U.S. consumers may be surprised to learn many products bearing the label “Made in America” are largely built outside of the United States. The practice exploits a little-known loophole in the product-label system that one California businessman says he is determined to expose.
Oftentimes, as much as 90 percent of the various components of a product can come from other countries, such as China and India, but it can still qualify for the “Made in America” label because a minimum percentage of the final product is assembled or “substantially transformed” in the U.S.
This process, which critics call deeply deceptive, can leave American consumers assuming they are buying from primarily domestic sources, when, in fact, most of their money is going overseas.
“Companies are gaming these rules,” said Alan Uke, owner of a specialty lighting manufacturer and author of “Buying America Back,” which lays out a strategy that he is hoping lawmakers on Capitol Hill will consider.
Under his proposal, American manufacturers would be able to distinguish genuine “Made in America” products - which are produced entirely in the U.S. - from those that are not. He proposes a redesigned country-of-origin label on all consumer goods listing where its components originate, what is the balance of trade between that country and the United States, and the location of the main offices of the company that sells the product.
Currently, U.S.-made parts and content must be disclosed for only a few specific categories of goods, including automobiles and textile, wool and fur products. There is no law that other products disclose the amount of U.S. content, but those that want to be labeled “Made in USA” must meet standards set forth by the Federal Trade Commission.
The agency in the 1990s considered a regulation that would have set a standard that U.S. manufacturing costs equal at least 75 percent of the total manufacturing cost and that final work to prepare the product for market be done in the United States, but the proposal did not become part of the final guidelines.
Currently, the FTC defines “Made in USA” to mean products that are “all or virtually all” made domestically.
Mr. Uke is working with Rep. Brian P. Bilbray, California Republican, to update the label laws, so consumers have a much better sense where their products come from. He expects the legislation to be introduced early next year.
“The whole idea is to help U.S. businesses by helping consumers make an informed decision,” Mr. Bilbray said. “I think there are a lot of consumers who would be willing to pay more, but they wouldn’t necessarily have to.”
This isn’t the first time Mr. Uke and Mr. Bilbray have worked together. In the 1990s, they pioneered a plan, known as the Smog Index, that required auto manufacturers to list emissions the same way they informed drivers of the mileage rates. The idea became law as an amendment to the Clean Air Act.
Mr. Uke “has already given me some great ideas that we’ve been able to make a reality, and this is another one that we’re taking a look at,” Mr. Bilbray said.
The lawmaker acknowledges that parts of the labeling law could be difficult to implement. It would be expensive for companies to print detailed product labels. It could also be challenging to determine the exact percentages of the contribution of each country to the final product. These are problems that Mr. Bilbray is trying to solve before he introduces the bill.
“How do we make it practical?” he asked.
Mr. Uke, who says he opposes protectionist trade policies, hopes to create a “local preference” among U.S. consumers that leads them to seek out American products over those made partially or wholly produced in other countries. Right now, he contends, U.S. companies are losing the local-preference war.
In fact, some U.S. retailers refuse to sell American products, Mr. Uke says.
“They actually take the American stuff off the shelf, because they don’t want you to buy it,” he explained.
This makes it difficult for American manufacturers to compete with foreign companies who benefit from the same local preference in their home markets that their U.S. competitors are lacking, Mr. Uke argues.
In other countries, “their people won’t buy your stuff, because they want to buy their stuff, even if yours is better,” he said. “It goes beyond economics. They are playing with different rules than we are.”
But Mr. Uke thinks that more detailed product labels in the U.S. could help create the local preference in the marketplace that American manufacturers are missing. “It’s like the environment,” he said. “People who want to protect the environment make different choices,” and sometimes spend more money to do so.
On the other hand, he said, some consumers don’t want to support certain countries, such as those that exploit child labor.
“There are countries [some customers] don’t want to support, and there are other countries they like,” he said.
Shoppers looking to buy exclusively American products could face higher prices, Mr. Uke concedes, but the payoff would come in more local jobs and wages.
“No one’s forcing anyone to buy American,” he said. “It will sometimes be higher than the lowest cost, but you don’t have to buy it.”