BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 633|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: SB 633
Author: Hill (D), et al.
Amended: 5/19/15
Vote: 21
SENATE JUDICIARY COMMITTEE: 7-0, 5/12/15
AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,
Wieckowski
SUBJECT: Consumer protection: Made in U.S.A. label
SOURCE: Author
DIGEST: This bill prohibits the sale of merchandise labeled
"Made in U.S.A.," "Made in America," "U.S.A.," or similar words
if the merchandise or any article, unit, or part thereof, has
been entirely or substantially made, manufactured, or produced
outside of the United States, unless: (1) the article, unit, or
part of the merchandise obtained from outside the United States
constitutes not more than five percent of the final manufactured
product; or (2) the article, unit, or part of the merchandise
obtained from outside the United States constitutes not more
than 10 percent of the final manufactured product and the
manufacturer of the merchandise shows that it can neither
produce the article, unit, or part within the United States nor
obtain the article, unit, or part of the merchandise from a
domestic source, as specified.
ANALYSIS:
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Existing federal law:
1)Authorizes the Federal Trade Commission to regulate country of
origin claims pursuant to authority granted to it under the
Federal Trade Commission Act, which prohibits "unfair or
deceptive acts or practices." (15 U.S.C. Sec. 45.)
2)Requires that a "Made in U.S.A." label be consistent with
orders and decisions of the Federal Trade Commission. (15
U.S.C. Sec. 45a.)
Existing state law:
1)Protects consumers and competitors against unlawful, unfair or
fraudulent business acts or practices and unfair, deceptive,
untrue, or misleading advertising. (Bus. & Prof. Code Sec.
17200 et seq.)
2)Makes it unlawful for any person, firm, corporation or
association, or any employee thereof, to make or disseminate
before the public in this state, in any newspaper or other
publication or in any other manner or means whatever, any
statement concerning personal property which is untrue or
misleading, and which is known, or which by the exercise of
reasonable care should be known, to be untrue or misleading.
(Bus. & Prof. Code Sec. 17500 et seq.)
3)Provides that the following are unfair methods of competition
and unfair or deceptive acts or practices: (a) using
deceptive representations or designations of geographic origin
in connection with goods or services; and (b) misrepresenting
the source of goods or services. (Civ. Code Sec. 1770.)
4)Makes it unlawful for any person, firm, corporation or
association to sell or offer for sale in this state any
merchandise on which merchandise or on its container there
appears 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
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substantially made, manufactured, or produced outside of the
United States. (Bus. & Prof. Code Sec. 17533.7.)
This bill:
1)Provides that merchandise made, manufactured, or produced in
the United States that has an article, unit, or part from
outside of the United States may be labeled "Made in U.S.A.,"
"Made in America," "U.S.A.," or similar words if the article,
unit, or part of the merchandise obtained from outside the
United States constitutes not more than five percent of the
final manufactured product.
2)Provides that merchandise made, manufactured, or produced in
the United States that has an article, unit, or part from
outside of the United States may be labeled "Made in U.S.A.,"
"Made in America," "U.S.A.," or similar words if both of the
following apply:
The manufacturer of the merchandise shows that it can
neither produce the article, unit, or part within the
United States nor obtain the article, unit, or part of the
merchandise from a domestic source; and
The article, unit, or part of the merchandise obtained
from outside the United States constitutes not more than 10
percent of the final manufactured product.
1)Specifies that, for purposes of the above provision, a
determination that an article, unit, or part of the
merchandise cannot be made, manufactured, produced, or
obtained within the United States from a domestic source shall
not be based on the cost of the article, unit, or part.
2)Provides that California's domestic origin labeling law shall
not apply to merchandise sold for resale to consumers outside
of the State of California.
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3)States that goods sold or offered for sale outside of the
State of California shall not be deemed mislabeled if the
label conforms to the law of the forum state or country within
which they are sold or offered for sale.
Background
The Legislature has long considered consumer protection to be a
matter of high public importance. State law is replete with
statutes aimed at protecting California consumers from unfair,
dishonest, or harmful market practices. The Consumer Legal
Remedies Act (Civ. Code Sec. 1750 et seq.), for example, was
enacted "to protect the statute's beneficiaries from deceptive
and unfair business practices," and to provide aggrieved
consumers with "strong remedial provisions for violations of the
statute." (Am. Online, Inc. v. Superior Court (2001) 90
Cal.App.4th 1, 11.) Similarly, California's Unfair Practices
Act (Bus. & Prof. Code Sec. 17000 et seq.) has protected
California consumers from "unlawful, unfair or fraudulent
business act[s] or practice[s]" for over 70 years. (Bus. &
Prof. Code Sec. 17200.)
Consumer protection regarding country of origin labeling is no
less a matter of fundamental public policy. Since 1961,
California has expressly required that businesses meet certain
standards before they can claim that their products are "Made in
U.S.A." California law prohibits a product from being labeled
and sold in California as "Made in U.S.A." or "Made in America"
when the product, or any article, unit, or part of the product,
has been entirely or substantially made outside of the United
States. California courts have observed that "[this law] does
not state . . . that a product may be represented as "Made in
U.S.A." if a substantial number or a majority of its parts are
made in the United States," but rather that "merchandise cannot
be represented as "Made in U.S.A." if the merchandise, or any
article, unit, or part of that merchandise, was entirely or
substantially made, manufactured, or produced outside of the
United States." (See e.g. Colgan v. Leatherman Tool Group, Inc.
