BILL ANALYSIS Ó SB 633 Page 1 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: SB 633 Page 2 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 SB 633 Page 3 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 SB 633 Page 4 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 SB 633 Page 5