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Made in the USA? Well, Mostly

On Behalf of | Nov 4, 2015 | Legal Blog

When you’re out shopping at your favorite big box store and you come across a pair of blue jeans prominently displaying the label “MADE IN THE USA,” does it affect your decision to purchase and, equally important, just what does that label mean to you? Does it mean the jeans were designed in the USA or that the fabric was made in the USA or that the cut pieces were sewn together in the USA?

A few years back, a client called our office irate over U.S. Customs in Long Beach that was refusing to allow into the country an order her company had placed for “MADE IN THE USA” labels that had been manufactured in Vietnam. She was especially upset because the company had planned to sew the labels onto an order of t-shirts it had ordered from Cambodia and, to her way of thinking, the act of sewing on the labels satisfied the legal requirements for fair advertising when using “MADE IN THE USA.”

At the time, the State of California had much stricter laws regarding the interpretation of what constitutes “MADE IN THE USA” and merchandise (or any article, unit, or part thereof) that had been made, manufactured, or produced outside the United States lawfully could not bear the label. Not surprisingly, consumer rights lawyers pounced on the opportunity and there has been a virtual epidemic of lawsuits against manufacturers over their compliance with California labeling laws. However, California Governor Jerry Brown recently signed into law SB 633 which may have singlehandedly resolved these suits by bringing California into alignment with Federal and other state requirements over the use of the label.

Beginning January 1, 2016, California businesses may label products as “MADE IN THE USA” if the finished product is made, manufactured, or produced in the United States and any parts manufactured outside the U.S. constitute no more than 5 percent of the final wholesale value of the finished product. There is a second, higher threshold of 10 percent if the manufacturer can prove that it cannot make the foreign components in the U.S. or obtain them from a domestic source. SB633amends Section 17533.7 of California’s Business and Professions Code, but the new standard does not apply to merchandise sold for resale to consumers outside the state. Such goods must conform to the labeling requirements of the state or country where it is sold to consumers and it is up to local authorities or parties to enforce those laws relative to the labeling.

Why It Matters. SB 633 effectively repeals California’s old “100 percent” labeling standard and the sudden change may allow the myriad defendants of pending false labeling lawsuits to sue the change to obtain a dismissal of their lawsuits. Further, California manufacturers are likely to welcome the relief from having to sweat over whether every nut and bolt in the goods they sell was actually made within the confines of the U.S. The eased compliance burden also makes enforcement much simpler given that California is now in alignment with the labeling rules used by the Federal Trade Commission and the remaining 49 states. The “new” standard means that manufacturers and retailers may affix a “MADE IN THE USA” label to goods even though those goods contain a negligible amount of foreign components provided “virtually all” of the individual goods were actually made in the United States.