More than 40 years ago, business analysts suggested that the phrase "Made in [country name]" appended to products would have a significant influence on their acceptance and success.1 Since then, others have attempted to address the importance to manufacturers and consumers of a product's designation of its country of origin. Empirical studies from the last two decades yield few concrete answers to what the phrase "Made in USA" means to the average consumer. And even fewer published decisions give practitioners guidance on the viability of lawsuits alleging that a manufacturer or seller improperly labeled a product Made in USA.
Despite years of surveys, analysis, statutory enactments, and litigation, manufacturers or consumers who become litigants in cases involving a product advertised as Made in USA cannot assert a bright-line rule. Federal standards generally call for a case-by-case analysis, and state laws vary. Some issues, particularly the globalization of manufacturing, merely add more questions rather than answers. Statutory and regulatory guidelines--and the few cases interpreting them--appear more suited for the clear-cut case. But the guidance does not uniformly reach across state lines, nor does it necessarily acknowledge the realities of today's global marketplace. Until more consistent standards are supplied by legislatures, lawyers on both sides of country-of-origin claims should be wary of the difficulties in prosecuting or defending them.
Over the years, researchers have tried to measure American consumer preferences to determine whether the Made in USA designation on a product truly matters to consumers. The results are decidedly mixed. Some research indicates that country of origin is an important characteristic in purchasing decisions.2 Other studies show that while Americans believe Made in USA denotes quality and value, many are not inclined to look for that designation on a product in the first place.3 The U.S. Department of Agriculture published a 2004 study concluding that food suppliers see little or no advantage in labeling domestic products as Made in USA.4 In 2006, Pet Business conducted a shopper preference study of 1,000 pet owners that listed several factors influencing the purchase of dog or cat food. While store location, nutritional ingredients, recommendations, and price were considered important, country-of-origin designation was not among the influential factors.5 One researcher concluded that adding Made in USA to an advertisement or label is not an automatic cue for consumers about the quality and value of a product.6 Nonetheless, many products contain the designation, and its use is regulated under federal and state schemes.
The Federal Trade Commission Act (FTCA)7 brought the issue of Made in USA labeling within the regulatory purview of the Federal Trade Commission:
To the extent any person introduces, delivers for introduction, sells, advertises, or offers for sale in commerce a product with a Made in the U.S.A. or Made in America label, or the equivalent thereof, in order to represent that such product was in whole or substantial part of domestic origin, such label shall be consistent with decisions and orders of the Federal Trade Commission issued pursuant to section 5 of the Federal Trade Commission Act [15 USCS §45]. This section only applies to such labels. Nothing in this section shall preclude the application of other provisions of law relating to labeling. The Commission may periodically consider an appropriate percentage of imported components which may be included in the product and still be reasonably consistent with such decisions and orders. Nothing in this section shall preclude use of such labels for products that contain imported components under the label when the label also discloses such information in a clear and conspicuous manner.8
The Federal Trade Commission's Enforcement Policy Statement on U.S. Origin Claims sets forth the commission's most recent guidance to marketers who want to make an unqualified claim that a product was Made in USA.9 Under the Policy Statement, a product can be labeled as Made in USA if all, or virtually all, of it is made in the United States.10
For consumers and private litigants, however, the reach and usefulness of the FTCA and the Policy Statement remain unclear. Under the FTCA, the Federal Trade Commission has the power to bring law enforcement actions against those making false or misleading claims that a product is Made in USA or is of U.S. origin. The act does not confer standing on private litigants. Some states allow the FTCA to serve as a predicate statute for private unfair competition law claims. Others, including California, do not.11
Nonetheless, most lawyers consider the FTCA and the Policy Statement to be a definitive statement of what constitutes the proper use of a Made in USA designation. It is helpful to examine the Federal Trade Commission's efforts to define what constitutes a product that is completely or almost completely made in the United States.
