Fireworks to the tune of "Stars and Stripes Forever," American flags everywhere-the Fourth always generates a swell of patriotism. Patriotism, for some, extends to supporting US manufacturing operations. Indeed, companies often sacrifice cost savings from sourcing materials overseas (or moving manufacturing operations overseas) so that they can continue to market their products as "Made in USA." We have previously blogged about both the FTC standard for a "Made in USA" label and the stricter California standard. Both require that final processing or assembly occur in the United States. But while the FTC requires that "all or virtually all" of the costs associated with a product be attributable to domestic parts and processing, California prohibits a "Made in USA" label if the product, "or any article, unit, or part thereof," is "entirely or substantially" made overseas. California courts have interpreted this strictly, to prohibit the label if any part of a product-perhaps even a single screw-is "substantially" made abroad. (For more information on the two standards, see this article.) However, the California law is so strict that it may well be self-defeating. Some companies, no matter how well-intentioned, may not be able to meet the California standard because, for example, a minor component is only available overseas. Failure to meet the standard means manufacturers must create special packaging for California-not always feasible-or drop the "Made in USA" label entirely. And once forced to drop the label, companies lose a big incentive to continue domestic sourcing and production, and US jobs may be lost, not gained. A recent MSNBC.com article highlights this issue. Mag Instruments' flashlights are almost entirely domestically sourced, satisfying the FTC standard. But two small components – a light bulb and an O-ring "not produced by anyone in the United States" – are imported, and so the Company believes it cannot satisfy the California standard. As a result, the company has had to drop the label entirely. Maglite has recently lost market share to cheaper foreign-sourced and imported products. It has now lost the "Made in USA" label that constituted "[o]ne of [its] advantages . . . in the U.S. market." Founder Anthony Maglica, an ardent supporter of American-made products, refuses to shift Mag Instruments' production overseas. But he laments the effects of the California law on US businesses, noting that just like "if you have a little dog, and you want him to do the tricks, you give him a bone," businesses "need incentive too." Of course, one solution is to qualify the claim, for example, "Made in USA of US and foreign components". Mag Instruments has done just that for its Maglite flashlights. However, this doesn't solve the problem of many companies being unable to make a "Made in USA" claim under standards adopted by the FTC because of a stricter California law. But for now, as Mag has concluded, it may be better than nothing. In case the Terminator is reading this, maybe it's time for California to fall in line behind the FTC. – Randy Shaheen, Amy Mudge, James Speyer, and Karen Otto
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