Many small manufacturers in the U.S. struggle to determine if the product that they assemble, manufacture or produce truly qualifies for the labels “Made in USA” or “American Made”.
Complying with American Made Standards
Consumers commonly make buying decisions based on labels. An important label includes country of origin. For example, U.S. manufacturers proudly label their products with “American Made” or “Made in the USA”. “American Made” represents quality products and lends a strong selling point for the product.
Unfortunately, there is confusion behind the definition of “American Made”. As a result, manufacturers in the U.S. are eager to comply with the “American Made” or “Made in USA” standards. Especially, as long as the standard is consistent and well defined.
Yet, some companies are too eager to capitalize on the “American Made” logo that actually do not qualify. Therefore, an “American Made” standard helps prevent those companies from just throwing a sticker on any product. Specifically, those that do so while disregarding its true origin.
What Does “All or Virtually All” Mean?
A Google search for “Complying with Made in the USA” produces 854,000 results. Furthermore, the #1 ranking is a link to the Federal Trade Commission website. The article is titled: Complying with the Made in USA Standard. The page offers a link to a pdf that dates back to 1998. However, it is still relevant today. This pdf states:
Traditionally, the Commission has required that a product advertised as Made in USA be “all or virtually all” made in the U.S.
“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 at least negligible — foreign content.-Federal Trade Commission pdf
So what does “or at least negligible” actually mean?
Manufacturers may think that they are truly making American products with all domestic suppliers. However, certain parts or raw material may be imports from a foreign country. All unbeknownst to the manufacturer.
Even if you purchase raw materials, parts, and components from a domestic distributor, those products may have originated in another country.
Manufacturers have to be aware of all aspects of their products. However, this can be a difficult undertaking. When you purchase components from a vendor they will not always provide you with the origin of those pieces. This is especially true if there is a larger component that has hardware or other parts that form the component as a whole. This is the situation that California manufacturer Maglite found themselves in.
As an example, Maglite, a California lighting manufacturer made national news. They lost a lawsuit over false “Made in USA” claims. Maglite is committed to American manufacturing and an amazing American entrepreneurial success story (click for video from ABC News). However, the lawsuit boiled down to a microchip and a rubber seal. Both of which had origins overseas. Therefore, costing the owner thousands of dollars in legal defense. Meanwhile, they still lost their case.
Check out this clip from CNBC (click here).
Unfortunately, in this case, the responsibility fell on the manufacturer. Like many manufacturers, they felt they were playing by the rules but fell short according to the court of California. Also, ignorance is not a reliable excuse or defense. There are companies that find themselves in trouble even when intentions are honest and genuine.
The Best Intentions
Manufacturers may have the best intentions of purchasing domestic goods. However, these products are not always available. Specific countries, geographical regions, climates, and many other factors affect the production of certain products in those areas. You may have a product that you assemble in the U.S. Production of that same product could occur with raw components originating from various countries.
In many cases, it is just not cost-effective to produce certain products in the U.S. Basic economics says that supply and demand control a market. Price is typically a key ingredient. What if the production of a product isn’t at a price that a customer is willing to pay? It is going to be extremely challenging to create a product that will sell. It will also be hard to sustain a profitable company due to the lack of interest in your product. Well at this point you are thinking, thank you Captain Obvious.
How Can You Protect Your Business?
One of the main ways to protect your business from lawsuits like that Maglite experienced is to be aware of your sourced parts. Also, before claiming your product is “Made in America” be aware of the laws in your state.
Why would the state you’re in make a difference? Different states have different definitions of “American Made”. Unfortunately for Maglite, California has one of the strictest definitions in the country (click here). Other states, however, acknowledge that there needs to be some leeway when it comes to hardware.
In Maglite’s case the components they got in trouble for were not available in the United States at the time. Maglite had done searches for that product and came up empty handed. That is another issue that manufacturers need to be aware of. When a component is not available in the U.S. what do you do? Also, how can you still receive the “Made in America” Stamp?
What if You Can’t Find Your Components in The U.S.?
Unfortunately, there are not many options. Depending on the component you may be able to employ a local business to manufacture the part for you. If your business is lucky enough to have ties to another manufacturer that would be willing to help, you are then all set. There is also the possibility of you manufacturing the piece yourself. The plus side to this is you would know exactly where the piece came from.
However, what if this isn’t an option? This is a very real possibility. There may not be an option of creating your own part. Whether due to time constraints or available resources. In this situation, you will need to find another way.
What if the only option is to import that specific part like Maglite had to? This is when you need to be aware of your state’s specific laws on the matter. If you are lucky enough to be in a state that has wiggle room depending on the component you may be able to import what you need without penalty.
However, if you are in a state with strict laws (like Maglite) you may have no choice then leaving off the “Made in America” label.
According to an article in the Daily Bulletin, Maglite hopes for a federal bill on the “Made in America” standard. A federal bill would certainly level the playing field as well as clarify the definition.
How Do You Still Represent Your American Workforce?
Do not lose all hope in that situation! There are other labels that you can use that will still encourage customers to buy your product. Some of these labels include:
- “Assembled in America”
- “Contains –% American Product”
- “Final Product Assembled in the USA”
- also “USA Factory Assembled”
Each of these labels still encourage loyal customers and patriotic sales. Customers will see one of these labels and know that they are purchasing a product from an American Factory. Furthermore, with these labels and others like them, you can represent your American workforce and still be in compliance with the law.
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