In 1995, the Federal Trade Commission considered revising its then-existing Enforcement Policy Statement on U.S. Origin Claims. To that end, it commissioned a two-part study to identify consumer perception of U.S. origin claims. The commission had previously conducted a more limited study of those issues in its 1991 Copy Test.12 According to the commission, the results of the 1995 studies indicated that many consumers expected that a product advertised or labeled as Made in USA had a high amount of U.S. content, but a significant number of consumers were willing to accept a product with at least some foreign content. Therefore, the commission found a wide range of scenarios in which most consumers would find a Made in USA claim to be appropriate.13
The 1995 studies included an Attitude Survey and a Copy Test. In the Attitude Survey, participants were presented with a series of scenarios and asked whether they agreed or disagreed that a Made in USA label on a product was appropriate. The survey indicated that a Made in USA label would likely be misleading to most consumers when a product contained 50 percent or less U.S. content or was assembled abroad. Where a product was assembled in the United States, a large majority of consumers believed that a Made in USA claim would be appropriate if the product contained at least 70 percent U.S. content. Some of that majority believed a product should contain 90 percent U.S. content in order to carry a Made in USA label. The data confirmed what many suspected: a range of standards applied to products likely to be considered acceptably denoted Made in USA by most consumers.14
In the Copy Test, the survey respondents were shown a Made in USA claim and then asked what it meant to them. According to the results, 63.5 percent of the respondents said simply that the claim meant Made in USA. When asked specifically whether the claim suggested or implied anything about the way the product was assembled, 49 percent said it did: 28 percent said it suggested or implied something about where the parts were made, and 11 percent said it implied something about how many of the parts were made in the United States. Moreover, 28.5 percent of the respondents said that the Made in USA designation implied that a product was assembled in the United States, but it did not imply that a product's parts were necessarily U.S. made.15
Because of these varying responses, the Federal Trade Commission declined to establish a bright-line rule for Made in USA claims of origin. Rather, for a domestic product to bear the stamp Made in USA, it must be "all or virtually all made in the United States."16 The commission defined this standard:
A product that is all or virtually all made in the United States would ordinarily be one in which all significant parts and processing that go into the product are of U.S. origin. In other words,...it should contain only a de minimis, or negligible, amount of foreign content. Although there is no single bright line to establish when a product is or is not all or virtually all made in the United States, there are a number of factors that the commission will look to in making this determination. These factors include the following:
- Site of final assembly or processing;
- Proportion of U.S. manufacturing costs (which includes both parts and processing); and
- The remoteness of foreign content (i.e. how far back in the manufacturing process is the foreign content found).17
The commission stated that, in its analysis, raw materials should be neither automatically included nor automatically excluded in the evaluation of whether a product is all or virtually all made in the United States. However, the percentage of the cost of the product that constitutes imported raw materials would be a factor.18 Certain raw materials, unlike manufactured elements, may be unavailable in the United States. The commission noted that it will consider whether the raw material is indigenous to the United States or available in the United States in commercially significant quantities.19
These pronouncements by the Federal Trade Commission do not provide a fixed point for products at which they suddenly become all or virtually all made in the United States. Rather, in an enforcement action, the commission conducts its inquiry on a case-by-case basis. It balances the proportion of U.S. manufacturing costs along with the other factors, taking into account the nature of the product and consumer expectations in determining whether an enforcement action is warranted.20
The practitioner litigating a private action using the Federal Trade Commission standards as a guide similarly must engage in a product-by-product examination. This is usually necessary in order for a trier of fact to even reach the threshold question of whether a product was improperly designated Made in USA. A challenge to a designation may therefore necessitate a minitrial on the issue of whether the a product label runs afoul of the Federal Trade Commission standards before other questions of reliance, injury, or amount of damages can be considered.
The California Approach
In 1961, the California Legislature tried its hand at regulating country-of-origin labeling on sales within the state by enacting Business and Professions Code Section 17533.7:
It is unlawful for any person, firm, corporation or association to sell or offer for sale in this State any merchandise on which merchandise or on its container there appears the words Made in U.S.A., Made in America, U.S.A., 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.
