The governor of California recently signed a bill that relaxes California’s stringent “Made in the USA” labeling law, bringing California in line with the FTC’s “all or virtually all” standard for an unqualified “Made in USA” claim. 

The governor of California recently signed a bill that relaxes California’s stringent “Made in the USA” labeling law, bringing California in line with the FTC’s “all or virtually all” standard for an unqualified “Made in USA” claim. The new law will permit products to be labeled as “Made in USA” if 1) foreign parts do not comprise more than 5% of the product’s wholesale value or 2) the manufacturer makes a specific showing that it cannot produce or procure a part or parts in the U.S. and those foreign parts do not constitute more than 10% of the product’s wholesale value.

The current California law prohibits companies from labeling a product as “Made in USA” when “the merchandise or any article, unit, or part thereof, has been substantially made, manufactured, or produced outside of the United States,” which had been interpreted by the courts to mean a product should not be labeled as “Made in the USA” if any component (no matter how small) was sourced from outside the United States. The change to the law is intended to curb the number of consumer class action lawsuits being filed in California alleging retailers and manufacturers are misleading consumers about the source or origin of their products labeled as “Made in USA.” The full text of the bill is available here.

TIP: The new standard is generally consistent with the FTC’s standard for an unqualified “Made In USA” claim, which requires “all or virtually all” of the product to be of U.S. origin, although the FTC has declined to provide specific guidance in terms of a percentage of a product’s value which constitutes “all or virtually all” of a product. Companies should ensure they have proper documentation on file to demonstrate compliance with the new California standard before labeling a product for sale in California as “Made in USA.”