In 2016, California amended Section 17533.7 of the California Business and Professions Code ("Section 17533"), liberalizing the standard for selling products labeled "Made in U.S.A" to California consumers. Recently, the Ninth Circuit confirmed a victory for a brand in a "Made in U.S.A." case, affirming a district court decision that applied the amended version of Section 17533 to a pre-2016 purchase. While the brand won, the case serves as a reminder that "Made in U.S.A." claims remain lightning rods for litigation. Here's a summary of the case and a refresher on the law of "Made in U.S.A." claims.
Background:
Before the 2016 amendment, Section 17533 prohibited the sale of any merchandise labeled as "Made in U.S.A.," "Made in America," "U.S.A." or similar language if the product or "any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside the United States." This strict standard effectively prohibited the sale of any product labeled as being "Made in the U.S.A." even if a small component of the product was made or produced abroad. As a result, because the statute provides for a private right of action, manufacturers who attempted to sell products labeled as "Made in U.S.A." in California were increasingly subject to consumer class action litigation.
California's 2016 Amendment:
In 2016 California amended Section 17533 to include language modifying the standard for labeling products as being "Made in U.S.A." In particular, the amended language allows for a product to be labeled as "Made in U.S.A." if "all of the articles, units, or parts of the merchandise obtained from outside the United States constitute not more than 5 percent of the final wholesale value of the manufactured product." The amended language further provides that if the manufacturer of the merchandise can neither produce the product (or any component thereof) within the United States nor obtain any component thereof from a domestic source, then the product may be composed of more than 5% of foreign components so long as the sum of the foreign components does not constitute more than 10% of the wholesale value of the manufactured product. In addition, the amended Section 17533 provides that the section itself shall not apply to merchandise sold for resale to consumers outside of California and such merchandise shall not be deemed as mislabeled if it conforms to the law of the forum state or country in which it is being sold.
Thus, California's amended Section 17533 now allows a product with some amount of foreign-made components to still qualify as being "Made in U.S.A." This amendment relaxes the once almost strict liability standard for labeling merchandise as being "Made in U.S.A."
Fitzpatrick v. Tyson Foods, Inc.:
In Fitzpatrick v. Tyson Foods, Inc., the plaintiff alleged that the defendant sold dog food unlawfully labeled as "Made in U.S.A." In particular, plaintiff claimed that defendant's "Chicken Grillers" dog food, labeled as "Made in U.S.A.", contained tapioca starch, an ingredient derived from a plant that is not commercially grown in the United States. The plaintiff purchased the product at issue in 2014 and 2015. In bringing a claim under Section 17533, the plaintiff argued that the pre-amended, strict version of Section 17533 should apply, while the defendant argued that the current version should apply. In granting the defendant's motion to dismiss, the Eastern District of California agreed with the defendant and held that the amended version of Section 17533 should apply to plaintiff's claims. In so holding, the court reasoned that "the substance of the amendment constitutes a reversal of legislative policy" and that the "California Legislature decided that something once unlawful is now permissible and has eliminated a cause of action." On appeal, the Ninth Circuit affirmed the district court's decision and held that "[a]lthough the statute does not apply retroactively, in amending § 17533.7, the California legislature enacted change in legislative policy, shifting from strict-liability to allow certain previously prohibited conduct under certain exceptions, amounting to statutory repeal."
The Take-Aways:
- "Made in U.S.A." standards remain strict. Although California relaxed its "Made in U.S.A." standard, at most 5% of a given product may be foreign made (10% under the limited circumstances described above). Additionally, the FTC requires that all or virtually all of a product be manufactured domestically to qualify for the "Made in U.S.A." label. As such, these standards set a high bar for manufacturers to meet in order to use a "Made in U.S.A." label.
- Enforcement of "Made in U.S.A." standards continues. California's recent relaxation of its standard regarding products that qualify to be labeled as "Made in U.S.A." should not be interpreted as a relaxation of the enforcement of California's statute or any other standard governing the labeling of products as being "Made in U.S.A." Indeed, in the last year, the FTC has entered into at least one settlement agreement with advertisers involving "Made in U.S.A." claims and has issued no fewer than 22 closing letters in other cases concerning "Made in U.S.A." claims. These cases are an important reminder that manufacturers and advertisers should exercise caution to ensure that their "Made in U.S.A." claims comply with relevant statutes and standards.
- Use the resources that are available to you. The FTC has issued guidelines to assist manufacturers and advertisers in complying with its "Made in U.S.A." standard. Visit the FTC's website at the following link to learn more: https://www.ftc.gov/tips-advice/business-center/guidance/complying-made-usa-standard.
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