While well intended, the statute raises as many questions as it answers. What does "substantially" mean? What is an article, unit, or part? Did the legislature intend that raw materials imported from outside the United States be considered a part of the merchandise sold? Would every ingredient in a food product processed in the United States have to be domestically sourced?
The Fourth District Court of Appeal attempted to answer some of these questions in Benson v. Kwikset Corporation.21 In Benson, the plaintiff, on behalf of the general public, sued Kwikset and its corporate parent, Black & Decker Corporation, for restitution and injunctive relief under California's Unfair Competition Law and False Advertising Law.22 The plaintiff alleged that the defendants violated those statutes when it sold lock sets (including deadbolts, doorknob sets, and door handle sets). Kwikset has several plants located throughout the United States and one in Mexico. During 1996 through 2000, the four-year period relevant to the lawsuit, Kwikset manufactured and sold 35 different varieties of lock sets. All of those products were sold with labels reading Made in USA, All American Made, or similar representations. Some of the products, however, included screws and pins made in Taiwan, a latch assembly that was assembled at the defendant's Mexico plant, or both.
After the action was filed, Kwikset elected to cease using country-of-origin labeling on its products. Additionally, Kwikset entered into a consent order with the Federal Trade Commission precluding the corporation from making country-of-origin representations unless the product was in fact 100 percent made in the United States.23 The action proceeded, and the trial court issued a statement of decision finding that Kwikset violated Business and Professions Code Section 17533.7 by its use of foreign-assembled components and foreign-made parts. Even though Kwikset had stopped selling the products with a country-of-origin designation, the court nonetheless issued an injunction precluding such conduct in the future. It also required the defendants to notify retailers, dealers, and distributors within California that any inventory still remaining on the shelves with a country-of-origin designation could be returned for replacement or refund. However, the court declined to order a return or refund program for consumers.
On appeal, the Benson court affirmed the determinations of the trial court on the interpretation of the language of the statute. In addressing the question of what constitutes an article, unit, or part within the context of the statute, the court of appeal made two important holdings: 1) the statute would not be violated if a product was made, manufactured, or produced solely in the United States even though raw materials acquired from a foreign source were used in the product, and 2) if the product consists of two or more physical elements or pieces, Section 17533.7 applies to any distinct component that is necessary for the proper use or operation of the product.24
The facts in Benson led to these relatively straightforward findings. There was no question about Kwikset's use of raw materials, and the assemblies and parts were crucial to the operation of the lock sets. Less clear cases might yield different results. For example, a court could reach a different conclusion with a domestically processed food product containing a limited amount of imported raw ingredients, or a device in which imported parts were not critical to its operation. The Benson holding could support a Made in USA designation. But a literal reading of the statute could eliminate the ability of some domestic manufacturers to ever advertise a product as American made, even though the Federal Trade Commission would not bring an enforcement action.
The dissent in Benson provides an example of the latter possibility. It shows that a literal reading of the statute could lead to absurd results, thanks in large part to its overinclusive language:
Consider: Would anyone really dispute the idea that the aircraft carrier U.S.S. Ronald Reagan, built by American shipworkers in Newport News, Virginia, was "made in America"? And yet if we take the statute too literally, the mere fact that a single television monitor in the communications section of the ship came from Taiwan would mean that the ship itself was not "made in America." After all, "a part thereof" was "entirely or substantially made" outside of the United States....A hyper-literal interpretation of the statute means that a product, like the U.S.S. Ronald Reagan, can be overwhelmingly and substantially "made in the United States" but could not be claimed to have been "made in the United States" unless it contained absolutely 100 percent American parts, down to the last screw.25
The majority in Benson noted that in some situations it may be difficult to correctly apply Section 17533.7. Moreover, it recognized the legitimacy of the concern expressed by the dissent: "We also share our dissenting colleague's angst about both the effect of this law, particularly in an age of global trade, and the potential for abuse that may arise under the Unfair Competition Law. If we had the power to do so, we would rewrite the statute to address those concerns."26
The other leading California decision, Colgan v. Leatherman Tool Group, Inc.,27 also presents a clear fact pattern in which each of the 22 multifunction, multicomponent tools at issue featured at least one (and sometimes three or more) operational components that were manufactured outside the United States.28 In applying the California statute, the court did not believe the question of whether a violation occurred was a difficult one to answer. The court held that the company violated Business and Professions Code Section 17533.7 by selling products represented as Made in USA when "the guts of the tools" were made in whole or in part outside of the United States.29 It did not have to reach the question of whether a literal reading of the statute would lead to the type of results suggested by the dissent in Benson.
