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Friday, January 31, 2014

Made In America: A Fad or Long-Term Commitment?

Made In America: A Fad or Long-Term Commitment?

Are Any Good Products Still Made In America?

Conventional wisdom says U.S. companies have shuttered their factories and moved manufacturing abroad for cheap labor.

During the recession, 2 million manufacturing jobs vanished. Here's the story you don't hear: The United States is still the world's largest manufacturing economy, producing $1.6 trillion of goods each year, or 21 percent of global production. And that number may rise as more companies move back to the United States in search of lower costs and higher quality.

The United States will experience a manufacturing renaissance within the next five years, predicts the Boston Consulting Group. Increases in Chinese wages and shipping costs, as well as subpar manufacturing quality overseas, have already inspired some companies to consider "onshoring" or "reshoring" their production efforts back to the United States. And as U.S.-based industrial giants such as General Electric (GE) and Caterpillar (CAT) make the switch today, thousands of smaller companies continue to churn out best-in-class products across the country. We're celebrating 10 American companies making signature consumer products with American ingenuity - and leaving foreign-made competitions in the dust.

Made in America? How To Know Which Flag-Waving Products Are True Red, White, And Blue

Puzzling Labels

Laws allow for patriotic symbols, as long as makers identify where a product was made.
Given a choice between a product made in the U.S. and an identical one made abroad, 78 percent of Americans would rather buy the American product, according to a new nationally representative survey by the Consumer Reports National Research Center.

More than 80 percent of those people cited retaining manufacturing jobs and keeping American manufacturing strong in the global economy as very important reasons for buying American. About 60 percent cited concern about the use of child workers or other cheap labor overseas, or stated that American-made goods were of higher quality.

And people would pay extra to buy American. More than 60 percent of all respondents indicated they’d buy American-made clothes and appliances even if those cost 10 percent more than imported versions; more than 25 percent said they’d pay at least an extra 20 percent. (Perhaps more surprising: According to a new survey of consumers in the U.S. and abroad by the Boston Consulting Group, more than 60 percent of Chinese respondents said they’d buy the American-made version over the Chinese even if it were to cost more.)

Clearly, most Americans want to know where products are made and want to buy those that will help create or keep jobs in the U.S.—an attempt applauded by economists like Jeff Faux, a distinguished fellow of the nonprofit, nonpartisan Economic Policy Institute, in Washington, D.C. “Consumers need to understand that all jobs and wages are interconnected,” Faux told us. “When you buy foreign goods—and sometimes there’s no choice—it means that fewer U.S. workers will have the money to buy the goods and services you sell.”

But what does “made in the USA” even mean? And how can you identify what’s made where?

In this special report, we’ll decipher labeling laws and explain why a product that pictures an American flag might be made abroad, identify companies that still make products in the U.S., hear from economists about manufacturing trends, and provide our experts’ assessment of the quality of some American-made apparel.

A Guessing Game

Few products except cars, textiles, furs, and woolens are required by law to reveal their American heritage. But when any manufacturer chooses to boast of an American connection, it must comply with federal rules designed to keep consumers from being misled.

Our evidence shows that if not misled, consumers are at least confused. Readers flood Consumer Reports with letters and e-mail seeking explanations as to why, for example, frozen blueberries from Oregon are identified as a product of Chile; why a company named Florida’s Natural sells apple juice with concentrate from Brazil; why pants made in Vietnam are labeled “authentic, active, outdoor, American”; or why a T-shirt with the words “Made in the” above the U.S. flag comes from Mexico.

Though perplexing, such words and pictures don’t usually violate regulations that are issued by the Federal Trade Commission, the agency responsible for protecting consumers from false or deceptive product claims. The key factors in determining whether a “Made in the USA” claim is deceptive, says FTC senior attorney Laura Koss, are the claim’s context and whether it’s likely to mislead a reasonable consumer. Ultimately, the line between legal and illegal is determined by the overall impression planted in consumers’ minds.

But the line is blurry. Every case is different and subject to interpretation, Koss says. Most of the complaints the FTC receives are initiated by companies that are pointing a finger at competitors they claim are seeking an unfair advantage.

