By Callie Nixon, Audit Senior I
In recent years, it appears that the trend of outsourcing to overseas suppliers and contractors may be losing some of its luster. Many businesses are returning to U.S. manufacturers, in a practice also known as reshoring, to obtain goods faster and at lower costs than foreign suppliers can offer. What’s more, “Made in the USA” tags and labels can win over domestic consumers who want to feel good about their purchases.
Complying with FTC rules and regulations
In order to make an unqualified claim that a product is “Made in the USA,” manufacturers must comply with strict regulations set forth by the Federal Trade Commission (FTC), the governmental body responsible for preventing deception and unfairness in the marketplace. These rules require that “all or virtually all” of the product is made within the U.S, with final assembly or processing taking place on U.S. soil. The FTC also considers other factors, such as how much of the product’s total manufacturing costs were spent on U.S. parts and processing and how far removed foreign content is from the final product. Complex labeling standards may also apply if an American flag or map is used on product packaging to imply the country of origin.
Although manufacturing and processing for a particular product may take place in several countries, and thus the product does not satisfy the criteria for an unqualified “Made in the USA” claim, a company can make a qualified claim in order for the product to be marketed as partially of U.S. origin. For example, a qualified claim may specify the percentage of a product’s domestic content, or label a product as “Assembled in the USA” instead.
Compliance with these rules is essential, and qualified and unqualified claims for “Made in the USA” must be truthful and substantiated. Falsified claims are likely to attract an FTC investigation, which could lead to enforcement actions, negative publicity, or costly correctional expenditures. For example, violators may be required to modify product packaging to comply with the FTC regulations, which can be expensive.
Touting the benefits
The “Made in the USA” resurgence is a welcome boon to domestic manufacturing. Businesses and manufacturers can prepare by investing staff, inventory and equipment to meet increasing demand for domestically made products. In order to increase the demand for your U.S.-manufactured products, you may need to remind your customers about the following benefits of using domestic manufacturers.
Whether you sell to businesses or consumers, you might consider implementing a marketing campaign that positions your products as American made. This may include new advertising programs and repackaging your products with the “Made in the USA” label.
Preparing for a comeback
As manufacturers and distributors budget for the coming years, they should consider whether the reshoring trend will attract more business, both domestically and abroad. Proactive businesses will position themselves as all-American and have extra capacity to meet the increasing luster of U.S.-manufactured products, and the increased consumer demand that will follow.
Seek the services of a legal or tax adviser before implementing any ideas contained in this blog. To reach a financial advisor at Lane Gorman Trubitt LLC, call (214) 871-7500 or email firstname.lastname@example.org.