I'm Kim Arpaia, a small business owner, sole turtle employee, and jewelry designer working out of a private studio located in New Haven, Connecticut USA.
This is my first beachlove blog!
The federal "Made in USA" rule is a hot topic because of the Federal Trade Commission's enhanced enforcement of the rule since July 2021. I know, I know, rules are not fun, but I'm hoping fellow jewelry devotees might be interested in knowing how the rule affects the marketing of jewelry in the U.S.
I'll do my best to avoid a snooze fest. Plus, we can illustrate the workings of the rule using a piece of my jewelry - the leather bracelet shown above, a one-off from my beachlove® collection.
The Federal Trade Commission (FTC) is charged with preventing deception and unfairness in the marketplace. One of its main objectives is to deter false "Made in USA" claims for the protection of consumers seeking to purchase American-made products and compliant businesses from losing sales to dishonest competitors.
The "all or virtually all" Standard
For this purpose, the FTC has long imposed a strict "all or virtually all" Made in USA labeling standard applicable to most products advertised or sold in the U.S., including jewelry.
This federal law prohibits manufacturers and marketers from making unqualified "Made in USA" claims on labels unless the following requirements can be substantiated by competent and reliable evidence:
(1) the final assembly or processing of the product occurs in the United States;
(2) all significant processing that goes into the product occurs in the United States; and
(3) all or virtually all ingredients or components of the product are made and sourced in the United States.
Unqualified versus Qualified Made in USA Claims
The FTC does not pre-approve advertising and labeling claims. Basically, any product claim is valid as long as it is honest and substantiated.
There is a distinction between unqualified and qualified Made in USA claims. The "all or virtually all" strict standard applies only to unqualified claims. An unqualified claim is an express or implied claim that a product is Made in USA without qualifications or limits on the claim.
Whereas, an express or implied qualified Made in USA claim indicates that the product is not entirely of domestic origin. One example of a qualified claim is "Made in the USA with Imported Parts." A qualified claim must be truthful and substantiated. Moreover, qualified claims should not be made unless the product has a significant amount of U.S. content or processing.
FTC Guppy Morphs into JAWS
Traditionally, the FTC enforced its "all or virtually" standard by targeting, counseling, and monitoring businesses with respect to rule compliance. On July 1, 2021, the remedial atmosphere of the FTC radically changed when it issued a Final Rule to codify the "all or virtually all" standard for products labeled as Made in USA, and further enabled a broad range of remedies to deter and penalize rule violations.
The title of the FTC's Rule Release signaled a stark warning to manufacturers and marketers making deceptive Made in USA claims: "FTC Issues Rule to Deter Rampant Made in USA Fraud - Made in USA labels will finally mean goods were made in America." Armed with shark-like enforcement teeth, for the first time, the FTC was able to seek redress for victims and damages, as well as other forms of relief, from rule violators, including hefty civil penalties up to $43,280 per rule violation.
Reinforcing its mission, the FTC is flexing its newfound powers. In one recent case, the FTC reached a $750,000 settlement with a U.S. company for making unsubstantiated Made in USA claims related to mattresses marketed as "proudly made with 100 percent USA-made premium quality materials." The FTC determined that the claims were deceptive since the mattresses were finished abroad and some were even completely imported or contained significant foreign materials.
Although the FTC's Made in USA rule has been in effect for many decades, its codification, along with serious new penalties and ramped-up enforcement, are quickly spreading awareness and increasing compliance.
Always a Learning Curve
I learn a lot about my profession as a member of the MJSA (Manufacturing Jewelers and Suppliers of America), whose motto is: "Professional Excellence in Jewelry Making & Design." The September 2021 Issue of the MJSA Journal included an article by Attorney Sara E. Yood, deputy general counsel for the Jewelers Vigilance Committee, titled: "Claim Check - FTC codifies 'Made in USA' guidance into rule."
In her article, Yood succinctly summarizes the major import of the FTC's strict unqualified Made in USA standard for the jewelry trade:
"Virtually no jewelry products made with gemstones will qualify as 'Made in USA,' as the majority of gemstones originate from outside of the the U.S. The same applies to jewelry products made with precious metals, which also generally originate outside of the U.S. The FTC has even previously said that precious metal recycled in the U.S. cannot be described as 'Made in USA' due to its untraceable origins."
Rounding Out the Made in USA Rule
The FTC Staff's Publication posted on the FTC's official government website provides helpful guidance for businesses on complying with the Made in USA rule, at: https://www.ftc.gov/business-guidance/resources/complying-made-usa-standard. Although not binding on the Commission, this is where the FTC Staff sets forth its view of the Made in USA rule requirements with interpretive guidance and examples.
Here are a few intricacies that helped buttress my grasp of the rule:
- The Made in USA rule focuses on deception. The FTC considers what a consumer is likely to believe about a product's origin based on the claim.
- The Made in USA standard covers synonyms for the word "made," including "manufactured," "built," "produced," "created," and "crafted."
- The Made in USA standard applies to any location within the domestic U.S. For example, "Made in Florida" or "Made in Cincinnati."