When a company definitely crosses the line, the FTC’s priority is stopping the behavior, not punishment. If a company refuses, it faces civil penalties—in theory. In practice, the FTC has brought only one civil penalty case since the late 1990s, slapping toolmaker Stanley with a $205,000 fine in 2006 to settle charges involving the pedigree of its Zero Degree ratchets. (Stanley claimed that the ratchets were made in America, but the FTC noted that much of their content was foreign.)

The Types of Claims

“Made in the USA” claims can be “unqualified” or “qualified.” Unqualified means that “all or virtually all” significant parts and processing are of U.S. origin. The product may contain a small amount of foreign ingredients if they’re not significant—the knobs of a barbecue grill, for instance. Companies must be able to document any claim.

Qualified claims, the main cause of confusion, come in many forms, but each must tell the whole story. Take the new iPad Mini. The packaging says, “Designed by Apple in California, Assembled in China.” That’s an acceptable claim. By contrast, a company could land in trouble if it said “created in the U.S.” without specifying the country of manufacture, since consumers are likely to interpret a vague, stand-alone term like “created” as all-inclusive. The FTC requires companies to post prominent, unambiguous statements (such as the actual country of origin) to leave an accurate impression.

Readers who have sent us complaints seem most irritated by foreign-made products whose makers have patriotic names (American Mills, Americana Olives, Great American Seafood, United States Sweaters, the U.S. Lock company) or whose packages have flag-waving slogans (“true American quality”) or symbols (pictures of the flag, eagle, Statue of Liberty). But all of those products are likely to be legal as long as they leave a clear impression about where they’re made.

Another type of labeling law, enforced by U.S. Customs and Border Protection with an assist from the Department of Agriculture, requires imported goods to bear a country-of-origin label when they enter the U.S. If an import combines materials or processing from more than one country, the agency considers the country of origin to be the last country in which a “substantial transformation” occurred—for example, the place where a computer was fabricated, not the country that supplied most parts.

The USDA’s Agricultural Marketing Service is responsible for administering and enforcing country-of-origin labeling of certain foods. Large retailers must use signs, labels, or stickers to identify the birthplace of covered commodities (most meat, fish, fresh or frozen fruits, vegetables, and some nuts). That’s why some brands of salmon are labeled both “wild-caught Alaskan” and “Product of Thailand.” The fish was caught in U.S. waters but took a detour to Asia to be skinned and boned (to take advantage of cheaper labor) before making its return voyage. Under the law, that side trip must be noted.

Bottom Line. If You Want To Buy American Products, These Tips Should Help:

Read Labels Carefully, Using The Info Above.

Consult websites that name companies making products in the U.S.: americansworking.com, madeinamericaforever.com, and madeinusa.org.

Contact A Manufacturer Directly.

Check Our Listing of Some of The Companies Still Manufacturing In America.

Still Made In The USA

Crayola Crayons

According to the Bureau of Labor Statistics, American manufacturing lost almost 6 million jobs between 2000 and 2010. “Offshoring” became a buzzword with the implementation of the North American Free Trade Agreement in 1994. But the more recent hemorrhaging of jobs was due in large part to China’s entry into the World Trade Organization in 2001, notes Ron Hira, associate professor of public policy at the Rochester Institute of Technology. A decade of BLS data reveals heavy job losses across more than a dozen manufacturing sectors, including apparel and textiles, electrical equipment, iron and steel production, computers, glass, and leather tanning and finishing.

Why are foreign nations so appealing to manufacturers? Simple economics, for starters. In 2010, compensation costs (wages and benefits) for manufacturing jobs in the U.S. were $34.74 per hour on average, according to the BLS. That’s lower than in 13 northern and western European countries, but far higher than costs in China: $1.36 per hour (in 2008), based on BLS estimates. Another manufacturing powerhouse, India, has even lower hourly compensation costs than China.

But depending on the manufacturing sector, labor may account for only a small fraction of operating costs. So China may offer manufacturers “goodie packages” to relocate, including tax breaks, low-cost land rental, and reduced utility costs, according to Hal Sirkin, a senior partner with global-management consultants Boston Consulting Group. In exchange, U.S. companies might be required to take on local companies as business partners or cut other deals with area businesses or municipalities.

The appeal of foreign countries may wane, Sirkin says. “China gets more expensive every year. By 2015, Chinese wages will average $6.15 per hour, still well below the U.S. minimum wage, but American worker productivity is significantly higher. When you consider all the factors, the true cost to manufacture goods from China will be only about 10 percent cheaper than to make them domestically in another few years.”