(2006) 135 Cal.App.4th 663, 684 [emphasis added].) Because the
law prohibits the use of the label if any component part of a
product is entirely or substantially made outside the United
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States, California law essentially requires a product to be
entirely made in the United States in order to be labeled as
such.
This bill modifies California's domestic content threshold for
labeling a product as "Made in the U.S.A." by making it lawful
to sell merchandise with this label, provided either no more
than five percent of the merchandise is obtained from outside
the United States, or no more than ten percent of the
merchandise is obtained from outside the United States and the
manufacturer shows that it can neither produce the foreign
article, unit, or part within the United States nor obtain the
foreign article, unit, or part of the merchandise from a
domestic source.
Comments
According to the author:
Under existing California law (Section 17533.7 of the Business
and Professions Code), a product may not be sold in California
as "Made in U.S.A." or "Made in America" if the product, or
any article, unit, or part of the product, has been entirely
or substantially made, manufactured, or produced outside of
the United States.
California's "Made in USA" labeling standard was created in
1961 to "prevent foreign firms from taking advantage of 'buy
American' promotions." This was a different era, when the
global economy was nascent. The statute establishes a 100
percent domestic requirement, meaning that all products used
in a manufactured product must come from domestic sources. In
today's complex and global economy this is an unrealistic
threshold for many modern companies that manufacture products
with many different components, some of which may not be
available domestically.
California is the only state in the country that establishes a
100 percent domestic requirement. All 49 other states and the
federal government use the more flexible "all or virtually
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all" standard for determining when a product is eligible to be
labeled as "Made in USA." This standard requires that the
significant parts of a final manufactured product come from
domestic sources. But, the standard also allows a product to
contain a negligible amount of foreign sourced material. As
an example, New Balance sneakers are made from roughly 70
percent domestic sources and the Federal Trade Commission
allows them to advertise as "Made in USA."
Even if a company goes out of their way to meet California's
100 percent "Made in USA" labeling threshold, it is not always
possible due to the nature of our global economy. Certain
components are simply not available in the U.S.
Related/Pending Legislation
AB 312 (Jones, 2015) provides that a product may be advertised
as being made or manufactured in the United States if the
merchandise has been all or virtually all made in the United
States. The bill is pending on the Assembly Floor.
AB 2624 (Medina, 2014) would have made it unlawful to sell any
product that contains the words "Made in North America," "North
American Made," or similar words on the product or its container
unless all or virtually all of the product was made in the
United States, Canada, or Mexico. The bill would have also
added misrepresenting a product as made in North America to the
list of unfair methods of competition and unfair or deceptive
acts or practices actionable under the Consumers Legal Remedies
Act. The bill died on the Senate Inactive File.
SB 661 (Hill, 2014) would have provided that merchandise made,
manufactured, or produced in the United States that has an
article, unit, or part from outside of the United States may be
labeled and sold in California as "Made in U.S.A." or "Made in
America" if the following requirements are met: (1) the
manufacturer of the merchandise certifies that it can neither
produce the article, unit, or part within the United States nor
obtain the article, unit, or part of the merchandise from a
domestic source; (2) the manufacturer's determination that the
article, unit, or part cannot be produced or obtained within the
United States from a domestic source is not based on the cost of
the article, unit, or part; and (3) the article, unit, or part
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of the merchandise obtained from outside the United States
constitutes only a negligible part of the final manufactured
product. The bill failed passage out of the Senate Judiciary
Committee on a 2-5 vote.
AB 890 (Jones, 2013) would have provided that a product sold in
California could carry the label "Made in U.S.A." if it was
substantially made, manufactured, or produced in the United
States as measured by the following criteria: at least 90
percent of the components, parts, articles, or units of the
merchandise were manufactured in the United States; United
States manufacturing costs constitute at least 90 percent of the
total manufacturing costs for the merchandise; and the
merchandise was last substantially transformed or assembled in
the United States. The bill failed passage out of the Senate
Judiciary Committee on a 2-5 vote.
AB 858 (Jones, 2012) was substantially similar to AB 312 (Jones,
2015). The bill failed passage out of the Senate Judiciary
Committee on a 2-3 vote.
ABX6-8 (Beall, 2010) which was identical to AB 858 (Jones,
2012), was introduced in the Sixth Extraordinary Session but was
never referred to a policy committee.
SB 1004 (Holmdahl, Chapter 676, Statutes of 1961) codified
California's "Made in the U.S.A." law, making it unlawful for
any person, firm, corporation, or association to sell or offer
for sale any merchandise that advertises itself as being made or
manufactured in the United States when any article, unit, or
part of the merchandise has been entirely or substantially made,
manufactured, or produced outside of the United States.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified5/21/15)
California Association of Independent Business
California Manufacturers & Technology Association
California Retailers Association
Chamber of Commerce of the Santa Barbara Region
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Consumer Specialty Products Association
National Federation of Independent Businesses
Oxnard Chamber of Commerce
San Francisco Chamber of Commerce
Silicon Valley Leadership Group
Small Business California
Specialty Equipment Market Association
OPPOSITION: (Verified5/21/15)
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Teamsters Public Affairs Council
Consumer Federation of California
Del Mar Law Group, LLP
Engineers and Scientists of California
International Federation of Professional and Technical Engineers
International Longshore and Warehouse Union
Unite-Here, AFL-CIO
Utility Workers Union of America
Prepared by:Tobias Halvarson / JUD. / (916) 651-4113
5/21/15 11:25:22
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