California Eases Its Made in USA Label Law With 5% and 10% Foreign-Content Allowances

California Gov. Jerry Brown approved Senate Bill 633 on Sept. 1, 2015, easing what had been the nation’s strictest “Made in USA” labeling law. The bill passed the Senate 39-0 and the Assembly 77-0 and was chaptered as Chapter 238, Statutes of 2015. It took effect Jan. 1, 2016.

What changed

California’s law, Business and Professions Code Section 17533.7, dates to 1961 and makes it unlawful to sell merchandise labeled “Made in U.S.A.,” “Made in America,” “U.S.A.” or similar words if the merchandise or any part of it was “entirely or substantially” made outside the USA. Courts had read the old version to bar the claim when virtually any part was foreign. SB 633 added two exceptions:

• 5% rule: A USA-made product may carry the label if all foreign articles, units or parts make up no more than 5% of the product’s final wholesale value.
• 10% rule: The limit rises to 10% if the manufacturer shows it can neither produce the part in the USA nor get it from a domestic source. That showing cannot be based on cost.

The law does not apply to merchandise sold for resale to consumers outside California, and goods sold elsewhere are not mislabeled if they meet the law where they are sold.

Still not the federal standard

The FTC requires a product labeled Made in USA to be “all or virtually all” made in the USA and does not use fixed percentages. Attorneys writing in The National Law Review noted that companies selling in California still had to meet both standards, and that the new law did not define terms such as “wholesale value.” They said the change was expected to reduce the wave of California class actions over Made in USA labels.

Two months later, a U.S. Senate committee advanced a bill to make federal rules the only Made in USA standard for products sold across state lines (our coverage).