Stihl Chain Saw

National security issues and an iffy supply chain are also concerns. “Natural disasters such as the 2011 tsunami in Japan can disrupt the product pipeline, leading to shortages of parts, products, and long shipping delays,” says John Hoffecker, a managing director of global business consultants AlixPartners in New York. By 2015, the Boston Consulting Group predicts, cost advantages (in electricity, natural gas, and labor) over Japan and several European countries in a range of industries will give U.S. exports a big boost. As a result, the group says, the U.S. could add as many as 2.5 million to 5 million manufacturing jobs by the end of the decade.

Jeff Faux, a distinguished fellow of the Economic Policy Institute in Washington, D.C., is not sanguine about the nature of those jobs. “When you think it through,” he says, “our default policy to compete in the global economy over the long run is to lower the wages and benefits of American workers, and no one at the top will admit that. There’s no question a few jobs are coming back. However, they’re jobs that once paid $22 per hour and are now paying $12. Globalization isn’t the problem. The problem is that we started to accelerate the opening of U.S. markets to foreign goods, but without preparing our workers for the brutalization of competition. For 30 years leaders have said we need to train and upgrade the skills of American workers, but it needs to be done before signing these trade agreements, not after the fact.”

Making It In America

Wolf Range

Still, it’s a stretch to say, as is commonly heard, that the U.S. doesn’t make anything anymore. In fact, Sirkin says, the U.S. makes about three-quarters of all the manufactured goods (including components) it consumes. The chemical and plastics industries are thriving, thanks to declining natural gas prices, and foreign automakers including BMW, Hyundai, Kia, Mercedes, and Volkswagen have opened plants in the U.S. Master Lock returned (“onshored” or   “insourced” in labor-speak) 100 union jobs to its Milwaukee lock factory. Among the companies that have dug in their heels and continued to manufacture domestically is Lenox, which says it’s the only maker of fine bone china in the U.S.

Some companies are bucking the outsourcing trend even in industries that have largely fled the U.S.: large appliances, electronics, and apparel.

Appliances. In 2000, Michigan-based Whirlpool manufactured most of its front-loading washers in Germany. Now the company is in the midst of making a five-year, $1 billion investment in U.S.-based plants, facilities, and equipment. Of the products Whirlpool sells in the U.S., it makes 80 percent in U.S. plants. And it continues to ramp up production of front-loaders in Ohio, where it already makes dryers, dishwashers, freezers, and top-loaders.

“On the one hand, U.S. labor costs are often higher than in other countries,” says Casey Tubman, Whirlpool’s general manager of cleaning. “But when you look at the higher productivity for American workers and consider the fact that it’s very expensive to ship something as big as a refrigerator or washer, we can quickly make up those costs.”

Last year, KitchenAid returned the manufacture of hand mixers from China to the U.S., and GE opened two factories in Kentucky to make hot-water heaters and refrigerators. A spokesman for Sears told us that “through our manufacturing partner, Electrolux, more than 1,200 new American jobs will be created at a plant being built in Memphis.”

There should be plenty of demand if the industry does come back. About a third of respondents to our survey said they’d tried to buy U.S.-made appliances during the past year. And more than half of respondents perceived such appliances as having much or somewhat better quality than those made abroad.

Pendleton Portland Collection Blanket

Electronics. Few TVs, cell phones, or digital cameras are made in America, but in December, Apple CEO Tim Cook said, “Next year, we will do one of our existing Mac lines in the United States.” China-based Lenovo, the world’s second-largest personal computer maker, announced last October that it would start making some PCs in North Carolina, bucking a trend “that has seen electronics manufacturing jobs migrate overseas for more than two decades,” the company said. And Element Electronics, an American company, has been assembling LCD TVs in its Detroit factory since January 2012. The company says that opting for domestic production was “an emotional decision . . . maybe even a patriotic choice.”

Apparel. The domestic industry has been scorched by job losses because of plentiful and cheap labor overseas. More than 90 percent of clothes and shoes sold in America are made elsewhere, according to Jack Plunkett of Houston-based Plunkett Research. Still, the industry is gaining traction in the U.S. There’s growth among designers with output too small to attract the interest of international manufacturers, and among those who simply want to be part of a Made in America movement. And as you'll read in "American Made, But Well Made?" even some big names are offering at least a limited assortment of American-made garments and accessories.