The Colgan court stated that because of the circumstances presented in that case, it did not need to address whether the legislature intended to exempt from the requirements of Section 17533.7 products containing only a single foreign-made part or a product in which a part or component is of minimal importance, value, degree, or amount in relation to the whole.30 This indicates that under a different fact pattern, the court might well have considered applying an analysis akin to the Federal Trade Commission guidelines. If it had done so, a product advertised as Made in USA that contained de minimis foreign content would not violate the California statute.
The tension and inconsistency between the Federal Trade Commission guidelines and a literal reading of California's statute is palpable. Under the federal guidelines, a product can have some foreign component (or components), while California's statute may not be so forgiving.
It is not possible to predict how Section 17533.7 will be interpreted in the close case involving hard goods or food products. Only two product groups--lock sets and Leatherman tools--have been subjected to detailed scrutiny in published opinions, and a previously published case involving a third product, license plate frames, was decided on a different issue altogether. Simply stated, the jurisprudence under Section 17533.7 is slim.31
Moreover, the other 49 states are not in agreement. Some states do not even have statutes specifically addressing Made in USA or country-of-origin claims. For example, the Arkansas Deceptive Trade Practices Act does not address making representations or designations of geographic origins in connection with goods or services.32 Kansas does not include representations or designations of geographic origin as part of its Consumer Protection Statute.33 Similarly, Maryland's Unfair or Deceptive Trade Practices Statute does not specifically reference representations or designations of geographic origins as an unfair or deceptive trade practice.34 At least one state (Alabama) does not permit class actions about deceptive trade practices.35
New York's General Business Law has a definition for a "mark of origin" that differs from the California scheme. A mark of origin is a name, mark, or indication of the place or country from which an article of merchandise was imported into the United States or the name, mark, or indication of the place or country in which an article of merchandise was manufactured, packed, assembled, grown, or produced.36 New York law also provides that compliance with Federal Trade Commission guidelines or regulations is a complete defense to an action for alleged deceptive acts or practices.37
These few examples highlight the difficulties facing a national manufacturer or distributor. Depending on its content, a product labeled Made in USA could run afoul of California law, be compliant with Federal Trade Commission regulations, be afforded a complete defense under New York law, and not even be covered under Maryland law.
Class Certification and Remedies
Will a plaintiff who can make a showing of an improper use of the Made in USA designation be assured of success in a lawsuit regarding the claim? The answer once again has to be perhaps, particularly regarding any eventual remedy.
The value of most consumer purchases would not exceed small claims limits. Therefore, individual actions based on country-of-origin claims would rarely be economically viable. As a result, the plaintiffs' bar focuses on class certification and remedies for Made in USA claims. Most of these proposed class actions settle prior to a final binding judicial determination on class certification, let alone trial on the merits. When the parties have proceeded to class certification and judgment, the results have been varied.
The most recent--and perhaps only--reported decision addressing the propriety of class certification in a lawsuit containing a Made in USA claim is In re Sears Roebuck and Company Tools Marketing and Sales Practices Litigation.38 In that case, the Northern District Court of Illinois denied the plaintiffs' motion for class certification. The plaintiffs claimed that Sears deceptively advertised its proprietary line of Craftsman tools as manufactured in the United States when many of the tools were foreign made or contained significant foreign parts. According to the plaintiffs, Sears sold a line of tools under the Craftsman brand for decades. Those tools were nationally marketed, and Sears advertised and promoted the brand as being Made in USA. The plaintiffs contended that Sears violated the guidelines of the Federal Trade Commission in marketing and labeling Craftsman products as Made in USA.
