BILL ANALYSIS �
SB 12
Page 1
Date of Hearing: July 2, 2013
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Richard S. Gordon, Chair
SB 12 (Corbett) - As Amended: June 26, 2013
SENATE VOTE : 30-9
SUBJECT : Consumer affairs.
SUMMARY : Creates the Made in California Program (Program)
within the Governor's Office of Business and Economic
Development (GO-Biz) to promote products manufactured in
California, and authorizes GO-Biz to develop and adopt standards
that would permit a company to represent that a product is made
in California. Specifically, this bill :
1)Declares the sale or lease of goods or services which
represent that a product is made in California if it does not
comply with the standards adopted by GO-Biz to be an unfair
method of competition and an unfair or deceptive practice or
act.
2)Establishes the Program, a public and private collaboration
within GO-Biz, and declares that the purposes of the Program
are to encourage consumer product awareness and to foster the
purchase of high-quality products manufactured in this state.
3)Authorizes GO-Biz to develop and adopt standards that permit a
company to represent that a product is made in California.
Those standards may include any of the following:
a) The company has a California-based workforce; and,
b) The product must be entirely or substantially
manufactured in the state.
4)Defines "manufacture" to mean the process of taking raw
materials or components and adding value to those materials
and components in order to create a final, recognizable
product. "Manufacture" does not include the process of
completing a final assembly from subassemblies made elsewhere,
or the act of packaging a product.
SB 12
Page 2
5)States that the Program and the standards shall not apply to
those agricultural products subject to the Buy California
Program, as specified.
6)Authorizes GO-Biz to issue and make effective a marketing
agreement, including but not limited to, issuance of a Made in
California label, and be advised by those California
businesses willing to participate in the Program on a
voluntary basis via funding or in-kind contributions in a
manner defined under the marketing agreement.
7)Requires each company to apply to GO-Biz for use of the Made
in California label.
8)Authorizes GO-Biz to require a fee to accompany the Program
application.
9)Requires GO-Biz to determine the application fee, and
restricts that amount to the reasonable costs in providing the
services for which it is charged. Proceeds from the fee shall
be used to cover the costs of implementing the Program.
10)Permits GO-Biz to begin accepting applications prior to fully
developing and implementing the Program.
11)Authorizes GO-Biz to accept monetary donations or other
donations from businesses, nonprofit organizations, or
individuals for the purpose of implementing the Program.
12)Requires GO-Biz to report to the Legislature on January 1,
2015, and each successive January 1, regarding its
expenditures, progress, and ongoing priorities with the
Program, as specified.
13)Establishes the Made in California Fund as a special fund in
the State Treasury consisting of the revenues contributed
pursuant to this bill, and, upon an appropriation of those
funds by the Legislature, to be available for purposes of this
bill.
EXISTING LAW :
1)Prohibits unfair methods of competition, acts or practices by
any person which either results in or is intended to result in
the sale or lease of goods or services to any consumer, and
SB 12
Page 3
enumerates several methods of unfair competition, acts or
practices. (Civil Code (CIV) Section 1770)
2)Provides that any consumer who suffers damage as a result of a
practice declared to be unlawful under the Consumer Legal
Remedies Act (CLRA) may bring an action against that person to
recover damages, as specified. (CIV 1780)
3)Allows for a class action suit to be filed on behalf of a
class of consumers adversely affected by an unfair method of
competition, act or practice. (CIV 1781)
4)Authorizes California to enter into marketing agreements and
to create the "Buy California Program." (Food and Agriculture
Code Section 58750)
5)States that it is unlawful for any person, firm, corporation
or association to sell or offer any merchandise in California
that uses the words "Made in U.S.A.," "Made in America,"
"U.S.A.," or similar words when the merchandise or any
article, unit, or part thereof, has been entirely or
substantially made, manufactured, or produced outside of the
United States. (Business and Professions Code Section
17533.7)
6)Establishes GO-Biz within the Governor's Office for the
purpose of serving as the lead state entity for economic
strategy and marketing of California on issues relating to
business development, private sector investment and economic
growth. GO-Biz also serves as the administrative oversight
for the California Business Investment Service and the Office
of the Small Business Advocate. (Government Code (GC)
Sections 12096 - 12098.5)
7)Establishes processes and accountability measures for GO-Biz
to accept private monies to fund, establish and operate
international trade offices. (GC 13997)
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of this bill . This bill would create a public-private
partnership Program within the Governor's GO-Biz office to
promote the marketing of products manufactured in California.
