• FDA-Regulated Industry Litigation Update regarding "Made in the U.S.A." Claims
  • April 15, 2015 | Authors: Melvin S. Drozen; Alissa D. Jijon; Richard F. Mann; Evangelia C. Pelonis; Frederick A. Stearns
  • Law Firm: Keller and Heckman LLP - Washington Office
  • We look forward to having you join us for our upcoming webinar, “Made in the U.S.A.” Claims: A Marketer's Guide. Relatedly, we are writing with an update on a recent litigation development in the “Made in the U.S.A.” claim arena, particularly as it may have implications for the food, drug, and cosmetic industries.

    Companies making “Made in the U.S.A.” (MIU) claims must take care to ensure compliance with applicable legal requirements, both at the federal and state level. Under federal guidelines enforced by the Federal Trade Commission (FTC), a product may bear an MIU claim where “all or virtually all” of the product has been made in the United States.[1] Under California law, a product may not bear an MIU claim when the “merchandise or any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States.”[2] (underlined emphasis added). California’s standard thus is stricter than the federal guidelines, effectively taking a zero-tolerance approach to foreign content in an article that bears an MIU claim.

    In the past year alone, companies have faced high-profile challenges in California related to MIU claims on consumer goods allegedly fabricated with foreign components. In early 2014, a manufacturer and a major retailer in the sporting goods industry settled a class action lawsuit premised on allegedly false MIU claims for basketball hoops manufactured in the United States with imported nets and some imported bolts.[3] In two similar cases filed in the U.S. District Court in the Southern District of California in June 2014, plaintiffs sued a clothing manufacturer and major retailers related to the marketing of apparel with allegedly false MIU claims where several components of the clothing - including fabric, thread, rivets, buttons, and zipper parts - purportedly were manufactured outside of the United States.[4] Both clothing cases are still pending.

    In an inevitable development, California MIU litigation now has made its way into FDA-regulated industry. In March 2015, plaintiffs sued a major beer producer in California state court over MIU claims on beverages allegedly produced using imported hops.[5] In the context of California’s MIU standard, food, drug, and cosmetic products raise special challenges and considerations that set them apart from many consumer goods. Unlike basketball hoops and jeans, many food, drug, and cosmetic products are not simply the sum of their parts. Therefore, an analysis based on the origin of the “article” and its “components” becomes much more complicated for these products.

    As noted above, the California MIU statute prohibits the use of an MIU claim where the “merchandise or any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States.” With a manufactured product that is stitched, stapled, or otherwise fastened together, it is somewhat easier to determine what materials constitute the whole and its parts. But where ingredients are cooked, denatured, catalyzed, filtered, or otherwise transformed during production, the analysis is much more complicated. For instance, could a potato chip bear an MIU claim where a processing aid - such as a defoamer, filtration aid, or anticaking agent - is the only component of foreign origin? Could an apple bear an MIU claim where an ingredient used in the wash water comes from Europe? Could a processed ingredient bear an MIU claim where enzymes used to catalyze specific chemical reactions come from Japan? Under the complex set of rules that govern the food industry, not every “component” used in food production actually becomes part of the “article” that is a finished food product. Similar issues arise in the drug and cosmetic industries. It will take effort and thoughtfulness to determine exactly how California’s blunt MIU standard may be honed appropriately for application to the food, drug, and cosmetic sectors.

    [1] FTC, “Complying with the Made in USA Standard,” available at: https://www.ftc.gov/tips-advice/business-center/guidance/complying-made-usa-standard.

    [2] Cal. Bus. & Prof. Code § 17533.7, available at: http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&group=17001-18000&file=17530-17539.6

    [3] Hecht-Nielsen et al. v. Lifetime Products Inc., et al., and Afrouznia et al. v. Lifetime Products Inc., et al., Case No. 37-2011-00089380-CU-BT-CTL.

    [4] Clark v. Citizens of Humanity LLC et al., Case Number 3:14-cv-01404; Paz v. Adriano Goldschmied et al., Case Number 3:14-cv-01372.

    [5] Nixon v. Anheuser-Busch, LLC, Case Number CGC-15-544985.