BILL ANALYSIS �
AB 2624
Page 1
ASSEMBLY THIRD READING
AB 2624 (Medina)
As Amended April 21, 2014
Majority vote
BUSINESS & PROFESSIONS 12-2 APPROPRIATIONS 16-0
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|Ayes:|Bonilla, Bocanegra, |Ayes:|Gatto, Bigelow, |
| |Campos, Dickinson, | |Bocanegra, Bradford, Ian |
| |Eggman, Gordon, Hagman, | |Calderon, Campos, Eggman, |
| |Holden, Maienschein, | |Gomez, Holden, Jones, |
| |Mullin, Skinner, Ting | |Linder, Pan, Quirk, |
| | | |Ridley-Thomas, Wagner, |
| | | |Weber |
|-----+--------------------------+-----+--------------------------|
|Nays:|Jones, Wilk | | |
| | | | |
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SUMMARY : Prohibits the sale or offer for sale in California and
product claiming to be "Made in North America," "North American
Made," or similar words, unless all or virtually all of the
product was made in the United States (U.S.), Canada, or Mexico,
the violation of which will constitute an unfair business
practice. Specifically, this bill :
1)Declares it unlawful for any person, firm, corporation, or
association to sell or offer for sale in California any
product claiming to be "Made in North America," "North
American Made," or similar words unless "all or virtually all"
of the product has been made in the U.S., Canada, or Mexico.
2)Deems the sale or offer for sale of a product unlawfully
claiming to be "Made in North America" or "North American
Made" to be an unfair method of competition, and an unfair or
deceptive act or practice.
3)States that no reimbursement is required by this bill pursuant
to the California Constitution because the only costs that may
be incurred by a local agency or school district will be
incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a
crime or infraction, or changes the definition of a crime, as
specified.
AB 2624
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FISCAL EFFECT : According to the Assembly Appropriations
Committee, negligible fiscal impact.
COMMENTS :
1)Purpose of this bill. This bill creates an "all or virtually
all" standard to use the terms "Made in North America," "North
American Made," or similar terms, based on the same federal
standard for "Made in U.S.A." products. The aim is to provide
certainty in content standards to manufacturers in order to
facilitate the use of commercially valuable "Made in North
America" labels and promote regional manufacturing. This bill
is author-sponsored.
2)North America Free Trade Agreement. The North American Free
Trade Agreement (NAFTA) is a trade pact signed by the U.S.,
Canada, and Mexico in 1992. NAFTA called for the elimination
of all trade barriers over a 15-year period, granting U.S. and
Canadian companies access to certain Mexican markets, and
incorporating agreements on labor and the environment.
According to the Office of the United States Trade
Representative, trade between the U.S. and its NAFTA partners
has soared since the agreement entered into force. This bill
would provide for an origination label that covers materials
and parts from all three countries.
3)The Federal Trade Commission's (FTC's) "all or virtually all"
standard. The FTC is charged with preventing deception and
unfairness in the marketplace. The FTC Act gives the FTC the
power to bring law enforcement actions against false or
misleading claims that a product is of U.S. 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
U.S. According to the FTC, "all or virtually all" means that
"all significant parts and processing that go into the product
must be of U.S. 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.
The "all or virtually all" standard requires that the product's
AB 2624
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final assembly or processing must take place in the U.S. The
FTC considers other factors as well, including how much of the
product's total manufacturing costs can be assigned to U.S.
parts and processing, and how far removed any foreign content
is from the finished product. Costs should be calculated
based on the cost of goods sold or the inventory costs of the
finished goods. Costs generally are limited to the total cost
of all manufacturing materials, direct manufacturing labor,
and manufacturing overhead.
FTC offers two illustrative examples of its standard: First, a
propane barbeque grill's major components are made and
assembled in the U.S., but the knobs and tubing are made in
Mexico. According to the FTC, a "Made in U.S.A." claim "is
not likely to be deceptive because the knobs and tubing make
up a negligible portion of the product's total manufacturing
costs and are insignificant parts of the final product."
Second, a table lamp may be assembled in the U.S. from
American-made brass, with an American-made lampshade but an
imported base. The base accounts for a small percent of the
total cost of making the lamp. Nevertheless, the FTC writes
that "[a]n unqualified 'Made in U.S.A.' claim is deceptive for
two reasons: The base is not far enough removed in the
manufacturing process from the finished product to be of
little consequence and it is a significant part of the final
product."
This bill would require individuals to adhere to that federal
standard when advertising a product as "Made in North
America."
Analysis Prepared by : Sarah Huchel / B., P. & C.P. / (916)
319-3301
FN: 0003483