- The FTC's Enforcement Policy Statement applies to U.S. origin claims that appear on products and labeling, advertising, other promotional materials, and all forms of marketing including digital and electronic, such as the internet and email.
- An implied claim gives the overall impression that a product was made in the USA. For example, using U.S. symbols or geographic references can constitute implied Made in USA claims. A consumer is likely to think that the product is of U.S. origin if a label bears the U.S. flag or U.S. map outline.
- The FTC considers several factors to determine if foreign content or processing is negligible versus substantial. For example, the FTC might compare how much of a product's total manufacturing costs are attributable to foreign parts and processing. If the aggregate foreign costs are de minimus, then the foreign content/processing is negligible (unless a different consideration negates that result).
- How far removed foreign content is from the finished product is another factor that the FTC might take into account to determine if the foreign content is negligible or significant. Foreign content incorporated early in the manufacturing process often will be less significant to consumers than content that is a direct part of the finished product.
- Raw material that is an integral component of the product is substantial and not negligible. For example, an unqualified Made in USA claim would be deceptive for a gold ring made with imported gold. In lieu, a qualified claim could be made that the ring was "Made in the USA with imported gold."
- An unqualified "Assembled in USA" claim may be made when the principal assembly takes place in the U.S., is substantial, and the product's last "substantial transformation" occurs in the U.S. Adopting from the country of origin test used by U.S. Customs, "substantial transformation" means the manufacturing process that results in a new and different product with a new name, character, and use that is different from that which existed before the change.
- Other federal statutes require that U.S. content must be disclosed on automobiles, as well as, textile, wool, and fur products. There's no law that requires most other products sold in the U.S. to be marked or labeled Made in USA or have any other disclosure about their amount of U.S. or foreign content. However, manufacturers and marketers who choose to make claims about the amount of U.S. content in products must comply with the FTC's Made in USA policy.
My Perspective on the Made in USA Rule Relative to the Craft Scene
Art and craft shows in the United States have been a touch stone for the selling of handmade goods. These markets provide a ripe opportunity to pair makers with repeat customers.
On a whole, my experience has been that makers of handmade goods relish sharing information about their creative work. I'm no exception. It's magical relaying what's special and unique about a piece of my jewelry when someone is truly interested. Excited happy eyes and our mutual keen attention are kismet. The exchange and engagement are bonding.
It's no surprise that artisan markets can instill excellent consumer knowledge and promote trusting relationships between maker-sellers and buyers. The shopping experience translates into sales with a high degree of buyer satisfaction. Indeed, in these arenas, buyer expectations are often exceeded.
Many U.S. artists, artisans, and crafters might have a complete lack of awareness of the made in USA rule. However, the live forums in which handmade goods are sold directly by makers typically hinge on transparency and the sharing of information that shoppers seek.
Conversely, shopping for handmade goods online, or in-person by a seller who is not the maker, presents informational challenges. Meeting buyer expectations in these circumstances can be lower. These marketplaces are where a lack of awareness of the federal Made in USA rule could have greater consequences in promoting handmade goods.
An understanding of the Made in USA rule allows makers of handmade goods selling online more capable of drafting compliant product descriptions and labels. In addition, knowledge of the rule can foster the taking of other opportunities to relay information about content origin. For example, on the homepage of my beachlove website, I announce in a noticeable place and manner, and in close proximity to a reference where my work studio is located, that the collection "showcases exquisite materials from around the globe."
Origins of Leather Bracelet
I chose this simple piece because it has just enough parts and processes to illustrate various aspects the FTC's Made in USA "all or virtually" standard.
Where components are sourced is a separate query from where components originate.
I purchased all components for this bracelet in the United States, except for the coral beads that I purchased in Hong Kong.
Based on the coral's de minimus wholesale cost in comparison to the aggregate wholesale cost of the American-sourced parts, the FTC might conclude that "virtually all" components of the bracelet were sourced in the United States. This result allows us to move on.
U.S. Origin Processes (at my Studio)
• Bracelet design and selection of all materials from inventory.
• Light fabrication work prior to assembly.
• Full bracelet assembly.
I can substantiate U.S. origin through business documentation.
U.S. Origin Parts
• 925 Sterling Silver Chain, Jump Rings, and Head Pins. U.S. origin stated directly on wholesale product packaging. I'm confident in the designated U.S. origin of these parts given status of U.S. supplier.
Foreign Origin Parts & Processing
• Ivory Leather Remnant from Peru with applied finishings to surface. "Peru" stamped on raw backside of leather. I'm confident in origin since purchased leather directly from a reputable handbag artisan.
• 925 Sterling Silver Oval-Shaped Swivel Lobster Clasp made in Italy. "Italy" hallmarked on part. Origin stated on U.S. supplier's wholesale product packaging.
• 925 Sterling Silver Open Metalwork Scroll End Bars made in Israel. Origin stated on U.S. supplier's wholesale product packaging.
Unknown/Unverified Origin Parts & Processing = Foreign Origin
•Angel Coral Beads. I don't know origin. It could be stated on wholesale invoice, but doubtful. It is not likely that this coral was harvested in U.S. waters or processed (cut and polished) in the U.S. For purpose of this exercise, I'll assume that the coral has foreign origin.
