By Mary Stucke, CPA Assurance Senior Manager
Consumers are aware more now than ever as to where their products are made. Many manufacturers, product distributors and stores produce and market products as “Made in the USA,” but what does this really mean? You may be surprised to learn the required guidelines of labeling products “Made in the USA.”
By definition, the “Made in the USA” mark is a country of origin label indicating the product is “all or virtually all” made in the United States. The Federal Trade Commission (FTC) has published guidelines regarding the appropriate use of this labeling and has the authority to bring law enforcement actions against false or misleading claims that a product is of U.S. origin.
The problem is that many U.S. manufacturers and marketers are unaware of, or at least unclear about the FTC’s guidelines, and proudly boast that their goods are made in the U.S., even when parts of those items are imported. There seems to be the misunderstanding that if assembly or final manufacturing takes place in the United States that the products may be marketed and labeled as “Made in the USA.”
Take for example a company that makes garden tools in Spirit Town, USA employing 100 local residents in the manufacturing process. On the surface, it sure feels like these tools from Spirit Town are “Made in the USA.” However, the key FTC requirement is based on how much of the total cost, including raw material, labor and overhead is of U.S. origin. When the FTC refers to “all or virtually all” they are referring to the total cost of the product. By definition, all is 100%. Although “virtually all” is not quantified by the FTC, enforcement actions issued by the FTC suggest it is all but an insignificant amount. If the garden tool company imports steel to make tools and the steel is 25% of the total cost of the product, is it made in the USA? Most likely, this would not qualify. What if the garden tool manufacturing company purchased component steel parts from Hardware Distributor in Plain City, USA, would that make a difference? If Hardware Distributor imported the steel component parts from overseas and those component parts were more than insignificant to the total cost of Garden Tool company’s total product cost, the answer is no. That would still not be considered “Made in the USA.”
The takeaway consideration of FTC enforcement actions, is that U.S. companies marketing or labeling product as “Made in the USA” really need to look one step back in the supply chain. They should ask their suppliers about the country of origin for components of products they supply. With that understanding, companies need to then evaluate whether the total cost of their products is “all or virtually all” made in the USA.
So how can you have more confidence that your supply chain, manufacturing process and marketing follows the guidelines to qualify to use the “Made in the USA” label? We can help. GBQ Partners LLC is the independent CPA firm used by the Made in the USA Brand Verification Program to execute examinations for determining compliance. The Verification Program helps your company understand the FTC’s requirements and takes a customized approach to review, test and document your company’s “Made in the USA” claim. Upon successful completion of the Verification Program you receive a Verification Letter and the right to use the “Made in the USA” Brand certification mark.
GBQ and Made in the USA Brand would welcome the opportunity to provide you more detailed information on this topic, for questions or comments please call us at 614.221.1120.
Contributors to this article:
Marci Gabor, Made in USA Brand
Tom Powers, GBQ Assurance Partner