California Eases Requirements for Making “Made in USA” Claims
California Gov. Jerry Brown signed into law Sept. 1 legislation that eases the state’s requirements for labeling products as having been made in the United States. The change gives apparel and other companies additional flexibility in sourcing their products and could lower their susceptibility to litigation.
California’s previous law specified that an item could not be labeled as “made in USA” if it or any article, unit or part thereof had been entirely or substantially made, manufactured or produced outside the U.S. The revised law will allow a product to be labeled “made in USA” if (a) materials from outside the U.S. constitute not more than five percent of the final wholesale value of the product or (b) the manufacturer can show that articles, units or parts from outside the U.S. are required to produce the finished good but do not make up more than 10 percent of its wholesale value. This aligns more closely with the standard enforced by the Federal Trade Commission, which states that “all or virtually all” of a product’s parts must be made, and final assembly must occur, in the U.S.
There has been a growing number of lawsuits in California alleging noncompliance with the previous standard, costing targeted companies substantial sums to either settle the charges or fight them in court. In November 2014 a federal judge declined to throw out a class action lawsuit against clothing labeled as “made in USA” for having components sourced elsewhere, ruling among other things that the California standard was not pre-empted by the more flexible FTC rules because it is possible to comply with both. Sandler, Travis & Rosenberg attorney Elise Shibles said that while the revised law should reduce the number of such cases in the future, she expects this and similar cases already underway to proceed because the changes will not take effect until Jan. 1, 2016.