A compliance problem truly “Made in the USA”

Following the expiration of a public comment period last week, the ink is now dry on the Federal Trade Commission’s consent decree against Made in USA Brand, LLC, settling charges that the Columbus, Ohio-based company sold its “Made in USA” certification label to product-sellers without making any attempt to verify whether the companies’ products were actually made in the USA.

The FTC’s case against Made in USA Brand, LLC seems to present a pretty bright line for what not to do when labeling a product as “Made in USA.” According to the FTC, the company’s certification would have been just as easily obtainable by a computer chip factory in Shenzhen, China as it would have been by a furniture maker in Pennsylvania Dutch country. But determining whether a product is truly “Made in USA” is rarely as obvious as in these extreme examples. In our increasingly globalized economy, even the most seemingly simple products may be assembled in one country from parts manufactured in another country using components made in yet another country. Can any one of these countries really claim to have “made” the product?

Fortunately, the FTC has attempted to bring a pragmatic approach to this conundrum by allowing use of a “Made in USA” label as long as “all or virtually all” of a product is made domestically. Problem solved, right? Wrong. Enter California.

California is the only state in the country with its with own “Made in the USA” statute. And, as might be expected by those familiar with California’s consumer laws (think Proposition 65, which effectively requires that every product sold in California bear a label telling you it might cause cancer), the statute is a compliance officer’s worst nightmare. Unlike the FTC’s flexible standard, the California statute forbids use of a “Made in USA” label if the product “or any article, unit or part thereof” comes from outside the USA.

Aided by a recent state supreme court ruling that broadened the private right of action for deceptive “Made in USA” claims under California law, some class action attorneys in the Golden State have gone on the attack against large retailers for marketing their products as “Made in USA” despite their having some foreign-made components. Retailers of apparel — such as Macy’s, Nordstrom and Land’s End — have been especially hard hit. They make easy targets, as even clothing made domestically from domestic fabric often contains zippers, buttons or rivets imported from foreign countries. And the lawsuits are not going away. Indeed, just this month, a federal judge in California refused to dismiss a “Made in USA” class action against Nordstrom on preemption grounds, acknowledging the disparity between the California and FTC standard but holding that Nordstrom could comply with the California law by using qualifying language on its “Made in USA” label for products sold in California.

In a twist of irony that simply can’t be overlooked, the “Made in USA” label has given rise to something even more purely American: the class action feeding frenzy.