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‘Made in the USA’ makes a comeback

Made in the USA

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.

  • Cheaper, more reliable shipping. The United States offers lower labor, natural gas and electricity costs than some other developed countries in Europe and Asia, including the United Kingdom, Germany, France and Japan. Tariffs and high shipping costs can also make overseas production cost prohibitive, and volatile foreign political environments may prevent products from shipping on time, leading to production delays.
  • Fewer business risks. Intellectual property theft and devaluation of the U.S. dollar are just some of the risks companies face when they outsource production to other countries. Additionally, important instructions — such as product specifications or shipping terms — may be lost in translation when communicating with foreign suppliers.
  • Safer products. News stories about contaminated plastic and pet food products from China have led to recalls, illnesses and even deaths. Products made under the scrutiny of the U.S. Food and Drug Administration and Departments of Commerce and Agriculture are typically held to higher quality standards than many foreign-made products. Safer materials and products give businesses and manufacturers peace of mind that they are not exposing end-users to unsafe products — and themselves to liability claims.
  • Environmental concerns. The U.S. Environmental Protection Agency also requires manufacturers to adhere to strict environmental standards that limit emissions and pollutants. Other countries, including China and India, are currently making huge carbon footprints that will harm the environment for many years to come.
  • Humanitarian aspects. Citizens tend to feel patriotic when they support the U.S. economy and lend a helping hand in creating and maintaining jobs for American workers. They also take comfort in knowing that factory workers are not subjected to unsafe conditions, low wages, or other forms of exploitation that the U.S. Department of Labor and domestic labor unions protect against.

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 askus@lgt-cpa.com.