The definition for the "Made in USA" label on consumer products should be updated to require a product be "substantially made" in the United States, the American Apparel & Footwear Association recently told the U.S. Federal Trade Commission.
In a Feb. 23 submission to the FTC, AAFA President and CEO Rick Helfenbein called for the agency to tighten its definition to exclude items that are only assembled in the U.S. Such a change would clear up confusion — both for manufacturers as well as for consumers looking to buy U.S.-made products, Helfenbein said.
Current FTC rules stipulate that a manufacturer may make an "unqualified" Made in USA claim when "all or virtually all" of a product's components are sourced from within the U.S. and the manufacturing or processing also took place in the U.S.
Manufacturers may also make a "qualified" Made in USA claim. Such a claim indicates that the product includes foreign-sourced materials but was assembled in the U.S. According to the FTC, qualified claims indicate "that the product isn't entirely of domestic origin" but leave out what some companies and groups feel are important details to provide clarity.
In both cases, manufacturers may include a Made in USA label on the product but do not need to use the words "qualified" or "unqualified."
To better delineate between the two classifications, AAFA proposed that the FTC adopt a requirement of "substantial transformation," meaning that the product is manufactured or otherwise processed in a manner that changes the name, character or use of the product once it arrives in the U.S. Specifically, the group called for a product to undergo at least a 51% physical change during U.S. manufacturing — known as a value-add — for it to receive an unqualified Made in USA label.
"Similarly, we urge the FTC to define the meaning of 'materials' and provide similar percentages to remove the ambiguity surrounding use of 'qualified' Made in USA labels," the group wrote.
The FTC did not return a request for comment from S&P Global Market Intelligence.
The AAFA's two-page submission was a response to a case pending before the FTC involving Bollman Hat Co., which the FTC targeted for claiming Made in USA labeling on its products despite the commission's finding that more than 70% of Bollman's hat styles are imported as finished products. On Jan. 23, the FTC said it had settled with the Pennsylvania-based hat company, requiring it to disclose "clear and conspicuous" proof of qualified Made in USA claims on their products.
"At a time when U.S. manufacturing is on the resurgent, we believe the case presents a renewed opportunity for the FTC to clarify the meaning of the 'all or virtually all' standard," Helfenbein wrote. "Creating a clear, enforceable standard will promote U.S. manufacturing and give consumers more, not less, certainty that the product they are buying is truly made in the USA."