The plaintiffs sought certification of a class of all persons and entities throughout the United States who purchased one or more Craftsman tools that were not all or virtually all Made in USA. Sears opposed certification, arguing that the proposed class was impermissibly overbroad, unidentifiable, and unmanageable. The district court agreed. It found the most serious problem with the plaintiffs' class definition was its overly expansive breadth. The court noted that under Rule 23 of the Federal Rules of Civil Procedure, the plaintiffs must show that the proposed class is identifiable as a class.39 The Sears court noted that the putative class of plaintiffs would, by definition, include people who 1) bought Craftsman tools but never saw any advertising, 2) bought Craftsman tools but never saw advertising representing that the tools were made in the United States, and 3) bought Craftsman tools with the knowledge that these tools were not in fact made in the United States, despite the labeling. The court found that under those circumstances the proposed class definition was too indefinite, overly broad, and would in fact include consumers who were never deceived or harmed by Sears's conduct.40
The Sears court found another reason why Rule 23(b) requirements were not met: Since the plaintiffs needed to demonstrate they were deceived by Sears's conduct, the bulk of the proof in the class lawsuit would involve individual fact patterns. The court rejected the plaintiffs' argument that this could be avoided by an offer of proof that class members paid a premium for products marked Made in USA, thereby avoiding the need to show each individual class member's motivation for purchase. The court found that no matter what prices were paid, it would be necessary to show that each class member purchased the tool and paid a price as a result of the defendant's deception. Moreover, it was not likely that the price would be common among class members, because the plaintiffs bought different tools from different locations at different times, and they had not demonstrated that Sears has a standard nationwide price formula for Craftsman tools.41 Thus, when a showing of actual reliance and damages is required, the road to recovery can be rough.
This prospect is underscored by the Colgan case,42 in which the plaintiff class asserted claims against the Leatherman Tool Group for violations of California's Unfair Competition Law and the Consumers Legal Remedies Act, and for false and misleading advertising. The plaintiffs claimed that Leatherman improperly represented a number of its products as Made in USA, but the tools contained parts that were made outside the United States. The plaintiffs sought injunctive relief, monetary relief, damages, and restitution on behalf of all class members.
The trial court eventually ruled on summary adjudication that Leatherman had made false Made in USA representations regarding 22 of its tools because some of the parts incorporated into the tools were entirely or partially manufactured outside the United States. The subsequent bench trial on remedies resulted in a multimillion-dollar award for restitution, which was reversed on appeal for a lack of evidentiary support.
The appellate court found no evidence quantifying the sums received by Leatherman that were attributable to the Made in USA representations on the products and product packaging. It also ruled that the plaintiffs did not present admissible evidence for all the various retail prices of the Leatherman products or any comparable tools with proper labeling regarding designation of origin. The court upheld the trial court's award of statutory minimum damages of $1,000 under the Consumers Legal Remedies Act.
Like Benson, in which the court did not order a refund, the purchasers of Leatherman products received no direct remedy after six years of litigation. With the reversal of the restitutionary award, the final judgment consisted of 1) an injunction prohibiting Leatherman from representing in California that its tools are Made in USA if any part of the tool is entirely or substantially made outside of the United States, and requiring Leatherman to advise retailers to return mislabeled tools for refund, 2) a monetary award of $1,000 to be divided between the two class representatives, and 3) a $10,000 service award to each of the two class representatives. The additional members of the class received nothing.43
In other cases involving settlements, consumers obtained some remedy, such as a $10 to $25 discount or credit voucher.44 This type of settlement--even when payments of fees to class counsel are included--might be considered a good deal for some litigants under a cost-benefit analysis, particularly given the costs of protracted litigation (for defendants) and the possibility of no restitutionary or damages award at the end of the litigation (for plaintiffs and class counsel).