What Does “MADE IN THE USA” Really Mean?

The current presidential race has made one thing clear: both major party candidates want to champion stemming the tide of manufacturing jobs leaving the U.S. for other countries. The candidates have gone so far as to attempt to publicly shame companies that begin manufacturing outside of the U.S. and have proposed tax plans and trade agreement proposals designed to keep those jobs in (or move them back to) the States.

Political platforms normally follow polls and reflect the mood of voters, who also happen to be consumers. As such, you would currently expect products stamped “Made in the USA” to be of premium value to your average consumer in the U.S. Companies looking to get a leg up on the competition may seek to place Made in the USA tags on their merchandise or package them with other patriotic symbols, such as the U.S. flag or an outline image of the USA.

But what does “Made in the USA” really mean? Take a table saw assembled at a plant in Ohio with a saw blade from Japan, metal frame legs from China, a wood surface from Brazil, a motor from another company in Indiana . . . you get the picture. Just because the final product rolls off of a line in Ohio, is it legal to label that product “Made in the USA”?

While some industries, such as textiles and automotive, have specific laws and regulations that require the disclosure to consumers of whether the goods or their components were made in the USA, the vast majority of products in commerce have no such requirement. For competitive reasons, however, many companies still want to slap the “Made in the USA” label on their products. Prior to applying that patriotic tag, companies should be very careful to ensure that this American Made statement will not be false or misleading. The Federal Trade Commission’s published guidelines offer help in sorting through this American Made issue.

The FTC uses an “all or virtually all” standard for determining whether a product was truly made in the U.S. As such, this does not require that the product or its components be 100 percent sourced and made on U.S. soil, but it does set a fairly high standard. While not setting forth specific percentages (as California law does), the FTC guidelines indicate that “all or virtually all’ means “that all significant parts and processing that go into the product must be of U.S. origin. That is, the product should contain no — or negligible — foreign content.”

While the final assembly of the product must be completed in the U.S. to qualify for the claim, the foreign assembly or manufacture of some parts of the product becomes a murkier inquiry. As noted above, the FTC will focus on “significant” parts and processing. The rubber hoses on a propane grill may not be significant parts, while the burners would be. In addition to the significance of the part to the functionality of the final product, the FTC guidance advises manufacturers to consider the costs of the components or processing relative to the total cost of the final product.

In a world of sourced components, manufacturers who want to make an American Made claim cannot simply rely upon the location of the facilities of its suppliers. In the table saw example, even though the motor may be assembled at an Indiana plant, the onus is on the manufacturer of the table saw to inquire with its supplier as to the source of the parts for the motor, especially since the motor would be considered a significant part of the saw. In some cases, manufacturers must even consider the source of raw materials for parts of the final product. A gold watch, handcrafted in New York, may not be considered Made in the USA if the gold was mined in Africa, as that gold accounts for a significant portion of the final cost.

As you can see, the inquiry into whether a product is truly “Made in the USA” is not cut and dry. To hedge risks, some companies may consider qualified claims such as “Assembled in the USA from foreign parts” or “Made with 60 percent U.S. Materials.” The bottom line for any claim is ensuring that it is true and not misleading. Equally as important, companies must have the evidence to substantiate a claim should the FTC or even a competitor question it.

Parties who feel aggrieved by an untrue American Made claim may file complaints with the FTC, which will then conduct an independent investigation. The Lanham Act, as well as some state laws, also provides an avenue for consumers and competitors to sue over such false or misleading claims. As the damages in any such action can be significant, it always pays to research and substantiate a claim before simply slapping on the “Made in the USA” tag.

Barnes & Thornburg LLP is a large, full-service law firm that seeks to take a more entrepreneurial and cost-effective approach both to client service and its own business.