A pair of cases decided in California federal court recently considered whether the Federal Trade Commission’s “all or virtually all” “Made in USA” standard is in conflict with or preempted by California domestic origin claim law and safe harbors included therein. In both instances, the courts answered in the negative.
California Business and Professions Code Section 17533.7 states 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 as MUSA even if it contains some foreign input. The first is where the foreign content does not exceed 5% of the product’s final wholesale value. The second is where the foreign content does not exceed 10% provided that the foreign content cannot be produced or sourced in the United States.
Simply stated and without delving into other pertinent aspects of the cases, 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.
However, these two rulings are important given the right factual scenario. Consult with an experience Made in USA attorney if your company is interested in implementing compliance protocols in order to minimize liability exposure; if you have received a Civil Investigative Demand, an access letter or a subpoena from a governmental agency; or if you have receive demand correspondence from a private plaintiff.
Takeaway: These recent California decisions should be of interest to those that advertise, marketing, label and/or package products that include express or implied domestic origin claims. They should be of particular interest to those that rely upon the safe harbors contained in California Business and Professions Code § 17533.7. Discretion and risk tolerance may dictate reliance upon the standard that imposes the more onerous requirements. 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.
