Electronic Retailer - May 2012 - 41

BY JEFFREY D. KNOWLES, AMY RALPH MUDGE AND RANDAL M. SHAHEEN

‘Made in USA’: Not So Fast
We recently returned from the International Home and Housewares Show in Chicago. It is always interesting to see what is trending, and, judging by this year’s show, it looks like there are a lot of espresso machines, celebrity chefs, smoothies and cake pop pans in America’s future. Two types of product claims also appeared repeatedly on the exhibition floor – “green” claims and “Made in USA” claims. We will discuss green claims in a later article and focus today on products made in the USA. With all of the attention paid to the flow of imports from China and elsewhere, it’s understandable that companies with manufacturing facilities still in the United States are proud of that fact and want to find a way to communicate that information to consumers. We saw many “Made in USA” and “Made in America” signs and American flags displayed alongside products. In conversations with exhibitors and with various clients, it is clear that many people understand “Made in USA” and similar claims (including potentially the use of American symbols) to mean that the product was manufactured at a U.S.-based facility. However, that is not the definition used by the Federal Trade Commission or the state of California. The FTC issued an Enforcement Policy Statement in 1997 that requires manufacturers who make unqualified “Made in USA” claims to be able to show that “all or virtually all” of the product was made in the United States. A “Made in USA” claim can be express, for example, “Manufactured in USA,” or it can be implied. Implied claims can include the use of American flags or outlines of U.S. maps or the use of phrases such as “True American Quality.” The FTC’s statement goes on to note that to meet this standard, ordinarily, “all significant parts and processing that go into the product are of U.S. origin.” Final assembly must take place in the United States and the FTC will then consider other factors such as “the portion of the product’s total manufacturing costs that are attributable to U.S. parts and processing; and how far removed from the finished product any foreign content is.” The FTC’s standard does leave room for some de minimis foreign content. In addition, foreign content further back in the manufacturing process, for example, the imported oil that was used to make plastic components, does not always need to be considered. There is also an exclusion, in some circumstances, for raw materials that are not available in the United States. California’s “Made in USA” law is arguably even stricter. It prohibits the use of “Made in USA” 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.” Because the law focuses not only on the product but any “part thereof,” one California judge lamented in a dissent from a recent class-action decision that an aircraft carrier built by American ship workers in Newport News, Virginia, could not carry a “Made in USA” label if a single television monitor in the communications section of the ship came from Taiwan. In addition to a pair of relatively recent California class actions, the FTC has brought numerous “Made in USA” enforcement actions. Companies also need to be wary of competitors who feel disadvantaged by a rival’s possibly misleading “Made in USA” claim and bring a complaint before the FTC, sometimes with supporting documentation such as import records. And, lest you think that your company is so small that it will fly under the FTC’s radar, it is important to remember that the agency brought its last “Made in USA” case against a company that makes electronic magnifiers for people with vision problems. In addition, the FTC has investigated “Made in USA” claims against such “household” names as Edcor Electronics, In The Swim and L.S. Starett. Discouraged as to how you can promote the still important fact that your product rolled off a U.S. assembly line instead of one in Shanghai? Your legal team should be able to help you analyze your products’ inputs and manufacturing costs and, if a “Made in USA” claim is not supportable, help you craft an appropriate qualified claim. “Made in USA” can be a powerful claim and important selling tool, but it is also one that must be used cautiously and within the limits of the FTC and California definitions. Jeffrey D. Knowles, Amy Ralph Mudge and Randal M. Shaheen are partners in Venable’s Advertising, Marketing and New Media Practice Group. They can be reached at (202) 344-4000. 41

CHANNEL CROSSING: LEGAL

May 2012 | electronicRETAILER



Electronic Retailer - May 2012

Table of Contents for the Digital Edition of Electronic Retailer - May 2012

Calendar of Events
Your Association, Your Bottom Line
Industry Reports
FTC Forum
eMarketer Research
IMS Retail Rankings
Jordan Whitney’s Top Categories
From the Executive’s Desk
Cover Story Leading a Fitness Revolution
ERA’s in Your Corner on the Key Issues
10 Secrets to Slashing Production Costs
Guest Viewpoint
Teleservices
Creative
Legal
Fulfillment
Member Spotlight
Advertiser Spotlight
Bulletin Board
Advertiser Index
Classifieds
Rick Petry
Electronic Retailer - May 2012 - cover1
Electronic Retailer - May 2012 - cover2
Electronic Retailer - May 2012 - 3
Electronic Retailer - May 2012 - 4
Electronic Retailer - May 2012 - 5
Electronic Retailer - May 2012 - 6
Electronic Retailer - May 2012 - Calendar of Events
Electronic Retailer - May 2012 - Your Association, Your Bottom Line
Electronic Retailer - May 2012 - Industry Reports
Electronic Retailer - May 2012 - 10
Electronic Retailer - May 2012 - 11
Electronic Retailer - May 2012 - 12
Electronic Retailer - May 2012 - FTC Forum
Electronic Retailer - May 2012 - eMarketer Research
Electronic Retailer - May 2012 - 15
Electronic Retailer - May 2012 - IMS Retail Rankings
Electronic Retailer - May 2012 - 17
Electronic Retailer - May 2012 - Jordan Whitney’s Top Categories
Electronic Retailer - May 2012 - 19
Electronic Retailer - May 2012 - From the Executive’s Desk
Electronic Retailer - May 2012 - 21
Electronic Retailer - May 2012 - Cover Story Leading a Fitness Revolution
Electronic Retailer - May 2012 - 23
Electronic Retailer - May 2012 - 24
Electronic Retailer - May 2012 - 25
Electronic Retailer - May 2012 - 26
Electronic Retailer - May 2012 - 27
Electronic Retailer - May 2012 - ERA’s in Your Corner on the Key Issues
Electronic Retailer - May 2012 - 29
Electronic Retailer - May 2012 - 30
Electronic Retailer - May 2012 - 31
Electronic Retailer - May 2012 - 10 Secrets to Slashing Production Costs
Electronic Retailer - May 2012 - 33
Electronic Retailer - May 2012 - 34
Electronic Retailer - May 2012 - Guest Viewpoint
Electronic Retailer - May 2012 - 36
Electronic Retailer - May 2012 - 37
Electronic Retailer - May 2012 - 38
Electronic Retailer - May 2012 - Teleservices
Electronic Retailer - May 2012 - Creative
Electronic Retailer - May 2012 - Legal
Electronic Retailer - May 2012 - Fulfillment
Electronic Retailer - May 2012 - 43
Electronic Retailer - May 2012 - Member Spotlight
Electronic Retailer - May 2012 - 45
Electronic Retailer - May 2012 - Advertiser Spotlight
Electronic Retailer - May 2012 - Advertiser Index
Electronic Retailer - May 2012 - Classifieds
Electronic Retailer - May 2012 - 49
Electronic Retailer - May 2012 - Rick Petry
Electronic Retailer - May 2012 - cover3
Electronic Retailer - May 2012 - cover4
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