BILL ANALYSIS �
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THIRD READING
Bill No: AB 2624
Author: Medina (D)
Amended: 7/1/14 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-2, 6/24/14
AYES: Jackson, Corbett, Lara, Leno, Monning
NOES: Anderson, Vidak
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 69-4, 5/19/14 - See last page for vote
SUBJECT : False advertising: Made in North America
SOURCE : Author
DIGEST : This bill makes it unlawful to sell or offer for sale
in this state any product that contains the words Made in North
America, North American Made, or similar words on the product or
its container unless all of the product was made in the United
States, Canada, or Mexico. This bill adds 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.
ANALYSIS : Existing federal law 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."
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AB 2624
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Existing federal law requires that a "Made in U.S.A." label be
consistent with orders and decisions of the Federal Trade
Commission.
Existing federal policy provides that a product may be labeled
as "Made in U.S.A." if the product is all or virtually all made
in the United States, however a product using such a label may
contain, in a negligible amount, components made outside of the
United States.
Existing law:
1.Protects consumers and competitors against unlawful, unfair or
fraudulent business acts or practices and unfair, deceptive,
untrue, or misleading advertising.
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.
3.Provides that the following are unfair methods of competition
and unfair or deceptive acts or practices: (1) using
deceptive representations or designations of geographic origin
in connection with goods or services; and (2) misrepresenting
the source of goods or services.
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
substantially made, manufactured, or produced outside of the
United States.
This bill:
1.Provides that it is unlawful for any person, firm,
corporation, or association to sell or offer for sale in this
state any product that contains the words "Made in North
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America," "North American Made," or similar words on the
product or its container unless all of the product was made in
the United States, Canada, or Mexico.
2.Provides that representing that a product is made in North
America in violation of the above provision is among the
unfair methods of competition and unfair or deceptive acts or
practices actionable under the Consumers Legal Remedies Act.
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, 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." Similarly, California's Unfair
Practices Act has protected California consumers from "unlawful,
unfair or fraudulent business act[s] or practice[s]" for over 70
years.
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."
Because the law prohibits the use of the label if any component
part of a product is entirely or substantially made outside the
United States, California law essentially requires a product to
be entirely made in the United States in order to be labeled as
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such.
Prior Legislation
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
of the merchandise obtained from outside the United States
constitutes only a negligible part of the final manufactured
product. This bill failed passage out of the Senate Judiciary
Committee.
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% of
the components, parts, articles, or units of the merchandise
were manufactured in the United States; United States
manufacturing costs constitute at least 90% of the total
manufacturing costs for the merchandise; and the merchandise was
last substantially transformed or assembled in the United
States. This bill failed passage out of the Senate Judiciary
Committee on a 2-5 vote.
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.: Yes
Local: Yes
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SUPPORT : (Verified 8/5/14)
California Chapter of the American Fence Association
California Fence Contractors Association
Coalition of Small and Disabled Veteran Businesses
Flasher Barricade Association
Marin Builders Association
Star Milling Company
OPPOSITION : (Verified 8/5/14)
Consumer Federation of California
Del Mar Law Group
ARGUMENTS IN SUPPORT : According to the author:
Existing California law requires that a product be 100
[percent] produced in the U.S. in order to be labeled as
"Made in the USA." The federal government and other states
use a more flexible "all or nearly all" standard, usually
70 [percent] to 80 [percent] produced. Given California's
access to global markets, these requirements may become an
impediment to marketing California businesses. The current
labeling standards are a problem and do not reflect current
supply chain practices.
Studies show that economies of Canada, Mexico, and the
United States have become increasingly integrated, with
Mexican products having upwards of 40 [percent] U.S.
content and Canadian products having 20 [percent] U.S.
content. Given the highly integrated markets of the U.S.,
Canada, and Mexico, a "Made in North America" label would
be a useful marketing alternative for product
ARGUMENTS IN OPPOSITION : The Del Mar Law Group states in
opposition, "As an initial matter, a product that is currently
being produced in Mexico and truthfully labeled and sold in
California as 'Made in Mexico' could be relabeled as 'Made in
North America' (the emphasis being on the word 'America') and
lawfully sold in California. This change in labeling
requirements would not help the California consumer, the
California worker, or the California economy. Simply put, we do
not see any benefits, except to the business that may increase
its sales of imported products when consumers mistake this new
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'Made in North America' label for the long-established and
highly desirable 'Made in America' label. AB 2624 could also
unwittingly eliminate jobs in California (i.e., the proverbial
'job killer') as companies may be inclined to move job across
the border to reduce labor expenses under the banner of this new
proposed 'Made in North America' label. This is the exact
outcome that the State Supreme Court ruled in 2011 violated
California's Made in USA labeling in Kwikset Corp. v. Superior
Court (Benson).
ASSEMBLY FLOOR : 69-4, 5/19/14
AYES: Achadjian, Alejo, Ammiano, Bigelow, Bocanegra, Bonilla,
Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau,
Chesbro, Conway, Cooley, Dababneh, Dahle, Daly, Dickinson,
Eggman, Fong, Fox, Frazier, Beth Gaines, Garcia, Gatto, Gomez,
Gordon, Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger
Hern�ndez, Holden, Jones, Jones-Sawyer, Levine, Linder, Logue,
Lowenthal, Maienschein, Medina, Melendez, Mullin, Muratsuchi,
Olsen, Pan, Perea, John A. P�rez, V. Manuel P�rez, Quirk,
Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner,
Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Williams,
Yamada, Atkins
NOES: Allen, Ch�vez, Patterson, Wilk
NO VOTE RECORDED: Bloom, Donnelly, Gonzalez, Mansoor, Nazarian,
Nestande, Vacancy
AL:nl 8/5/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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