WASHINGTON — The debate over Made in USA labeling and advertising has made its way to Capitol Hill.
House lawmakers are poised to mark up and potentially vote on legislation Wednesday in committee that would give preemption to the Federal Trade Commission over a state’s Made in USA labeling laws.
Industry officials said the bill stems from a much stricter statute in California in particular that has made it difficult for companies to put Made in USA on their labels and has spurred several lawsuits.
The House Energy and Commerce Committee is slated to mark up a bill dubbed the “Reinforcing American Made Products Act” that was introduced by Rep. Gregg Harper (R., Miss.) at the end of April. A companion bill was introduced in the Senate last year. The bill must be approved by the full House and Senate.
The measure would amend the Violent Crime Control and Law Enforcement Act of 1994 to require the FTC’s regulation of the labeling of products as “Made in USA” or “Made in America” to supersede any state laws regarding the extent to which a “product is introduced, delivered, sold, advertised or offered for sale in interstate or foreign commerce with such a label in order to represent that the product was in whole or substantial part of domestic origin.”
The FTC is charged with preventing deception and unfairness in the marketplace. The FTC Act gives the commission the power to bring law enforcement actions against false or misleading claims that a product is of U.S. origin. U.S. Customs and Border Protection overseas imported products and enforces a requirement that “all products of foreign origin imported into the U.S. be marked with the name of the country of origin.”
Lawmakers are seeking to establish that the FTC’s authority over Made in USA labeling is “the single, national standard, preventing a patchwork of state laws.”
When the bill was introduced in the Senate last year, senators subtly pointed to a state they said has a “rigid threshold” on country-of-origin labeling standards that “exposes manufacturers to unnecessary litigation.”
Brands in California that have labeled their clothing Made in USA and the retailers carrying those brands have been the target of lawsuits in the past year.
Stephen Lamar, executive vice president at the American Apparel & Footwear Association, said: “The California law created problems because very few people can actually make products that meet the Made in USA requirements. It was discouraging manufacturing in the U.S.”
California’s origin labeling law states that companies can’t promote merchandise as Made in America if any part “has been entirely or substantially made, manufactured or produced outside of the United States.” The state’s statute, passed in 1961, is stricter than the national standard overseen by the FTC that requires that a product marked as being made in the U.S. be “all or virtually all” made domestically.
California amended its origin labeling law last year after separate lawsuits were filed against involving denim brand AG and Nordstrom, and Citizens of Humanity and Macy’s, challenging Made in USA labeling.
Gov. Jerry Brown signed legislation in September that essentially requires 95 percent of a product’s final wholesale value to come from American-made components. The bill allows manufacturers to advertise or label merchandise Made in USA as long as any foreign components do not make up more than 5 percent of a product’s wholesale value. The state’s revised Made in USA labeling also applies to merchandise that contains imported parts that can’t be obtained from a domestic source but total less than 10 percent of the final wholesale value.
But industry officials claim the California statute is still too strict and are supporting the federal legislation that gives the FTC sole authority over Made in USA labeling and advertising.
The FTC said it analyzes a number of factors to determine whether a product is “all or virtually all” made in the U.S., including the proportion of manufacturing costs attributable to U.S. parts and processing of a product, how “far removed any foreign content is from the finished product and the importance of the foreign content or processing to the overall function of the product.”
Navigating and meeting FTC’s Made in USA standards can also be complex, as the popular watch brand Shinola, which came under review by the FTC and implemented a remediation action plan, recently discovered.
The FTC also has a different standard and origin labeling rules for apparel, compared to the standard for all other consumer products, such as watches or bicycles.
Julia Solomon Ensor, an attorney in the FTC’s enforcement division of the Bureau of Consumer Protection, explained in an interview that apparel manufacturers only have to consider the origin and materials in their products that are “one step removed from a particular manufacturing process.”
“For example, a yarn manufacturer would [have to] identify imported fiber,” Ensor said. “A manufacturer of a knitted garment must identify imported yarn and a manufacturer of apparel made from cloth must identify imported fabric. So you look one step back for products that are regulated under the Textile Act.”
“To underline the baseline standard for [those claims] is to tell the truth as consumers understand it,” she said. “That’s really the standard from our perspective — tell the truth and make sure that you can back up your claims.”