"Made in the USA." It's a label that evokes patriotism, carries an unspoken promise of quality and has a political undertone of job security for American workers. It's also more complex and harder to define than one might expect. The official definition as set forth by the Federal Trade Commission (FTC) requires that a product advertised as "Made in the USA" be entirely or virtually entirely made in the United States. The details regarding exactly what that means are spelled out in a 40-page document titled "Complying with the Made in the USA Standard."

The Standard
With the exception of automobiles, textiles, wool and fur products, there is no law requiring disclosure of the percentage of a product's content that was made in the United States. Companies that choose to make such disclosures must follow the standards set forth in the FTC's "Made in the USA" policy. The policy's definition of the United States includes the 50 states, the District of Columbia and the U.S. territories and possessions. The underlying definition of the standard requires that "all significant parts and processing that go into the product must be of U.S. origin. That is, the product should contain no - or negligible - foreign content."

The product's final assembly or processing must take place in the United States. The Commission also considers other factors, including how much of the product's total manufacturing costs can be assigned to U.S. parts and processing and how far removed any foreign content is from the finished product. In some instances, only a small portion of the total manufacturing costs are attributable to foreign processing, but that processing represents a significant amount of the product's overall processing. The same can be true for some foreign parts.

The guidelines use a gas grill sold in the United States as an example. If the knobs and tubing, which are minor components of the grill, are imported from Mexico, the product can still include the "Made in the USA" label. On the other hand, a lamp made with an imported base does not qualify, as the base is a significant component of the finished product. Determining whether a product meets the standard should also involve an evaluation of the cost of manufacturing the product, including materials and labor.

Qualified and Comparative Claims
Products that do not meet the requirements for an unqualified claim may choose to advertise the percentage of their content sourced from the United States or the fact that they have been assembled in the United States. "Assembled in the USA" or "Made in the USA from domestic and imported parts" are examples of qualified claims.

In order to claim assembly in the United States, the standards require that the item be "substantially transformed" by the manufacturing process. For this reason, items that are manufactured abroad, imported and then put together via simple "screwdriver" assembly will not generally qualify for a claim of "Assembled in the USA."

Advertisers interested in comparing their products to competitors' products through claims such as "We use more U.S. content than any other cellular phone manufacturer" must also comply with the stated standards. In particular, the difference between the products must be substantial.

Not so Simple
The variety of potential distinctions requires a complex set of guidelines. Overlapping regulations on this topic add further confusion. For example, the Textile Fiber Products Identification Act and Wool Products Labeling Act mandate that textile, wool and fur products disclose the amount of their contents sourced in the United States. The American Automobile Labeling Act has similar requirements for vehicles.

The U.S. government has a completely different standards when it comes to the items it purchases. According to the Buy American Act, a given product must "be manufactured in the U.S. of more than 50% U.S. parts to be considered Made in USA for government procurement purposes."

The U.S. customs agency also has a set of requirements that pertain to imported goods. Under these requirements, "if a product is of foreign origin (that is, it has been substantially transformed abroad), manufacturers and marketers also should make sure they satisfy Customs' markings statute and regulations that require such products to be marked with a foreign country of origin. Further, Customs requires the foreign country of origin to be preceded by "Made in," "Product of," or words of similar meaning when any city or location that is not the country of origin appears on the product."

Enforcement is another issue altogether. The FTC has no proactive efforts to ensure compliance with labeling guidelines. Rather, enforcement relies on responding to specific complaints. Aggrieved parties are instructed to contact "the Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, your state Attorney General, or the Better Business Bureau." You are also able to sue the company making the fraudulent claim if you can prove you were damaged by it. The sheer number of potential entities with which you can lodge a complaint suggests that achieving satisfaction may be a task with a magnitude of difficulty akin to complying with the rules themselves.

Why the Label Matters
A legitimate "Made in the USA" label evokes an instant sense of nationalism and pride, as well as an implied level of quality and the promise of well-paying jobs for American citizens. The long history of the decline of the U.S. manufacturing sector, and the detrimental effect on U.S. employment of the outsourcing of manufacturing jobs to third-world countries, has resulted in high level of emotion and sensitivity around this topic.

Labels that read "Made in China" or other countries are often associated with the decline of the American middle class and lower safety and quality standards as well as substandard working conditions and corporate greed. From a marketing standpoint, labeling has power.

The Bottom Line
Domestic versus foreign production is also something of a national security concern. While inexpensive imported t-shirts, steel and electronics may be appealing to the wallet, there are real questions around how the United States would make the required volume of tanks, guns, aircraft and sensitive electronics should the nations it now relies on for imports suddenly become adversaries. While the spread of globalization has resulted in an interconnected global economy, there are a variety of reasons why a concerned minority of the country's population strongly believes in the mantra, "If you sell it here, build it here."

Related Articles
  1. Insurance

    Medicare 101: Do You Need All 4 Parts?

    Medicare is the United States’ health insurance program for those over age 65. Medicare has four parts, but you might not need them all.
  2. Economics

    Understanding Donald Trump's Stance on China

    Find out why China bothers Donald Trump so much, and why the 2016 Republican presidential candidate argues for a return to protectionist trade policies.
  3. Economics

    Will Putin Ever Leave Office?

    Find out when, or if, Russian President Vladimir Putin will ever relinquish control over the Russian government, and whether it matters.
  4. Economics

    What China's New Policy Means for Business

    Now that China has eliminated its one-child policy, how will the new policy impact businesses?
  5. Markets

    Will Paris Attacks Undo the European Union Dream?

    Last Friday's attacks in Paris are transforming the migrant crisis into an EU security threat, which could undermine the European Union dream.
  6. Insurance

    Avoid the Obamacare No-Insurance Penalty by Jan. 31

    If you don't have health insurance, act NOW or you could owe penalties on your 2016 taxes, in addition to this year's.
  7. Budgeting

    How Much Will it Cost to Become President In 2016?

    The 2016 race to the White House will largely be determined by who can spend the most money. Here is a look at how much it will cost to win the presidency.
  8. Economics

    How to Invest in the Philippines' Stock Market

    The Philippines offers more long-term growth potential than most economies around the world. Here's how to play it.
  9. Economics

    Current Probability of Donald Trump as President

    Predict the current odds of a Donald Trump presidency, and understand the factors that have kept him on top and the looming challenges he faces.
  10. Economics

    Explaining Devaluation

    Devaluation is the deliberate decrease in one county’s currency relative to the currency of other countries.
  1. Can FHA loans be used for condos?

    A borrower can obtain Federal Housing Administration (FHA) loans to finance the purchase of a condominium as long as the ... Read Full Answer >>
  2. Can I get dental insurance with Medicare?

    Medicare does not offer dental insurance that will cover dental care and medical supplies, such as cleanings, sealants, extractions, ... Read Full Answer >>
  3. Who can make catch-up contributions to a Health Savings Account (HSA)?

    An eligible individual who is 55 years or older at the end of his tax year can make additional catch-up contributions to ... Read Full Answer >>
  4. Do banks offer FHA loans?

    Many major U.S. banks, including Well Fargo & Company, U.S. Bancorp, Bank of America and Flagstar Bancorp, offer Federal ... Read Full Answer >>
  5. What do states do with unclaimed property?

    Unclaimed property refers to personal accounts in financial institutions or companies that have had no activity and whose ... Read Full Answer >>
  6. How can you reclaim escheated, or unclaimed, property?

    The process for reclaiming unclaimed or escheated property varies by state, as the federal government does not have a central ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  4. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  5. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  6. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
Trading Center