Apparel Companies Under Threat from “Made in USA” Cases Under California Law

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U.S. apparel companies that use de minimis amounts of foreign-made components such as zippers or buttons in their garments were dealt a blow recently when a federal judge declined to throw out a class action lawsuit alleging that clothing labeled as “made in USA” is in violation of California’s strict false advertising law. The case will thus continue and could still result in settlements, damages or other expensive alternatives for affected companies.

In Paz v. AG Adriano Goldschmeid Inc. et al, the defendant requested that such an allegation against it be dismissed on the grounds that the California law is pre-empted because it conflicts with federal laws – namely, the Federal Trade Commission Act and the Textile Fiber Products Identification Act – that allow more flexibility in the use of the “made in USA” label.

In its decision, the court indicated for the first time that a  “made in USA” claim using qualifying language, such as “made in USA of imported fabric and components,” would not run afoul of the California statute. The court noted that the strict conditions in the California law only apply to “made in USA” labels and that the statute fails to provide any guidance on whether qualified labels would constitute a violation.  However, the decision is not yet final.

The court held that there is no conflict between the different federal and California standards because it is possible to comply with both (e.g., by labeling the jeans according to the California standard inside California and according to the federal standard elsewhere), even though doing so may be burdensome to the apparel company.

California law prohibits any product from being labeled “made in USA” if that product or any article, unit or part thereof has been entirely or substantially made, manufactured or produced outside of the United States. Apparel companies are particularly vulnerable to claims of violating this law because their goods are typically composed of many components sourced from numerous locations around the world.

 

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This article originally appeared in the Sandler, Travis & Rosenberg Trade Report, a daily e-newsletter covering the international trade agreements and global laws, regulations, policies and procedures that affect the importation and exportation of goods around the world. To receive a free subscription, click here.