Due to the increasing globalization of production, consumer goods manufacturers are faced with new legal and regulatory hurdles. One of these problems involves cross-border country-of-origin labeling compliance. For example, the US labeling requirements for imports are difficult to reconcile with the current Canadian country-of-origin labeling legislation.
The Canadian
“Made in Canada, Product of Canada” Guidelines specify that in order for a “Product of Canada” claim to be in compliance with the Competition Bureau’s “false and misleading” prohibition, 98% of the total direct costs of the good, and the last substantial transformation, must have occurred in Canada. On the other hand, the “Made in Canada” claim requires a lower threshold of only 51% but includes the requirement that manufacturers qualify the assertion. Such a qualifier could include, for example, “with imported ingredients” or “60% Canadian content and 40% foreign content” or “with Canadian and French ingredients.”
If a manufacturer is unable to meet the 51% threshold, however, they are also prohibited from labeling a product as “Manufactured in Canada,” as this is described in the
Guidelines as synonymous in the minds of consumers with “Made in Canada” claims. Where a Canadian manufacturer uses less than 51% Canadian content, the
Guidelines suggest labels such as “Assembled in Canada with Foreign Content,” or by analogy “Formulated in Canada with Imported Ingredients.”
Section 304 of the
U.S. Tariff Act of 1930, however, provides that, unless subject to an exemption, every article of foreign origin (or its container) imported into the U.S. shall be marked with its country of origin. The country of origin mark includes “Made in,” and also “Manufactured” or “Assembled in” claims.
Not only is country-of-origin labelling a requirement in the U.S., but the U.S. definition of country-of-origin is also distinguishable from Canadian standards. For U.S. importation purposes, country-of-origin is broadly defined as the country of “manufacture, production, or growth of the article.” Unlike the
Guidelines, this definition does not consider the geography of expenditures or specify a numerical threshold.
The US is also more flexible in allowing qualified country-of-origin labeling for products that fall below the 51% threshold. The Federal Trade Commission Complying with the “Made in USA” Standard gives the example of a treadmill, manufactured in the US of 97% imported parts, which could be labeled “Made in USA from Imported Parts.” A similar claim would be prohibited under the
Canadian Enforcement Guidelines.
The US is also more lenient regarding other country-of-origin claims. For example, “A product that includes foreign components may be labeled “Assembled in USA” without further qualification.” The only requirements for this claim are that 1) the assembly be substantial and 2) that the “last substantial transformation” occurred in the US. Canada, by comparison, would prohibit such a statement without further qualification.
In light of the developing global economy, Canadian consumer goods manufacturers seeking to import to the United States may now be forced to choose between three problematic labeling alternatives: 1) double-labeling (one for Canadian market and one for the US), 2) labeling goods as “Formulated in Canada with Imported Ingredients,” or 3) selling exclusively to the U.S.
Due to the larger US market, companies may decide to avoid selling to Canada altogether to save the cost of double-labeling. A “Made in Canada” label is a clear marketing advantage, and without this to offset higher labor costs, the US may witness an exodus of Canadian manufacturers moving South.
Author: Caroline M. Reebs, CLASS Co-President, 2010-11
Contact: president@consumerlawstudents.com
In 2009 only 44% of tested sites selling electronic goods complied with EU consumer law. Today, however, nearly 84% of sites are classified as compliant. This 40% improvement is largely attributed to increased EU Health and Consumer Commission sweeps. The principal problems included failure to provide required ifnromation about consumer rights, failure to provice sufficient information about price, and the lack of vendor contact information. The Commission's next target will be to improve compliance for non-electronic good sales, such as the sale of cultural and sports tickets.
