BILL ANALYSIS Ó
SB 12
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Date of Hearing: June 18, 2013
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Richard S. Gordon, Chair
SB 12 (Corbett) - As Introduced: December 3, 2012
SENATE VOTE : 30-9
SUBJECT : Consumer affairs.
SUMMARY : Creates the Made in California Program (Program)
within the Governor's Office of Business and Economic
Development (GO-Biz), authorizes GO-Biz to develop and adopt
standards that would permit a company to represent that a
product is made in California. Specifically, this bill :
1)Declares the sale or lease of goods or services which
represent that a product is made in California if it does not
comply with the standards adopted by GO-Biz to be an unfair
method of competition and an unfair or deceptive act or
practice.
2)Establishes the Program, a public and private collaboration
within GO-Biz, and declares that the purposes of the Program
are to encourage consumer product awareness and to foster
purchases of high-quality products manufactured in this state.
3)Authorizes GO-Biz to develop and adopt standards that permit a
company to represent that a product is made in California.
Those standards may include any of the following:
a) The company primarily designs and manufactures a
physical product, rather than a digital product or service;
b) The company manufactures one or more products in
California; or,
c) The company has a California-based workforce and has the
desire to grow that workforce over time.
4)Defines "manufacture" to mean the process of taking raw
materials or components and adding value to those materials
and components in order to create a final, recognizable
product. "Manufacture" does not include the process of
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completing a final assembly from subassemblies made elsewhere,
or the act of packaging a product.
5)States that the Program and the standards shall not apply to
those agricultural products subject to the Buy California
Program, as specified.
6)Authorizes GO-Biz to issue and make effective a marketing
agreement, including, but not limited to, issuance of a Made
in California label, and be advised by those California
businesses willing to participate in the Program on a
voluntary basis via funding or in-kind contributions in a
manner defined under the agreement.
7)Requires each company to apply to GO-Biz for use of the Made
in California label.
8)Authorizes GO-Biz to require a fee to accompany the Program
application.
9)Requires GO-Biz to determine the application fee and restricts
that amount to the reasonable costs in providing the services
for which it is charged. Proceeds from the fee shall be used
to cover the costs of implementing the Made in California
Program.
10)Permits GO-Biz to begin accepting applications prior to fully
developing and implementing the Program.
11)Authorizes GO-Biz to accept monetary donations or other
donations from businesses, nonprofit organizations, or
individuals for the purpose of implementing the Program.
12)Requires GO-Biz to report to the Legislature on January 1,
2015, and each successive January 1, regarding its
expenditures, progress, and ongoing priorities with the
Program, as specified.
13)Establishes the Made in California Fund as a special fund in
the State Treasury consisting of the revenues contributed
pursuant to this bill, and, upon an appropriation of those
funds by the Legislature, to be available for purposes of this
bill.
EXISTING LAW :
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1)Prohibits unfair methods of competition, acts or practices by
any person which either results in or is intended to result in
the sale or lease of goods or services to any consumer, and
enumerates several methods of unfair competition, acts or
practices. (Civil Code (CIV) Section 1770)
2)Provides that any consumer who suffers damage as a result of a
practice declared to be unlawful under the Consumer Legal
Remedies Act (CLRA) may bring an action against that person to
recover damages, as specified. (CIV 1780)
3)Allows for a class action suit to be filed on behalf of a
class of consumers adversely affected by an unfair method of
competition, act or practice. (CIV 1781)
4)Authorizes California to enter into marketing agreements and
to create the "Buy California Program" (Food and Agriculture
Code Section 58750)
5)States that it is unlawful for any person, firm, corporation
or association to sell or offer any merchandise in California
that uses the words "Made in U.S.A.," "Made in America,"
"U.S.A.," or similar words when the merchandise or any
article, unit, or part thereof, has been entirely or
substantially made, manufactured, or produced outside of the
United States. (Business and Professions Code (BPC) Section
17533.7)
6)Establishes GO-Biz within the Governor's Office for the
purpose of serving as the lead state entity for economic
strategy and marketing of California on issues relating to
business development, private sector investment and economic
growth. GO-Biz also provides administrative oversight for the
California Business Investment Service and the Office of the
Small Business Advocate. (Government Code (GC) Section 12096
- 12098.5)
7)Establishes processes and accountability measures for GO-Biz
to accept private monies to fund, establish and operate
international trade offices. (GC 13997)
FISCAL EFFECT : Unknown
COMMENTS :
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1)Purpose of this bill . This bill would create a public-private
partnership Program within the Governor's GO-Biz office to
promote the marketing of products manufactured in California.
SB 12 would require the Program to develop and adopt standards
for representing a product as "Made in California," and
require products using that term to be approved by the Program
or be subject to legal action. The Program would also engage
in voluntary marketing agreements to promote California-made
products paid for by participants or other donors. This bill
is author-sponsored.
2)Author's statement . According to the author's office, "This
much needed statewide marketing strategy can help our small
businesses maintain competitive edge against businesses that
decide to manufacture out of the state or even out of this
country and thus bringing the jobs with them.
"California businesses need a unifying brand targeted at
consumers who care about CA jobs, the environment and quality.
This label assures consumers that the product was manufactured
in CA and carries the excellence and standards that this state
offers.
"Manufacturers that embrace California's high quality, safety,
and environmental standards as a vital component of their
business strategy should have this marketing advantage. The
myriad of similar products on the market make it difficult for
consumers to differentiate between products that are made in
California versus elsewhere."
3)The Buy California Program . In 2001, the "Buy California
Program" was created within the Department of Food and
Agriculture to boost consumption of California's agricultural
commodities and provide resources to growers of specialty
crops. The Buy California Program addresses research,
agricultural education, nutrition, food safety and pest and
disease eradication to provide safe and nutritious food in a
fair marketplace with responsible stewardship of the
environment.
