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California Steps Back from Strict “Made in USA” Label Requirements

An audible sigh of relief from domestic manufacturers everywhere greeted California’s recent enactment of a law loosening its restrictive “Made in USA” label requirements. In fact, California’s new law may provide a degree of certainty in what has previously been an uncertain regulatory landscape.

Long considered the bane of domestic manufacturers, forcing them to maintain multiple label inventories and juggle competing domestic and foreign country of origin marking requirements, California law previously prohibited labeling products with an unqualified “Made in USA” claim if any portion of the underlying product was made outside the United States.

Such a high burden previously imposed by California was almost impossible to meet for some products, and was in direct conflict with the Federal Trade Commission’s (FTC) “Made in USA” standards, which allow for unqualified “Made in USA” claims where products are “all or virtually all” made from domestic inputs, and provided any foreign inputs had been substantially transformed. While the FTC’s standard is still quite high, California’s prior law forced domestic manufacturers who satisfied the FTC’s “Made in USA” standard to meet an almost impossible burden of 100% U.S. content or otherwise maintain separate California inventories which was economically prohibitive.

On September 1, 2015, Governor Jerry Brown signed S.B. 633 into law, amending Section 17533.7 of the California Business and Professions Code, allowing companies to label their products “Made in USA” if less than 5% of the product’s wholesale value is from foreign components, or if less than 10% of the wholesale value is from foreign components which are unavailable in the United States. This new standard more closely resembles the FTC’s “Made in USA” standard.

The FTC’s current “Made in USA” standard requires a product to be “all or virtually all” of U.S. content and have its final assembly occurring within the U.S. However, the FTC has consistently refused to provide quantitative benchmarks as to when an unqualified “Made in USA” claim is appropriate, or specify an exact percentage for compliance. Instead, the FTC has evaluated each claim on a case-by-case basis. The new California law arguably allows for a more practical application of unqualified “Made in USA” claims, and provides guideposts for U.S. manufacturers on when an unqualified “Made in USA” claim is authorized. Whether those guideposts are reasonably set is no doubt a battle for another day.

Although United States Customs and Border Protection (CBP) requires that all imported merchandise be marked upon entry in accordance with its country of origin marking requirements, the U.S. customs laws only require marking for products considered to be of foreign origin. Where imported goods are substantially transformed as a result of domestic processing or otherwise meet the requirements of the North American Free Trade Agreement (NAFTA) for inputs from Mexico or Canada, manufacturers may utilize an unqualified “Made in USA” label voluntarily if their goods meet the FTC standard, and, if sold in California, meet California’s loosened standard. Both California and the FTC will continue to allow for qualified “Made in USA” claims (e.g., “Made in USA of foreign and domestic materials”) for product that is not required under CBP’s laws to be marked with a foreign country of origin, but which do not otherwise meet the FTC’s or California’s threshold for an unqualified claim.

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About this Author

James Sawyer, Drinker Biddle Law Firm, Chicago, Trade Law Attorney
Partner

James L. Sawyer counsels clients in all areas of U.S. import laws and regulations, including tariff classification, valuation, origin determination and marking, Free Trade Agreements, and duty preference programs. He chairs the firm’s Customs and International Trade Team and is the Regional Partner in Charge of the firm's Chicago office.

James represents clients in enforcement proceedings and investigations, Focused Assessment audits, and other verification proceedings conducted by U.S. Customs and Border Protection (CBP). He frequently assists clients craft...

312-569-1156
Mollie Sitkowski, Drinker Biddle Law Firm, Chicago, Trade Law Attorney
Associate

Mollie D. Sitkowski assists clients in ensuring their internal processes meet Customs' "reasonable care" standard. She assists clients with various aspects of trade law, including valuation, classification, free trade agreements, country of origin determinations, and auditing their import documentation to identify potential issues and risk areas. Mollie also supports clients with export compliance, including advising on export screening and classification, and filing license classification requests and voluntary disclosures with the Bureau of Industry and Security (BIS) and the Directorate of Defense Trade Controls (DDTC). She works with clients to obtain beneficial outcomes from Customs' administrative processes by filing PEAs and Protests, submitting ruling requests, and filing prior disclosures. Additionally, Mollie assists in drafting briefs to the Court of International Trade and Court of Appeals for the Federal Circuit concerning tariff classification disputes for firm clients.

In General. Mollie earned her law degree from Chicago-Kent College of Law, where she was a Chicago-Kent Honors Scholar and on the Dean’s List. While in law school, Mollie was a paralegal with the firm’s Customs & Trade practice. She earned her bachelor’s degree cum laude from University of San Diego.

312-569-1502