SB 12
Page 4
SB 12 would authorize the Program to develop and adopt
standards for representing a product as "Made in California,"
and require products using that term to be approved by the
Program or be subject to legal action. The Program would also
engage in voluntary marketing agreements to promote
California-made products paid for by participants or other
donors. This bill is author-sponsored.
2)Author's statement . According to the author's office, "This
much needed statewide marketing strategy can help our small
businesses maintain [a] competitive edge against businesses
that decide to manufacture out of the state or even out of
this country and thus bringing the jobs with them.
"California businesses need a unifying brand targeted at
consumers who care about CA jobs, the environment and quality.
This label assures consumers that the product was manufactured
in CA and carries the excellence and standards that this state
offers.
"Manufacturers that embrace California's high quality, safety,
and environmental standards as a vital component of their
business strategy should have this marketing advantage. The
myriad of similar products on the market make it difficult for
consumers to differentiate between products that are made in
California versus elsewhere."
3)The Buy California Program . In 2001, the "Buy California
Program" was created within the Department of Food and
Agriculture to boost consumption of California's agricultural
commodities and provide resources to growers of specialty
crops. The Buy California Program addresses research,
agricultural education, nutrition, food safety and pest and
disease eradication to provide safe and nutritious food in a
fair marketplace with responsible stewardship of the
environment.
Within the Buy California Program is the Buy California
Marketing Agreement (BCMA), which was created in 2001 to be a
joint effort of agricultural industry groups representing the
products of California's farms, ranches, forests and
fisheries. Working as an advisory board to the California
Department of Food and Agriculture (CDFA), BCMA brings
together industry and government resources to increase the
awareness, consumption and value of California agricultural
SB 12
Page 5
products.
BCMA also oversees the popular "California Grown" campaign. The
"California Grown" campaign is funded through public and
private contributions by the U.S. Department of Agriculture,
CDFA, and California agricultural organizations.
The author of this bill asserts that other products made and
produced in California, many by small businesses, would
greatly benefit from another California labeling program.
However, unlike the Buy California Program, which also
provides research, agricultural education, nutrition, food
safety and pest and disease eradication, the program
envisioned by this bill would be exclusively a marketing
effort.
This bill would also add a new category of unlawful conduct
under the Consumer Legal Remedies Act and designate it an
unfair or deceptive trade practice for anyone to represent
that a product is made in California unless the product
complies with the standards adopted by GO-Biz.
4)Existing 'Made in California' programs . There are several
existing for-profit and nonprofit marketing programs that
promote California-made products:
California Manufacturing Technology Consulting (CMTC) is a
non-profit corporation affiliated with the National Institute
of Standards and Technology (NIST) that operates a "Made in
California" program to recognize manufacturers who produce
products in southern California. CMTC's "Made in California
Program" is marketing program that offers manufacturers who
make products in California visibility through the CMTC
website ( http://www.cmtc.com/made-in-california-program ).
Manex Inc. operates a similar manufacturing promotion program
for products manufactured in northern California.
( http://manexconsulting.com/made-in-ca/ )
There are also other outlets that promote "Made in California"
goods, such as www.madeincalifornia.net ,
www.americansworking.com , and www.shopcal.com .
However, there is currently no official definition for what
constitutes "made in California." Consumers may seek
SB 12
Page 6
compensation to recover damages for buying a product that is
not made in California through the Consumer Legal Remedies Act
(CLRA). CLRA prohibits unfair methods of competition, acts,
or practices by any person.
5)Comments for the Committee . The Committee may wish to take
the following issues into consideration:
a) Unrestricted fee authority; restricted use of standards .
This bill takes the unusual step of granting unrestricted
fee authority to GO-Biz, when the more common practice is
to approve a fee range to ensure affordability and some
measure of Legislative oversight. While the bill does
state that the fees required by this bill may only be used
to pay the "reasonable costs" of implementing the program,
that fee amount remains completely unknown.
