What It Takes to Be 'Made in the USA'

What Is "Made in the USA"?

"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 of a "Made in the USA" label 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 rules for a "Made in the USA" label on a product are very specific. And the details regarding exactly what that means are spelled out in a 40-page document titled "Complying with the Made in the USA Standard."

How "Made in the USA" Works

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 FTC 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.

Certification Is 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 percentage 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 standard 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 the 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 online 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 a 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.

The Bottom Line

Domestic versus foreign production is also something of national and economic security concerns. While inexpensive imported t-shirts, steel, and electronics may be appealing to the wallet, there are real questions about 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."