For many Americans, keeping it local and buying American is an important part of their purchasing decisions. In this regard, we have all seen labels and advertising touting that an item was "Made in U.S.A." but what does that really mean and who sets the standards for determining if the item was really made in the U.S.A. On September 1, 2015, California Governor Jerry Brown signed into law Senate Bill 633 which will make an important change in the State's regulation of manufacturers and retailers as of January 1, 2016.
Currently, California Business and Professions Code Section 17533.7 provides that it is unlawful to sell any merchandise on which appear the word "Made in U.S.A.," "Made in America" or similar words when "the merchandise or any article, unit or part thereof, has been entirely or substantially made" [italics added] outside of the United States. Accordingly, if any individual component—no matter how small—of an item offered for sale in California was not made in the United States, it cannot be labeled "Made in U.S.A." This standard is more stringent than the Federal Trade Commission ("FTC") standard for such labeling. The FTC requires that "all or virtually all" of a product be made in the United States, examining the content of the product as a whole. The FTC guidelines provide that "all or virtually all" means that "all significant parts and processing that go into the product must be of U.S. origin." To date, California's stricter standard has meant that manufacturers either had to meet California's standard for its nationally distributed products to carry the "Made in U.S.A." label, or the manufacturer had to produce different versions of its products depending on whether they were to be sold inside or outside California, and, for unsuspecting manufacturers, they could be hit with lawsuits in California for failure to comply with Section 17533.7 though they were in compliance with the FTC standard.
Manufacturers and retailers should soon feel some relief from this double standard with Senate Bill 633's amendment of Section 17533.7. Effective January 1, 2016, that Section will not apply to three classes of merchandise produced in the United States that have one or more articles, units or parts from outside the United States: (1) merchandise of which all of the foreign articles, units and parts constitute not more than five percent (5%) of the final wholesale value of the manufactured product; (2) the manufacturer shows that it can neither produce in the United States, or obtain from a domestic source, the article, unit or part and all of the foreign articles, units and parts constitute not more than ten percent (10%) of the final wholesale value; and (3) merchandise sold for resale to consumers outside California.
Manufacturers will still need to determine whether their products meet the new California foreign content standards, However, the amended statute should go a long way toward allowing manufacturers to market uniform products withde minimus foreign content both inside and outside California without the risk of claims of unfair methods of competition or deceptive practices.