Another court in the Southern District of California has agreed that California’s Made in USA law is more stringent than the federal standard, holding that the law is not preempted by the Federal Trade Commission Act or the Textile Fiber Products Identification Act. But the court also addressed a new claim—that the California law violates the Dormant Commerce Clause of the United States Constitution.
In Clark v. Citizens of Humanity, LLC, plaintiff alleged that defendants’ jeans were falsely labeled as “Made in USA” when they actually contained fabric, thread, buttons, rivets, or subcomponents of the zipper manufactured outside of the United States. Defendants moved to dismiss on the same grounds as defendants in Paz v. AG Adriano Goldschmeid, Inc., but also on the ground that the California law violates the dormant commerce clause. Denying the motion to dismiss, the court adopted similar reasoning to the court in Paz on the preemption claims.
For the Dormant Commerce Clause argument, the defendants asserted that the law has no public benefit and imposes significant burdens on interstate commerce. The defendants argued that the California law has no purpose because consumers across the country accept that products labeled as “Made in USA” may contain components made abroad. They also argued that the law may be harmful to the public because manufacturers may move all of their operations overseas if “Made in USA” is limited to products made entirely in the US (it is probably infeasible for most companies to distribute one type of product to California and another everywhere else). Finally, the defendants argued that the law significantly burdens interstate commerce because labels that are allowed in the rest of the country may not be permitted in California.
The court denied these arguments.
It first determined that California has a legitimate state interest in combating deceptive advertising, and that the “legislature wanted to ensure that only those products made, and whose component parts were made, in the United Sates can bear the unqualified ‘Made in the U.S.A.’ label to protect consumers.” And, since the court determined that the California law permits qualified “Made in USA” labels, it does not pose an undue burden on interstate commerce because manufacturers and retailers can comply with both laws by using qualified labels on their products nationwide.
Like the Paz decision, this ruling confirms that Made in USA labels complying with the FTC standard are likely prohibited in California unless the product and all of its component parts are made in the US. And, it is unlikely that the Ninth Circuit will grant interlocutory review of this ruling.
In light of these realities, none of the options for compliance appear appealing: using different labels in California than the rest of the country, qualified “Made in USA” labels nationwide, or limiting the use of such labels to products that are entirely made in the US.