The author of this bill asserts that many other products made
and produced in California, often by small businesses, would
benefit from another California labeling program. However, in
contrast with the Buy California Program which provides
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research, education, public health, and marketing assistance,
the Program envisioned by this bill would be focused
exclusively on marketing.
This bill would also add a new category of unlawful conduct
under the Consumer Legal Remedies Act and designate it an
unfair or deceptive trade practice for anyone to represent
that a product is made in California unless the product
complies with the standards adopted by GO-Biz.
4)Other 'Made in California' Marketing Programs . There are
presently several for-profit and nonprofit marketing programs
that promote California-made products.
For example, California Manufacturing Technology Consulting
(CMTC) is a non-profit corporation affiliated with the
National Institute of Standards and Technology (NIST) that
operates a Made in California program to recognize
manufacturers who produce products within the State. CMTC's
"Made in California Program" uses its website to raise
awareness of manufacturers who make products in California
(http://www.cmtc.com/made-in-california-program).
There are other outlets that promote "Made in California"
goods, such as www.madeincalifornia.net ,
www.americansworking.com , and www.shopcal.com . However, since
there is no precise definition for what constitutes a product
that is "made in California".
5)Questions for the Committee . The Committee may wish to take
the following issues into consideration:
As noted above, there are a number of existing marketing
programs in the private and nonprofit sectors that aim to
market California-made products. As the fees required by this
bill may only be used to pay the reasonable costs of
implementing the program, any funding for the proposed
marketing program would presumably need to come as donations
or grants from outside sources, none of which have been
identified. The Committee may wish to consider whether or not
this particular funding model is likely to be effective.
In directing GO-Biz to develop a standard for products
represented as "Made in California", this bill also requires
that products so marketed comply with those standards, and
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manufacturers of those products must apply to the Program for
use of the label, which may include paying an application fee
of an unknown amount. This approach may have the unintended
and unfortunate result of delaying use of the label, because
manufacturers would now have to submit an application and fee,
and then wait for permission from GO-Biz before marketing the
product.
Furthermore, the standards provided by the bill, which are not
exhaustive, provide incomplete guidance for 'Made in
California' products. The first standard in (b)(1)(A)
restricts use of the representation to companies that
primarily design and manufacture physical products. This
emphasis on a company's entire product line rather than the
product in question is problematic, as individual products
should be judged on their own merits. Moreover, it is not
clear whether or not the emphasis on physical products means
that non-physical products (presumably software) are not
eligible for the label. This standard would theoretically
prohibit a major software company from selling t-shirts and
other merchandise with its logo made exclusively in California
for no other reason than because the majority of its revenues
come from software. Instead, the standard should focus on
factors such as the source of raw materials and parts, and the
place of manufacturing or final assembly.
The second standard in (b)(1)(B) again focuses on the company,
rather than the individual product. The standard should
instead require that the product in question be manufactured
in California, either from the raw material stage or at least
final assembly. Again, the question of how much
California-sourced materials or labor are required to meet the
standard is unanswered.
The third standard in (b)(1)(c) also focuses on the
manufacturer rather than the product, and overlooks the likely
scenario where companies manufacture products both in
California and elsewhere. The standard would be clearer if it
simply required the product to be manufactured in California,
which should address the concern about a California-based
workforce. If the aim is to provide use of the label to
companies primarily located in California, then that should be
made clear. Additionally, a "desire to grow that workforce
over time" is certainly laudable, but entirely subjective and
impossible to prove, making it a problematic additional to a
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legal standard. GO-Biz would likely need to develop more
precise standards to guide manufacturers in making their
sourcing and production decisions.
Given these questions, the Committee may also wish to consider
alternate approaches to setting a clear standard for fairly
marketing a product as "Made in California." For example, one
could use a specific content standard, such as an explicit
content requirement based on cost and number of parts (see SB
661 Hill, 2013) or an existing federal standard (see AB 890
Jones, 2013). Admittedly, these approaches are not without
their own considerations, but they have the advantage of being
relatively clear and self-implementing. If it is unclear
precisely what the California standard should be, then a state
agency (such as GO-Biz or the State and Consumer Services
Agency), could be tasked with promulgating regulations to set
those standards by 2014. The author could even mirror existing
law governing use of the "Made in the USA" label (BPC
17533.7), which uses an "entirely or substantially made"
standard for use of the label, which in practice is a 100%
domestic production standard.
6)Previous legislation . SB 823 (Corbett, 2011) would have
created a "Made in California" program within the Governor's
Office of Economic Development. SB 823 was held in the
Assembly Appropriations Committee.
7)Related legislation . AB 890 (Jones) aligns California with
the Federal standard regarding the use of the terms "Made in
U.S.A.", "Made in America", "U.S.A." or similar words when a
product or any portion of the product was not substantially
produced in the United States. This bill is in Senate Rules
Committee, pending referral.
SB 661 (Hill) would have amended the standards for use of the
terms "Made in U.S.A.", "Made in America", "U.S.A." or similar
words, so that such merchandise must have 90% of its
manufacturing costs be accrued in the United States, and no
more than 10% of its total manufacturing costs may accrue
outside of the United States, and only then if such costs are
imposed because of the unavailability of raw materials or
component parts. The merchandise must also be last
substantially transformed in the United States. This bill was
held in the Senate Judiciary Committee.
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REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees
(AFSCME), AFL-CIO
California Small Business Association
dB Control
PLASTIKON
Primus Power
Small Business California
Tesla Motors, Inc.
Opposition
None on file.
Analysis Prepared by : Sarah Huchel / B.,P. & C.P. / (916)
319-3301