate Judiciary Committee.

So, while the desire to capitalize on consumers' love of all things American is unlikely to cool anytime soon, companies who make unqualified "Made in USA" claims should tread cautiously, particularly in California.

© Arnold & Porter Kaye Scholer LLP 2013 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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