Country of Origin Issues
Origin arises as a material in many different contexts in international trade. For example:
Origin must be accurately declared as a requirement of entry.
Origin determinations are frequently a prerequisite for the qualification of goods for preferential duty treatment (i.e. NAFTA, CAFTA, GSP, CBERA, AGOA, and other similar free trade agreements).
Origin is also frequently at issue in government procurement contracts.
Origin can be a critical aspect in determination of quotas and/or tariffs (such as section 232 or 301 tariffs).
Origin can be a critical aspect behind antidumping and/or countervailing duty liabilities.
False origin (transshipment) can give rise to civil/criminal liabilities.
Finally, the goods may (or may not) be subject to specific marking and labeling requirements (either on the goods themselves, or on their packaging).
“Made in USA” claims are separately administered under the FTC and various state law (such as California).
In sum, the failure to accurately label and declare goods may be the basis for customs seizure actions against importers, as well as private lawsuits and/or class action lawsuits directed against the downstream distributors and retailers.
Made in USA
Labeling claims of "Made in USA" are specifically regulated by both federal (15 U.S.C. §45a) and state law (California Bus. & Prof. Code §17533.7). The Federal Trade Commission enforces the federal law, and allows that Made in the USA" claims even where small (de minimis) amounts of foreign content are present (known in the trade as the "all or virtually all" standard).
For a period, California's laws were stricter than the federal standard, and would not allow for any foreign content unless "the product and all articles, units and parts thereof has been entirely or substantially made, manufactured or produced in the United States." The period gave rise to various class actions, such as in AG Adriano Goldschmeid, Inc. (“AG”) and Nordstrom, Inc., plaintiffs alleged that certain jeans contained fabric, thread, buttons, rivets, and/or certain subcomponents of the zipper assembly which were not of US origin. See, Paz v. AG Adriano Goldschmeid, Inc. et al. See, also Kwikset Corp. v. Superior Court, 51 Cal. 4th 310 (2011); Colgan v. Leatherman Tool Group, Inc., 135 Cal. App. 4th 663 (2006). These class actions prompted renewed concern and a revision of the California statute.
Therefore, on September 1, 2015, California re-aligned its requirement to more closely match the federal approach and that of many other states. Under the new state law (set out in Senate Bill 633), merchandise made, manufactured, or produced in the United States can be labeled “Made in the U.S.A” so long as “all of the articles, units, or parts of the merchandise obtained from outside the United States constitute not more than 5 percent of the final wholesale value of the manufactured product.” Additionally, merchandise can be labeled “Made in the U.S.A.” “if the manufacturer makes a showing that it cannot produce or obtain a certain article, unit, or part” within the United States for reasons other than cost, and that the article, unit, or part does not constitute more than ten (10) percent of “the final wholesale value of the manufactured product.” It is suggested that manufacturers may wish to obtain due diligence memos from law firms when proceeding under the second of these two exceptions.
Curated News Related to Origin:
September 1, 2015: California amends “Made in USA” provisions to more closely match federal standard.
March 11, 1980: Federal Appeals Court United States v. Murray upholds Massachusetts District Court’s criminal conviction of an importer for false origin claims re: Chinese glue alleged to have undergone a “substantial transformation” in Holland.