Made in USA: Label or Liability?

The electronic hardware for our Priamble audio earrings is manufactured in China.

What the consumer sees—the pretty part—is handcrafted in Manhattan.

So what should our label claim: Made in China, or Made in USA?

If you are like many founders, designers, or consumers, your gut reaction might be: USA, obviously. After all, the core identity, the aesthetic, and the skilled bench work all happen here.

Intuitively, we expect "substantial transformation" to be the test for the country of origin: if transformative work happens on American soil, you’ve earned the "Made in USA" label, right?

Nope.

Trying to figure out what I was legally allowed to say sent me down a regulatory rabbit hole that upended my assumptions.

Here is the interesting truth about how "Made in USA" actually works—at least to my understanding as a brand (and not a lawyer):

Two Referees, Two Different Rulebooks

The root of the confusion? Two separate federal agencies govern country-of-origin claims:

• U.S. Customs and Border Protection (CBP) uses "substantial transformation" as the test: did the manufacturing process create a new article with a distinctive name, character, or use?

• The Federal Trade Commission (FTC) uses a voluntary, but strict, standard: the product must be "all or virtually all" made in the United States.

Just because your goods cleared Customs labeling requirements doesn't mean you won't fail the FTC's test.

(Just to make things more interesting, California has its own entirely separate origin law—a head-scratcher we’ll save for a later article.)

"Screwdriver Assembly"

Say you buy shoe uppers from one country, laces from another, and soles and eyelets from a third. You then assemble them in the US to make a shoe. Now it’s a shoe; before, it was just components. Made in the USA? Not by a long shot.

Take the case of boot-makers who marketed footwear as "handcrafted 100% in the United States" and "from heel-to-toe, using no pre-assembled components from overseas." Federal investigators found that the uppers were stitched in the Dominican Republic and the outsoles were produced in Brazil. Putting those components together in the US did not save the claim, resulting in substantial fines.

Another example is a Detroit-based watch company that had a similar unfortunate run-in. They opened a factory, trained locals to assemble delicate timepieces, and understandably and proudly announced them as "Built in Detroit."The hiccup? The quartz movements were Swiss, with other components sourced from Asia. Long story short, they had to add a disclaimer: "Built in Detroit with Swiss and Imported Parts."

What If the Imported Amount Is Tiny?

The FTC looks at functional necessity.

For example, if a refrigerator is made in the USA with American labor and American steel, but the compressor comes from abroad, it cannot get away with a "Made in USA" label. Why? Because the compressor is critical to the refrigerator's function.

Essentially, if a product cannot function without the imported component, that component—however small—cannot be considered negligible. It will have a very big say in whether the "Made in USA" label can be used.

Ingredient Anomaly: Fabric vs. Media

Depending on the industry, the origin of the raw material may or may not undo your "Made in USA" claim.

Take a compact disc. If you import the plastic but mold the disc and encode the music here in the US, it can legitimately carry a "Made in USA" label. Why? Because the actual functional product took form on American soil.

On the other hand, if you import fabric yardage—which looks nothing like a finished product—and then cut, drape, sew, and fashion it by hand into an elaborate dress in New York, common sense says you transformed it. Completely.

The law says otherwise. If the fabric itself wasn't spun and woven in the United States, you cannot claim "Made in USA," no matter how much skilled artistry happens afterward.

So one raw material transformed in the USA earns the label; another gets rejected.

The Takeaway

Which brings us back to the question for our Priamble audio earrings: Made in China, or Made in USA?

The most liberating realization in origin law is that for the FTC, "Made in USA" is entirely voluntary in most cases.

So, as I understand it, though I am still learning: comply with Customs requirements for imported components, and completely skip the domestic claim if you can’t say "Made in USA" without getting into serious hot water.