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What does “Made In America” Mean?

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The label “Made in America”, “Made in the USA”, and other such phrases, have two meanings which depend on where the product is sold.  “Made in the USA” still has value to many customers.

Applicable in every state (and territory) in the United States, the Federal Trade Commission (FTC) has developed an enforcement policy which dictates “all or virtually all” of the materials and labor that went into the product are of U.S. origin in order for a manufacturer to claim “Made In America”.  The FTC’s  authority to regulate U.S. origin claims derives from Section 5 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 45, which prohibits “unfair or deceptive acts or practices.”

However, and this is a big “however”, California has their own law, CA Bus. & Prof. Code § 17533.7, which makes it unlawful to sell or offer for sale in California “any merchandise on which . . . there appears the words ‘Made in the U.S.A.,’ ‘Made in America,’ ‘U.S.A.,’ or similar words when the merchandise or any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States.”

Carefully note the distinction of “or any article, unit, or part thereof” in the California law.  Accordingly, all parts, screws, pins, lubrication, everything, has to be made in the US under California law.  The smallest little part has to be manufactured in the US.

A person sued Kwikset Corporation because Kwikset used some screws and pins which were made in Taiwan and some sub-assemblies which were manufactured in Mexico, even though a majority of the lock sets’ content was manufactured in the US.  The California Supreme Court sided with this person and allowed the suit to continue under the state unfair competition law.

Note the California law applies to any material sold in the State, regardless in which state it was manufactured.  So there exist two conflicting laws, Federal versus California, regarding the ability of a manufacturer to claim “Made in America”.

For example, consider an article of clothing.  The cotton can be grown and processed in California.  The fabric can be manufactured in a mill in California.  The cloth can be cut and sewn in a plant in California.  But the one button or zipper or clasp might have been manufactured in China.  That article of clothing cannot be sold in California as “Made in America”.  Under Federal law, it can be labeled as such.  By the way, Federal law exempts textiles.

You can see the burden this imposes on manufacturers.  Maglight, for example, can sell their flash lights as “Made in the USA” in all states except for California.  Presuming they want to sell in California, they have to have two different SKU numbers and different packaging for each of their products; one for California and one for all other states.  Ironically, Mag Instruments is located in Ontario, California, and has a strong corporate belief in Made in America.

What About Computers?

It should be very obvious by now there is not a computer or LCD display currently being made which can claim “Made in America” when sold in California.  The manufacturers for most of the ICs, drives, LCD displays, and so forth, are located off-shore.  There are no manufacturers for these parts in the US.  If even one tiny surface-mount resistor was made overseas; not “Made in the USA” according to California.

Under the FTC’s ruling, though it can be argued, computers also do not qualify for the “Made in the USA” label.  One of the tests is the Proportion of U.S. Manufacturing Costs”.  Assuming the product is put together or otherwise completed in the United States, the Commission will also examine the percentage of the total cost of manufacturing the product that is attributable to U.S. costs (i.e., U.S. parts and processing) and to foreign costs.  Looking at the costs of the components versus assembly labor to put a computer together in the US, again is should be obvious the majority of the cost in a computer is for the motherboard, processor, memory, drives (not so much anymore), power supply, etc.  The total domestic labor cost would be a small fraction of that.

Assembled in the USA

Per the FTC, “A product that includes foreign components may be called “Assembled in the USA” without qualification when its principal assembly takes place in the U.S. and the assembly is substantial. For the “assembly” claim to be valid, the product’s “last substantial transformation” also should have occurred in the U.S.A.”

However, the FTC provides an example that applies to computers:

“Example: All the major components of a computer, including the motherboard and hard drive, are imported. The computer’s components then are put together in a simple “screwdriver” operation in the U.S., are not substantially transformed under the Customs Standard, and must be marked with a foreign country of origin. An “Assembled in U.S.” claim without further qualification is deceptive.”

CP Technologies can claim “Assembled in the USA” because there is much more than “simple screwdriver operation” in the assembly of one of our rugged rackmount computer systems.  There are usually custom cables included which are domestically manufactured.  Software is loaded and configured on a per-order basis.  System documentation is prepared to allow future builds of the same product.  Custom sheet metal is fabricated.  Chassis are modified to fit the application.

California does not recognize or regulate “Assembled in the USA”.  However, California law specifically states “…on which merchandise or on its container there appears the words “Made in U.S.A.”…”   Thus, it appears that “Assembled in the USA” is valid in California and meets the Federal test as long as it is not applied to the product or the packaging.

CP Technologies proudly manufactures our products in San Diego, CA, USA.  We use domestic sources whenever possible.  As with all computers, there is foreign content which is carefully assembled into final form depending on the customer’s requirements.  CP Technologies’ military computer system enclosures are fabricated in the USA though there may be  foreign content in the fasteners and the installed components are of foreign manufacture.

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