BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 633


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          SENATE THIRD READING


          SB  
          633 (Hill)


          As Amended  July 13, 2015


          Majority vote


          SENATE VOTE:  39-0


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Privacy         |11-0 |Gatto, Wilk, Baker,   |                    |
          |                |     |Calderon, Chang,      |                    |
          |                |     |Chau, Cooper,         |                    |
          |                |     |Dababneh, Dahle,      |                    |
          |                |     |Gordon, Low           |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
           ------------------------------------------------------------------ 


          SUMMARY:  Permits merchandise with the words "Made in U.S.A." to  
          be offered for sale if no more than 5% of the final wholesale  
          value of the product is foreign-made, or no more than 10% is  
          foreign-made if the content could not be produced or obtained  
          domestically, regardless of cost.  Specifically, this bill: 










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          1)Permits merchandise with the words "Made in U.S.A." or similar  
            words to be sold or offered for sale in California if not more  
            than 5% of the final wholesale value of the manufactured  
            product consists of articles, units or parts obtained from  
            outside the United States (US). 
          2)Permits merchandise with the words "Made in U.S.A." or similar  
            words to be sold or offered for sale in California if not more  
            than 10% of the final wholesale value of the manufactured  
            product consists of articles, units or parts obtained from  
            outside the US, and the manufacturer cannot produce or obtain  
            the articles, units or parts domestically, regardless of cost.  



          3)Declares that the prohibitions and exceptions for use of the  
            "Made in U.S.A." label shall not apply to merchandise sold for  
            resale to consumers outside of California.


          4)Clarifies that merchandise sold or offered for sale outside 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.


          5)Makes other technical or nonsubstantive changes. 


          EXISTING LAW:   


          1)Generally protects consumers and competitors against false or  
            misleading advertising.  (Business and Professions Code (BPC)  
            Section 17500, et seq.)


          2)Makes it unlawful for any person, firm, corporation, or  
            association to sell, or offer for sale, merchandise that  
            advertises itself as being made or manufactured in the US when  








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            any article, unit, or part of the merchandise has been  
            entirely or substantially made, manufactured, or produced  
            outside of the US. (BPC Section 17533.7)


          3)Authorizes the Federal Trade Commission (FTC) to regulate  
            claims of US origin pursuant to authority granted to it under  
            the FTC Act, which prohibits "unfair or deceptive acts or  
            practices."  (15 United States Code (USC) Section 45)  


          4)Requires that a "Made in U.S.A." label be consistent with  
            orders and decisions of the FTC.  (15 USC Section 45 (a))


          5)Provides, in the form of a policy statement, that a product  
            may be labeled as "Made in U.S.A." if the product is all or  
            virtually all made in the US; however, a product using such a  
            label may contain - in a negligible amount - components made  
            outside of the US.  ("Enforcement Policy Statement on U.S.  
            Origin Claims,"  FTC, 62 Federal Regulations Section 63756  
            (December 2, 1997))


          FISCAL EFFECT:  None.  This bill has been keyed non-fiscal by  
          the Legislative Counsel.


          COMMENTS:  This bill is intended to permit a domestically  
          produced product to bear a "Made in USA" label even if up to 5%  
          of the final wholesale value of the product contains  
          foreign-produced content, or up to 10% foreign content if the  
          article, unit or part could not be obtained in the US.  This  
          bill is author-sponsored.  


          California is unique within the US for having its own statutory  
          standard for use of the term "Made in U.S.A."  California's law  
          is different from - and, in practice, stricter than - the  








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          federal standard laid out in the FTC's December 1997 Enforcement  
          Policy Statement on US Origin Claims (the "FTC Standard"). 


          The FTC is charged with preventing deception and unfairness in  
          the marketplace.  Federal law gives the FTC power to bring  
          enforcement actions against false or misleading claims that a  
          product is of US origin.  The FTC's standard requires that for  
          any unqualified "Made in U.S.A." claim, the product must be "all  
          or virtually all" made in the US.  According to the FTC, "all or  
          virtually all" means that "all significant parts and processing  
          that go into the product must be of US origin.  That is, the  
          product should contain no - or negligible - foreign content."   
          The precise meaning of "negligible" is not provided, meaning  
          that it will be understood and applied on a case-by-case basis.   
          Any unqualified claim must have a reasonable basis in fact.   


          Conversely, California's Business and Professions Code states  
          that it is unlawful to sell or offer merchandise in California  
          with the words "Made in U.S.A." or similar wording when the  
          merchandise or any part thereof  has been entirely or  
          substantially made, manufactured, or produced outside of the  
          United States.  This provision was added to the BPC in 1961.  


          Courts have interpreted this requirement strictly, holding that  
          any merchandise containing even one part that is foreign made or  
          assembled may not be marketed as "Made in U.S.A."  (Colgan v.  
          Leatherman Tool Group, Inc. (2006) 135 Cal.App.4th 663).  As  
          such, California's domestic production standard for use of the  
          "Made in USA" designation is effectively 100%.


          Analysis Prepared by:                                             
                          Hank Dempsey / P. & C.P. / (916) 319-2200  FN:  
          0001242










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