California's Made in the USA safe harbors aren't preempted by federal law

McCoy v. McCormick & Co., 2025 WL 1918546, No. 1:25-cv-00231-JLT-SAB (E.D. Cal. Jul. 11, 2025) (R&R)

McCoy alleged that French’s mustard bottles were falsely advertised with the claim “Crafted and Bottled in Springfield, MO, USA,” appearing at times with “American flavor in a bottle,” because the product contains foreign-made components. The magistrate recommended granting the motion with leave to amend. Interesting dive into the “Made in the USA” waters.

Specifically, McCoy alleged that the primary substantive ingredient is mustard seed, which is sourced primarily, if not exclusively, from Canada. Some varieties, including French’s Yellow Mustard, allegedly contain turmeric, another imported ingredient.

McCormick argued that California’s statutory safe harbors for “Made in the U.S.A.” protected it against McCoy’s California claims (including state law claims). McCoy argued that California’s safe harbor provisions are preempted by federal law—a conclusion rejected by the court. But he also argued that he alleged that a substantial portion of McCormick’s products exceeded California’s safe harbor levels.

The FTCA provides:

To the extent any person introduces, delivers for introduction, sells, advertises, or offers for sale in commerce a product with a ‘Made in the U.S.A.’ or ‘Made in America’ label, or the equivalent thereof, in order to represent that such product was in whole or substantial part of domestic origin, such label shall be consistent with decisions and orders of the Federal Trade Commission issued pursuant to section 45 of this title.

The FTC’s resulting Rule states:

[I]t is an unfair or deceptive act or practice...to label any product as Made in the United States6 unless the final assembly or processing of the product occurs in the United States, all significant processing that goes into the product occurs in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States.

16 C.F.R. § 323.2 (emphasis added).

California law also makes it unlawful to sell products as “Made in U.S.A.,” or other similar words, if the product or “any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States.” However, under California law, a product may be lawfully labeled as “Made in the U.S.A.” if no more than five percent of the final wholesale value of the manufactured product is obtained from outside the United States, or if no more than ten percent of the of the final wholesale value of the manufactured product is obtained from outside the United States and the manufacturer shows that it can neither produce the foreign article, unit, or part within the United States nor obtain the foreign article, unit, or part of the merchandise from a domestic source.

The FTC’s Rule provides that “this part shall not be construed as superseding, altering, or affecting any other State statute...relating to country-of-origin labeling requirements, except to the extent that such statute...is inconsistent with the provisions of this part, and then only to the extent of the inconsistency.” There is clearly not field preemption, and the judge was not persuaded that California’s safe harbor provisions were inconsistent with the FTC’s “all or virtually all” standard. The disjunctive standard of “all or virtually all” “necessarily means the FTC contemplates that a small amount of foreign content may be present to lawfully label a product as Made in the U.S.A.” The FTC has expressly declined to adopt a definition of “all or virtually all” because “adding further specificity also increases the risk the rule would chill certain non-deceptive claims.” Instead, it says that its rule requires a “de minimis, or negligible, amount of foreign content.” There was certainly no rule that a product containing foreign materials that make up less than 90-95% of a product’s wholesale value qualifies as more than a “de minimis, or negligible, amount of foreign content.” The legislative notes for the state safe harbor specifically referenced the FTC’s Rule, and the FTC, while it declined to adopt percentage thresholds because the “ ‘all or virtually all’ standard is better tailored to prevent unqualified U.S.-origin claims that will mislead consumers in making purchasing decisions,” it didn’t suggest that California’s safe harbors were, in every instance, inconsistent with the “all or virtually all” standard. Nor was it inherently inconsistent with the FTC Rule to rely on “final wholesale value,” since the FTC considered that one of the often-relevant factors in determining whether foreign content was de minimis.

Thus, there was neither express nor conflict preemption. And McCoy failed to plead facts showing that his claims weren’t barred by the safe harbor provisions, but the magistrate judge recommended that he should get a chance to fix that. It wasn’t enough that mustard seed was the third ingredient by weight, since that didn’t show final wholesale value in a product with six or more ingredients.