Quote: Originally Posted by
Dayo Steph /img/forum/go_quote.gif
Actually the rules of origin are a bit more complicated (I'm a licensed customs broker) just to clarify - there are yarn forward, fabric forward, and assembly requirements. People do use the tricks you mention, but they aren't legal for import of goods and are a violation of FTC/CBP requirements. To meet a label requirement of Made in USA - "all or virtually all" of the product must be manufactured of goods that are a product of the US - meaning they meet a threshold of 97% US originating components. Almost no products these days meet that requirement, but the FTC isn't actively enforcing the regs, so a lot of companies get away with it - sometimes intentionally, sometimes not so much. Look at any chocolate bar as an example. Odds are it will say made in the US, but Cocoa is never grown in the US, so it wouldn't meet that threshold.
This isn't quite correct as there are perfectly legal ways around it. You are right in assembly requirements, but those requirements are subjective and don't have to even include the actual materials. One way they get around this is by having the shipping country declare the goods they created with are made in the US. Since that then falls outside the US jurisdiction, TCB goes with it (even COO claims are subjective with "substantial transformation"). The company can also declare what is the "most" of the good/item sold and leverage this way. Yes, the rules are more complicated but it doesn't mean first and foremost that any or even majority follow them (and studies show a majority don't on the import of retail goods) but I simplified it since obviously this isn't a customs forum.
For the first example (I want to make absolutely sure everyone knows this is a hypothetical for an example): The company could import the finished product from the overseas manufacturer who declares the metal is made in the US. It doesn't mean the metal was and then it can declare the metal is the largest component because it's a requirement of the product to be unique or individual to the company. Further for the second example, a company can declare an item by weight rather than total product. Which means if the fabric is only x% of the total weight but they add a heavier tag to it, it then becomes "majority" made in the US. In an example of a labeling with say candles (the business I owned prior), I can import the wax, the canister, the fragrance oil, the wick (as long as it didn't contain lead, illegal in the US) and even private labeling from overseas. As long as I poured it once it got to me and slapped those labels on myself, I could declare it "handmade in the US" when it's actually "hand assembled" - the same holds true for say cars where less than 10% of the parts are actually made in the US but the heaviest is or a stated "largest portion" which is company submitted, it's just assembled here and they can use "made in the USA" legally according to the FTC. I didn't do this as I felt it unethical but I know many who have. Mine I labeled as hand poured.
The FTC even notes in their FAQ first that what happens in the other countries is up to them (their laws) and also notes:
The Commission does not pre-approve advertising or labeling claims. A company doesn’t need approval from the Commission before making a Made in USA claim."
The FTC also lays it out here:
The product’s final assembly or processing must take place in the U.S.
Hence my noting "adding the tags" which would qualify as the "final assembly" - adding a single piece, no matter how small. The last word is the cost analysis, not the product makeup.
Are raw materials included in the evaluation of whether a product is "all or virtually all" made in the U.S.? It depends on how much of the product’s cost the raw materials make up and how far removed from the finished product they are.
...Because even qualified claims may imply more domestic content than exists, manufacturers or marketers must exercise care when making these claims.
So if the company says adding that tag cost them 50 cents while the rest of the manufacturing only cost them 10 cents, it can still be recognized as Made in the US. Just because a company declares it's more expensive to do their part (which isn't hard to do since overseas labor is so cheap). In fashion items, it's not uncommon to find adding the tag is claimed as increasing the value because it
becomes name brand thus enhances the cost of the product. So without that name brand tag on the headbands for example, it's worth is only in the material of $5. The tag adds $43 "value" (or total retail cost), so it's "majority" US. The Tommy Hilfiger brand has gotten away with this for almost two decades now, while using a technicality for the Mariana Islands - US territory but without US labor laws. Then came the Bangladesh fire where it was found they were also making clothes for his line. So you are right, it goes deeper than what I mentioned but it's not so far off in the end. Much of all the steps here are completely and entirely subjective allowing 50 different ways to allow "Made in the USA".
In the end it boils down to just what I said. The use of the phrase is highly misleading and while it leads to many people thinking it's straight from the US (or in this case, happy workers in California), it may not even be majority or mostly from the US. There are not only ways around imports, but ways around the evaluating the cost of the item which the FTC allows. Given the reported workers and reported income from a business profile the owner created, it's just simply impossible for only a handful of people to create thousands of items. They sell dresses as well so even if I could say the bare minimum $1m is for $200 average each items (I'm also being generous here too), that still leaves 5000+ pieces created annually by the max of 20 people (again, assuming the listed employees, none of them are marketing, distribution/shipping or management - all just straight workers) in 260 work days.
In a normal scenario however, there would be at least 3-5 employees in this type of business who aren't creating but I'm trying to really give the benefit of the doubt.
(Apologies for the formatting/text style - copy/paste from FTC broke the reply and wouldn't let me change it to normal text.
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