A California federal district court judge recently provided some clarity on the apparent disparity between California’s “Made in the USA” law and the standard set forth by the Federal Trade Commission.

The Southern District Court of California’s recent decision in Paz v. AG Adriano Goldschmied confirms that California’s “Made in the USA” standard sets forth more stringent requirements than the FTC standard.

In Paz the plaintiff filed a class action complaint against AG Adriano Goldschmied and retailer Nordstrom, alleging that AG falsely labeled its jeans “Made in USA.” The plaintiff alleged that AG’s jeans actually contained fabric, thread, buttons, rivets, and/or certain subcomponents of the zipper manufactured outside of the United States. The plaintiff alleged he relied on the “Made in USA” representation when purchasing the jeans.

The defendants moved to dismiss the complaint on the ground that the Federal Trade Commission Act and the Textile Fiber Products Identification Act preempted plaintiff’s claims.   The FTC standard permits “Made in the USA” labels when “all or virtually all” of the product is made in the US.  The Textile Fiber Products Identification Act requires identifying the country of origin of textile fiber products.

Acknowledging that the laws set out different standards, the court noted that the federal standard allows for a “Made in the USA” label “even if the product includes or contains material from a foreign country,” while the California standard does not allow such a label “unless the product and all articles, units, or parts thereof were ‘entirely or substantially made, manufactured, or produced’ in the United States.” However, the court held that the FTC Act does not preempt the California standard because it is possible to comply with both laws. Although “burdensome” the court suggested defendants could use different labels for products sold in California and outside California.

The court also disagreed with defendants’ argument that the FTC Act gave the FTC exclusive authority over “Made in the USA” claims. The court explained that Congress’s delegation of “that authority to the FTC is not the same as depriving other agencies or states from exercising that same authority.”

The court similarly held that the Textile Fiber Products Identification Act does not preempt the California standard because defendants could comply with both laws. The court explained that the Textile Fiber Products Identification Act requires the jeans be labeled “Made in USA of imported fabric,” and rejected defendants’ claim that such qualified claims are prohibited by the California law.

It is possible that the defendants may ultimately appeal this ruling, but in the interim, this ruling provides further guidance to the industry on complying with California’s “Made in the USA” standard.