• Handmade Glass Bead. I purchased the bead directly from a New England glass artist. However, I don't know if the glass contains significant foreign content. I could contact the artist to find out. Absent that, I'll assume that the glass was made with significant foreign content.
"Insignificant" Versus "Significant"
In its Enforcement Policy Statement, the FTC reinforces that products advertised or labeled with an unqualified "Made in USA" claim should contain only a "de minimus" or "negligible" amount of foreign content. In the FTC Staff's Publication, "negligible" is further defined as "insignificant."
Keeping in mind that the FTC might make a different determination, with respect to one-of-a-kind jewelry, my view is that any part or process that either (1) affects the overall beauty of the piece (an adornment or other decorative design element), or (2) is integral to the foundation or function of the piece in a special way, is "significant."
My thought is that parts and processes that cannot be easily substituted without changing the jewelry's appearance or function to a noticeable degree are significant. Whereas, minor, inexpensive, and nondescript findings are "negligible" in my view. Here, I'm thinking stringing materials and standard manufactured attachment or fastening components that can be substituted easily for like kind by a different brand.
Significant Foreign Parts & Processing of the Leather Bracelet
My conclusion is that, certainly in the aggregate, there is significant foreign content and processing in the leather bracelet. As a result, I cannot legally make an unqualified claim that the bracelet was made in the USA, or made in Connecticut, or made in New Haven.
Further, each foreign component on its own might be significant foreign content with respect to the made in USA rule, as follows:
1. The Peruvian leather strips serve as the main part of the bracelet's foundation. The leather is a decorative design element as well. The leather's surface is finished with luxurious foreign-applied finishes to enhance beauty, suppleness, durability, color, texture, and sheen. These finishes are obvious to the eye and to the touch when compared to the leather's raw backside.
In designing this bracelet, I selected this particular leather for the above reasons. The leather could not be swapped out easily for a different leather without changing the appearance of the bracelet (and possibly function too, unless the supportive structure and drape were very similar).
2. The 3 angel coral beads are decorative design elements. Despite being tiny, the coral beads add a lovely pop of color and are noticeable. To my designer's eye, these gemstones looked best to complete the bracelet's overall look. Eliminate or substitute the coral with a different gemstone or other adornment, and the overall look and fashion style of the bracelet changes.
Given the coral's modest wholesale cost, the FTC might conclude that the coral beads on their own constitute negligible foreign content. In other words, if all other content and processing of the bracelet had U.S. origin except for the coral, the FTC might determine that it would not be deceptive to make an unqualified claim that the bracelet was Made in USA.
This result makes sense from a substitution analysis too. In contrast to the leather, which would be difficult to locate, match, or reproduce, the angel coral beads could be substituted relatively easily with a different batch of angel coral beads without altering the appearance or function of the bracelet. It would be possible to purchase coral beads of similar quality, shape, color, size, and polish. However, availability of similar coral could become more difficult in the future if export/import restrictions change to actual prohibitions.
3. The pretty sterling silver swivel clasp and end bars are functional findings, but they are not minor, nondescript, nor inexpensive. I specifically chose the clasp and end bars for their superior function, as well as, for their style. They are not only in keeping with the look of the bracelet, but enhance it. Moreover, they function precisely as desired - they are not standard manufactured findings and are not easily replaceable. It's possible that each is a significant foreign part of the bracelet.
4. The handmade green glass bead is the focal design element of the bracelet. This artisan-crafted bead can't be substituted with a different adornment without altering the look of the bracelet. Also, another adornment could affect the bracelet's drape, appearance, and function unless the bead is of equal size, shape, and weight.
Steadily, I have built phenomenal relationships with manufacturers, suppliers, and artisans from many places. The international facets of my work greatly appeal to me, and I promote them as the true assets that they are. I'm proud of my jewelry and every glorious part, process, and origin that goes into every piece. I'm delighted to embrace the world in my work.
Similar to the leather bracelet, few of my jewelry designs would meet the FTC's unqualified "Made in USA" strict standard because a large part of my inventory is of foreign origin ... most pearls and other gemstones, most crystal and glass, most artisan-crafted precious metal beads and findings, and all recycled metal. As a result, foreign content is prevalent throughout my jewelry collections.
Now that I am more familiar with the Made in USA rule, I have a better understanding of what causes deception. Going forward with compliance, I do my best to steer clear of past favorite unqualified phrases like "Made in New Haven" or "Made in my Connecticut studio." These simple expressions merely reflected my beaming love for New Haven, Connecticut, working in my studio, and of course, my jewelry.
An "assembled in Connecticut" claim - though would be honest and substantiated - is not satisfactory with respect to my work. Its meaning minimizes my craft and causes a misdescription of how one of my creations comes to fruition, which is not helpful to me nor a prospective purchaser.
As obvious, I continue to use a fave noun "creation" and the verb "create." Though now, I do my best not to combine those words in the same sentence as location; if I do, then I also try to include a reference to the likelihood of foreign (international) content.
Dear fellow jewelry beans, thanks so much for staying with me until The End.
Kimberly Arpaia, Jewelry Designer, GIA GG, GP, AJP