Depending on the parameters and strictness of the standards
adopted, GO-Biz may be required to travel to manufacturing
sites and inspect premises, review employee files, and
verify sourcing of raw materials and components - which
presumably would be an expensive endeavor. Although this
bill allows for in-kind contributions and donations, these
funding sources have not been identified, so it is
reasonable to believe that Program participants would bear
the bulk of the cost or choose not to participate.
As a result, some small businesses may succeed in meeting the
future standard, and yet be barred from promoting their
products as California-made because of the high cost of the
Program. The Committee may wish to consider the prudence
of asking a government agency to invest the time and
expense in promulgating a California-based manufacturing
standard and then prohibit businesses from advertising
their adherence to that standard unless they first pay an
as-yet-to-be-determined sum of money to the State to
participate in a voluntary marketing program.
b) Standards guidance remains unclear . The recommended
standards contained in the bill include "The product is
entirely or substantially manufactured in the state." The
term "entirely or substantially manufactured", which is
borrowed from an existing statute that imposes such a
standard on products advertised as "Made in USA". Courts
have previously interpreted this standard very strictly,
SB 12
Page 7
meaning that any merchandise containing even one part that
is foreign made or assembled may not be marketed as "Made
in USA." (Colgan v. Leatherman Tool Group, Inc. (2006) 135
Cal.App.4th 663). It is functionally a 100% domestic
content standard, which some contend is discouragingly high
(see AB 890 (Jones) from 2013).
If GO-Biz or a subsequent court followed this same
interpretation, then that same 100% standard might be
applied. That would make California's national and state
standards consistent with one another, but it is also
unclear whether even the bill's current supporters would
meet that high standard if it were applied solely to
in-state manufacturing.
c) Continued exclusion of non-physical goods . By tying the
standard to physical manufacturing, this bill would exclude
intangible products like software or other intellectual
property from qualifying as "Made in California." Given
that California is a major producer and exporter of such
products, the Committee may wish to inquire of the author
as to the rationale for excluding these sectors of the
California economy from the Program.
The Committee may also wish to consider alternate approaches
to setting a clear standard for fairly marketing a product as
"Made in California." The Committee may wish to consider
separating the standard and the marketing label, so that
compliant companies could legitimately claim to be "Made in
California" but without the time and expense of applying for a
permit. GO-Biz could also develop a marketing program that is
truly voluntary for those individuals who want to use a unique
"Made in California" label more akin to a trademarked brand,
while adhering to the same standards.
6)Technical amendment . The following corrects a drafting error
by Legislative Counsel, which was supposed to make the
promulgation of the standards mandatory, rather than
permissive:
12098.10 (b)(1) should read "The office shall develop and
adopt standards"
7)Reconsideration . This bill was previously heard in this
Committee and is being granted reconsideration.
SB 12
Page 8
8)Related legislation . AB 890 (Jones) would align California
with the Federal standard regarding the use of the terms "Made
in U.S.A.", "Made in America", "U.S.A." or similar words when
a product or any portion of the product was not substantially
produced in the United States. AB 890 failed passage in the
Senate Judiciary Committee.
SB 661 (Hill) would have amended the standards for use of the
terms "Made in U.S.A.", "Made in America", "U.S.A." or similar
words, so that such merchandise must have 90% of its
manufacturing costs be accrued in the United States, and no
more than 10% of its total manufacturing costs accrued outside
of the United States, and only then if such costs are imposed
because of the unavailability of raw materials or component
parts. The merchandise must also be last substantially
transformed in the United States. This bill was held in the
Senate Judiciary Committee.
9)Previous legislation . SB 823 (Corbett) 2011, would have
created a "Made in California" program within the Governor's
Office of Economic Development. SB 823 was held in the
Assembly Appropriations Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees
(AFSCME), AFL-CIO
California Small Business Association
dB Control
PLASTIKON
Primus Power
Small Business California
Tesla Motors, Inc.
Opposition
None on file.
Analysis Prepared by : Sarah Huchel / B.,P. & C.P. / (916)
319-3301
SB 12
Page 9