Inaugural Trade Compliance Flash: "Made in USA" and Environmental Goods Tariffs

International Alert
01.06.16

We are celebrating the new year with publication of the inaugural issue of the Miller & Chevalier Trade Compliance Flash. This new e-publication will alert you to noteworthy customs, export controls, sanctions, trade policy and other supply chain-related developments. The concise "quick-read" format contains links to source materials and more in-depth coverage. As always, we appreciate your feedback and look forward to hearing from you about how we can use this new communication tool in a way that best serves your needs.

California Rings in 2016 with a New "Made in USA" Labeling Law

Richard Mojica and Austen Walsh

Effective January 1, 2016, products sold in California may be labeled as "Made in USA" if the finished product is made domestically and the value of any foreign-origin components does not exceed five percent of its wholesale value. That threshold rises to 10 percent if the manufacturer can show that it cannot make the foreign components in the United States or obtain them from a domestic source.

Up until this year, California prohibited the use of the label "Made in USA" unless 100 percent of a product's components were manufactured or produced in the United States. That standard was more stringent than the federal standard enforced by the Federal Trade Commission (FTC) and followed by every other state, which requires a product be "all or virtually all" made in the United States to be labeled "Made in USA" (meaning that the product may contain a negligible amount of foreign content). This change is a welcome development for companies that have struggled to comply with both laws, some of whom have gone as far as to keep separate inventories of products labeled for sale in California and elsewhere.

The relaxation of California's standard is expected to stem the tide of class action lawsuits filed in that state concerning "Made in USA" claims, some of which have resulted in expensive settlements. But important differences still remain between the federal and California standards for unqualified "Made in USA clams." For example, the California law applies only to product labels, whereas the FTC standard extends to "Made in USA" claims in advertising and marketing materials. In addition, California articulates a bright-line foreign content requirement, whereas the FTC does not.

The bottom line is that the use of unqualified "Made in USA" claims requires careful analysis. In some cases, including a qualifier on the label, such as "Made in USA of U.S. and imported parts," is sometimes more appropriate and worth considering. 

The United States Cuts Tariffs on Environmental Goods

Richard Mojica and Austen Walsh

U.S. tariffs on certain environmental goods were reduced to five percent on December 31, 2015, pursuant to commitment between Asia-Pacific Economic Cooperation (APEC) countries to cut tariffs on 54 environmental goods -- including water treatment filters, gas and wind turbines and solar water heaters -- to five percent or less by the end of 2015. The modifications to the U.S. tariff schedule are explained in a recent Presidential Proclamation (available here).

The APEC's list of environmental goods was the impetus for a broader, tariff-cutting agreement on environmental goods that is currently being negotiated at the World Trade Organization by 17 countries, including the United States and the European Union. Although U.S. tariffs on environmental goods are already low, many other countries charge tariffs as high as 35 percent on these goods.

This is a good time to review whether any of the products your Company imports into the United States or any of the other twenty APEC countries -- including China, Japan, Russia, Canada and Mexico -- will benefit from tariff reductions. The APEC list of environmental goods is available here.

For questions or comments about these articles, contact one of the following authors:

Richard Mojica, rmojica@milchev.com, 202-626-1571

Austen Walsh, awalsh@milchev.com, 202-626-5566

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