Two separate cases recently decided in California federal court considered whether the Federal Trade Commission’s “all or virtually all” “Made in USA” standard is inconsistent with or preempted by California domestic origin claim law and the safe harbors included therein.
In both instances, the courts held that the federal law did not preempt California’s safe harbors for unqualified Made in USA claims. Consult with a Made in USA attorney about the applicability and importance of these recent holdings to marketers and manufacturers.
The California Unqualified Made in USA Safe Harbors
By way of background, California Business and Professions Code § 17533.7 provides that it is unlawful to market a product as “Made in USA” if any part of it is “entirely or substantially made, manufactured, or produced outside of the United States.”
There are two safe harbors pursuant to the California statute that permit promoting a product in an unqualified manner as “Made in UDA” even if it contains some foreign input. A seasoned FTC defense lawyer is able to guide advertisers and manufacturers about the nuances and limitations of the safe harbors.
The first safe harbor exists where the foreign content does not exceed 5% of the product’s final wholesale value. The second safe harbor exists where the foreign input does not exceed 10%, provided that the foreign content cannot be produced or sourced in the United States.
Recent California Court Rulings
Without delving into other pertinent aspects of the cases, including pertinent facts considered by both courts, in McCoy v. McCormick & Co., a magistrate judge held that there exists no inconsistency between California’s safe harbors and the FTC’s “all or virtually all” standard. In Corona v. It’s a New 10, LLC, the court held that the FTC Labeling Rule standard did not preempt California’s safe harbors.
Granted, the FTC “all or virtually all” standard considers other factors, in addition to cost. Compliance with California’s statute does not necessarily mean compliance with the FTC Labeling Rule “all or virtually” all standard.
An experienced Made in USA attorney if you are a manufacturer or reseller interested in implementing preventative compliance protocols in order to minimize liability exposure, or if you have received a Civil Investigative Demand from a governmental agency.
Takeaway: Those that advertise, marketing, label and/or package products that include unqualified express or implied domestic origin claims, including resellers, should take note of these decisions. The decisions should be of particular interest to those that rely upon the safe harbors set forth in California Business and Professions Code § 17533.7. Discretion and risk tolerance may dictate reliance upon the standard that imposes the more onerous requirements. Compliance with the California statute may not necessarily provide protection in the event compliance with the federal “all or virtually all” standard. If you have any questions about “Made in USA” claims or compliant country-of-origin disclosures, contact a seasoned FTC Made in USA attorney that can also assist with the assessment of compliance under both federal and applicable state legal regulations.