ARTICLE

Proud to be “Made in America”

by: Smith and Howard

December 7, 2015

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There’s a mounting grassroots movement favoring domestic-made products. People want to feel good about their purchases and, for many, this means products that are locally sourced from companies that they feel they can trust. This trend is good news for retailers and manufacturers that operate primarily in the United States — and their lenders.

Here’s what it takes to claim that a product is “Made in America” and why that label makes good business sense.

The FTC definition

For a company to claim that a product is Made in America, the Federal Trade Commission (FTC) requires that 1) its final assembly take place on U.S. soil and 2) the majority of total manufacturing costs be spent on U.S. parts and processing. Other labeling rules also may apply if an American flag or map is used on a product’s packaging to imply the country of origin.

To further complicate matters, a company can make a qualified claim when production occurs in several countries. A company may, for example, specify the percentage of a product’s domestic content or label it as “Assembled in the USA.”

False claims can lead to FTC investigations, enforcement actions, packaging modifications, lost production time and negative publicity. Such outcomes can impair the ability of smaller borrowers to service debt, so compliance is essential.

It pays to operate domestically

The rewards of boasting that products are American-made often far outweigh these compliance costs, however. The benefits include:

  • Lower shipping costs
  • Fewer shipping delays
  • No tariffs, geopolitical risks, language barriers or currency exchange issues
  • Reduced risk of intellectual property theft
  • Safer, higher quality components and end products

In addition, real estate, labor and utility costs are rising in many foreign countries, including China and India, eliminating one of the key benefits of offshoring.

Perhaps the most compelling reason to operate domestically is the goodwill it creates with employees and customers. Americans like to believe they’re supporting the U.S. economy and creating jobs for other Americans. Many have seen too many news stories about environmental and human rights violations — such as child or forced labor — that occur when components or products are made in countries with a lax regulatory regime and/or weak enforcement.

Make the most of Made in America

Just operating in the United States isn’t enough to reap all of these benefits. Domestic companies need to shout it from the mountaintops.

If a company qualifies under the FTC rules to claim that its products are U.S.-made or assembled, the company’s packaging and marketing materials should make that readily apparent. Too many businesses downplay their domestic activities, when, in fact, the Made-in-America label can be a powerful marketing tool.

Lenders can cheer from the sidelines

Remind your borrowers about the power of the Made-in-America label to generate new sales and establish customer loyalty. In some cases, it may be worthwhile to launch a new Made-in-America marketing campaign. Lenders can also become a powerful resource for connecting borrowers in the same domestic supply chain, such as U.S. retailers that prefer to sell products made by domestic manufacturers, or U.S. original equipment manufacturers in search of local parts suppliers. 

Are you looking for more information on our commercial lender services, including SBA valuation? Contact Kate Maxwell at 404-874-6244 or fill out our form for more information. 

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