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More transparency needed with ‘Made in USA’ claims

SNEWS looks at the questions and debate that have arisen in the outdoor industry after last week's "Made in USA" ruling by the FTC.

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Last week, we brought you the story of the Federal Trade Commission clamping down on “Made in the USA” claims and what it could mean for the outdoor industry.

The FTC’s recent action left many questions from brands on what still seem to be unclear rules. It also spurred a broader debate on how to best promote and increase U.S. manufacturing.

After speaking to outdoor brands and FTC officials, SNEWS attempts to cut through the minutia to answer some questions and put forth what some in the industry feel is the best route to take.

What does “Made in the USA” really mean?
The straightforward, but unsatisfactory answer for brands, retailers and consumers is that there is no clear definition of what’s “Made in the USA.”

At heart of the recent FTC ruling, federal officials accused outdoor accessory brand E.K. Ekcessories of falsely using the “Made in the USA” term on its products because the components of those items, such as iPhone cases, largely came from overseas before being put together in the United States.

In order for a product to claim domestic origin “all or virtually all significant parts and processing that go into the product must be of U.S. origin,” FTC officials said. “That is, the product should contain no — or negligible — foreign content.” (You can find out more here about how the FTC defines negligible foreign content, but it’s sufficed to say, it isn’t a simple percentage or formula). The FTC does allow for accompanying qualified statements such as “Made in the USA with imported parts,” for example.

From this point of view, the FTC takes the position that when a consumer only sees a “Made in the USA” promotion they expect that the product was not only made here, but sourced here as well.

But as we’re finding out, this isn’t so clear-cut, particularly with textile and wool products. Other U.S. laws such as the Textile Fiber Products Identification Act and Wool Product Labeling Act come into play. These regulations “require a ‘Made in USA’ label on most clothing and other textile or wool household products if the final product is manufactured in the U.S. of fabric (or yarn) that is manufactured in the U.S., regardless of where materials earlier in the manufacturing process from.”

Confused yet?
For wool and textiles, it’s known as the “one-step removed rule,” FTC officials told SNEWS. “In deciding whether to mark a product as made, in whole or in part, in the U.S., a manufacturer must consider only the origin of materials that are one step removed from the particular manufacturing process. For example, a yarn manufacturer must identify imported fiber. A manufacturer of knitted garments must identify imported yarn. A manufacturer of apparel made from cloth must identify imported fabric.”

So, if an outdoor sock brand knits its socks in the United States with yarn that was created in the United States from raw wool initially from New Zealand, it’s still considered “Made in the USA.” However, if the yarn was sourced and created overseas and then only knitted in the United States, brands would have to disclose the imported yarn.

What we’re left with is different rules for different products. And to complicate matters further, FTC officials declined to comment on which law might supersede the other when a complaint is made. In other words, sock manufacturers might be able to label their socks with New Zealand wool “Made in the USA,” but there is question to whether they can they heavily promote and market it, especially with terms like “100-percent U.S. Made,” unless the raw wool comes from United States as well.

“There’s a delicate balance to strike,” FTC attorney Julia Ensor said. “There’s no one threshold (of what defines Made in USA) … we look at every product on a case-by-case basis and we can’t offer opinions on hypothetical situations.”

Ensor said brands with questions should directly contact the FTC.

We won’t blame outdoor brands for not wanting to start a discussion with federal officials — it can be a bit of a rabbit hole — and that brings us to the next issue sources discussed with us: The need for more transparency.

If brands do alter their “Made in the USA” claims, what should they say?
As one commenter on our earlier SNEWS story put it: “Don’t throw the baby out with the bathwater. If it’s ‘Designed, Sewn, and Finished’ in the USA just tell the consumer exactly that.”

Most all brands we talked to agree: Consumers want, and the industry should move toward, more transparency with regards to manufacturing — not only with country of origin, but with environmental impact as well.

“If it’s good enough for a company to source the raw materials or make their products in another country, then they should be happy to advertise that,” said Dan English, CEO of Voormi, whose primary mission is to make 100 percent U.S. sourced technical outdoor wool apparel. “Why all the loopholes?”

“Is there any value left with “Made in the USA?” asked Crescent Moon Snowshoes President Jake Thamm, who makes a majority of his products in the United States. “You measure what it means by [the brand’s] behavior… their intentions. If they are being disingenuous, then that’s not right.”

So what’s the broader issue at play beyond the labeling?
Several sources noted to SNEWS that brands that at least do some manufacturing in the United States, even if not sourcing here, deserve some credit for creating domestic jobs when they easily could have gone overseas.

But in English’s opinion, the industry should put more focus toward rebuilding both the source and production ends of making products in the United States.

“This is a much larger issue than big companies wasting time and money to find a way around the law and placing a U.S. flag on a product,” he said. “This is about re-establishing an industry that this country used to have … whether it be American wool farmers or cut-and-sew career paths.”

Fashion brand Ralph Lauren got a taste of U.S. manufacturing this year, after it received flak two years ago at the Summer Olympics, where it was revealed that most of Team USA’s uniforms at the opening and closing ceremonies were made in China. Public outrage forced the designer to make the 2014 Winter Olympic uniforms entirely in the United States.

“They used more than 40 vendors, from ranchers in the rural West to yarn spinners in Pennsylvania to sewers in New York’s Garment District,” the Associated Press reported. “Moving production to the U.S., though, was a lesson in the state of American manufacturing. It was hard to come by facilities that could create the quantity and quality needed for the Olympic uniforms and the versions that will be sold to the public, officials said. As a result, there are fewer pieces in the collection for 2014.”

While not easy, English said the full approach to U.S. manufacturing could solve many problems that have grown to hurt outdoor brands, retailers and consumers with overseas manufacturing — particularly long lead times, and need for earlier pre-orders.

“In effect, today’s retailers and consumers are left with decisions that designers made three years ago,” English said. “There can be no immediate response to consumer demand.”

“Made in the USA,” isn’t just a marketing tool, English said. It can be a successful business tool as well.

–David Clucas