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‘Made in America’ rules are complex, confusing

An “American” car sold in Chicago may have rolled off an assembly line in Tennessee with parts made from a dozen different countries. Who decides what's "Made in the USA"?
Among its various mandates, the Federal Trade Commission is charged with policing false or misleading claims about products sold in the U.S.Paul J. Richards / AFP - Getty Images

Long before companies invented something called global supply chain management, most of the products you bought in America were made in America. It was just too expensive to manage production in far-flung global factories and ship the goods back home.

Today, an “American” car sold in Chicago may have rolled off an assembly line in Tennessee with parts made in a dozen different countries. Last year, some 60 percent of the value of goods sold in the U.S. was imported. That's up from 14 percent in 1980 and 8 percent in 1960, based on the government's gross domestic product data.  

So what does it mean to be "Made in America"?

A product has to be “all or virtually all” produced in the United States (or one of its territories or protectorates) to stamp "Made in America" on its packaging or advertising, according to Federal Trade Commission regulations. Among its various mandates, the FTC is charged with policing false or misleading claims about products sold in the U.S.

It sounds simple enough. But it takes roughly 40 pages to spell out the FTC’s rules of the road for companies that want to make the Made in America claim. And those are just one of a half dozen separate sets of rules that apply to “country of origin” labeling.

Here are some more questions and answers about the "Made in America" label.

When can a company say a product is "Made in America"?

The rules governing "Made in America" claims were overhauled in the late 1990s, as globalization blurred the lines of exactly where products were made. As manufacturing jobs moved overseas, many consumers who wanted to support American workers demanded assurances they were buying American-made products.

The basic premise is fairly simple: A product that is "Made in America" has to be assembled, and most of the cost of making the product incurred, in the United States. But that’s where things start to get a little tricky. (And that’s why it takes 40 pages to explain the rules.)

For example (and the FTC uses lots of examples), a California radio manufacturer can claim its product was made in America even though it has a plastic case made from imported oil. So can a computer maker in Texas that is building a PC from American-made parts which include a disk drive with a case made from steel imported from overseas. But if you make a wrench in Ohio with steel imported from Korea, you can’t say that wrench was made in America because the  steel represents a significant cost of production.

What if a product was made in several different countries?

If one of those countries is the United States, and you want to let potential customers know that, you can only make what the FTC calls a “qualified claim.” There are lots of ways to do this.

For example, you can spell out clearly just how much of your product was made in the U.S. or what percentage of the content is American made. The phrase “Made in USA from imported parts” is OK with the FTC, for example.

But other phrases can be tricky. “Assembled in the USA” is allowed only if you “substantially transformed” the product or if most of the work involved in making it was done in America. If all you’re doing is what the FTC calls a “screwdriver assembly" of parts from around the world, you can’t claim your product was "Assembled in the USA.”

Are those the only rules governing labels showing where a product was made?

No. The Federal Trade Commission regulates claims that companies choose to make in their packaging or advertising, but other federal laws require labels for imported products. For example, there are rules for labeling products made from textiles, wool and fur. The Buy American Act of 1933 created yet another set of rules for government procurement; to be “considered American-made” for those purposes, more than half of the parts have to be made in the U.S.

Then there's the American Automobile Labeling Act, which requires that every car sold domestically have a label showing where it was manufactured, what percentage of the content was made in the U.S. and Canada, and where the engine and transmission were made. Those rules are enforced by the National Highway Traffic Safety Administration. (If you want to make an advertising claim about where the car was made, you have to deal with the FTC again.)

If something is not made in America, do companies have to say so on the label?

Yes, unless your product is on a long list of exemptions.

The folks at Customs and Border Protection require foreign companies that export to the U.S. to clearly label that product’s “country of origin.” If a product started out in one country and was “substantially transformed” somewhere else, the second country has to be listed as the “country of origin.” That transformation, the law says, happens when a “new article with a different name, character and use is created.”

There are even detailed rules about the markings themselves — down to the size of the letters or the adhesive used for a stick-on label. Some products, like watches and clocks, manhole covers and “hinged hand tools for holding and splicing wire” get their own special marking rules.

Not all products have to be marked, including raw materials, goods that will be used to make other products or those that would be very difficult or costly to mark (like an egg).

Then there’s something called the “J-list,” named for the section of the Smoot-Hawley Tariff Act of 1930 that grandfathered exemptions for about 100 products. Feathers are on the list, so you may have a hard time figuring out where they came from. Same goes for playing cards and hairnets. The list is a just one more example of the complexity of global trade negotiations.

What happens if you don’t follow these "country of origin" marking rules?

If you get caught, Customs will give you three options. You can “re-export” the product, which means you just send it somewhere else. You can have the products marked properly (at your expense, of course.) Or you can have the products destroyed. Your call.

What happens if you break the rules and make a false “Made in America” claim?

Companies have tried all sorts of ways to skirt the law with indirect claims, like proudly displaying an American flag or the Statue of Liberty on the product.

Not allowed, says the FTC. Unless the product meets the “all or virtually all” standard, you can’t try to trick consumers by wrapping your product in the flag.

If you get caught, and the FTC decides you’ve crossed the line, you’ll get an order to stop making the claim. Most companies who get nabbed agree to stop making false Made in America claims without admitting or denying they did anything wrong. If you break the rules again, you'll probably get hit with a heavy fine for each infraction.

But the FTC doesn’t have a Made in America Police browsing store shelves for violations. The agency relies on consumers to tip them to infractions. If you think a company is falsely making a "Made in America" claim, you can notify the FTC’s Complaint Assistant Web site.