To build on the momentum, President Obama, through the departments of Commerce and Labor, last fall launched the “Make It in America” challenge, offering $40 million in grants to applicants who come up with the best proposals to encourage “insourcing,” spur foreign investment, and expand job opportunities through employee training programs.

Close To Home—Mostly

Here’s a sampling of companies that make or assemble at least some of their products in the U.S. Note that a company’s entire output isn’t necessarily American-made. And some primarily American companies may have manufacturing facilities in more than one country to meet demand overseas.

Although looking for U.S.-made products is important to most Americans, our national survey found that other corporate behavior matters at least as much. We asked respondents, "All things being equal, would you be more likely, less likely, or neither to buy from a company that . . . "

American Made, But Well Made?

Respondents to our survey praised the quality of U.S.-made products: 61 percent said that U.S. clothing and shoes were of better quality than foreign goods (34 percent said “much better” and 27 percent said “somewhat better”). Just 5 percent said American-crafted clothing or shoes were of worse quality. And almost 60 percent of Americans said they had tried to buy U.S.-made clothing or shoes within the past year. No wonder more and more companies are adding at least a few U.S.-made items to their product lines. But no product is worth your hard-earned dollars if it’s poorly made. For a snapshot of how American-made products measure up, we bought one sample of six products from big brands and asked our experts to assess their quality. Price is what we paid.

Brooks Brothers Cotton Sport Shirt, $84

Made in America from long-staple Egyptian cotton woven in Italy, the fabric is smooth, strong, and unlikely to pill. (Egyptian cotton is typical in fine sheets and shirts.) Brooks Brothers sweated the small stuff, and the shirt has impeccable details: The button holes are perfect, the collar has interfacing that makes it “stand up and be noticed,” our expert said; the striped fabric on the back of the shirt lines up with the yoke, and the yoke lines up with the collar (“like a good wallpaper job,” our expert noted). There are gussets on the side of the tail and small pleats in the sleeve to help resist accidental tears. The shirt also comes with two extra buttons, one for the placket and another for the collar. Our only nitpick: a few loose threads.

Bottom line. “It’s a well-made, high-quality shirt,” our expert said, “with features that help it resist wear and touches you’d expect from a tailor.”

Lands’ End Ragg Socks, $30

These thick casual socks (made in Osage, Iowa) are multicolored, as the name “ragg” implies. They’re 66 percent cotton, 28 percent wool, 5 percent nylon, and 1 percent spandex. The heel and toe are densely knit to keep those areas from wearing out; a bit of spandex in the heel and toe adds strength. Elastic throughout helps the socks stretch and retain their shape over time. But a raised seam across the top of the toe could irritate the foot and give a hiker blisters. Better socks have a smooth seam. Other drawbacks: chaff in the wool (the processor didn’t eliminate all field debris after the sheep was sheared), loose threads, and sloppy finishing at the top of the ankle.

Bottom line. “Construction could be better, and you’d expect higher wool content for the price,” our expert said.

L.L.Bean Women’s Braided Leather Belt, $35

The leather isn’t butter-soft, but it’s fine for a belt. The braids are machine made, and the belt (made in California) features simple, flat-cut leather with unfinished edges that could abrade over time. The braid’s ends were taped before sewing and double backstitched to create sturdier seams. The sewing is neat. The buckle components fit together nicely, and the metal prong that slips into the hole is well finished, so it’s unlikely to snag on other materials.

Bottom line. “It’s well made overall,” our expert said, “and decent for the price.”

New Balance 587 Running Shoe, $115

It looks well built, with double-stitching at most joints and good adhesion between the sole and upper, but the synthetic materials seem cheap. The shoe feels very stiff, and inflexible materials could result in unusual wear. Because the materials aren’t porous, the shoe is likely to retain heat. It’s also somewhat heavier than many of today’s running shoes, which tend to be very light. The company’s plants are in Maine and Massachusetts.

Bottom line. “The shoes appear well made but are very stiff and use crude-looking materials,” our expert said. “For the money, there are better choices.”

Orvis Cropped Cotton Pants For Women, $54

They’re made (in California) of a stretchy jersey knit, like T-shirt fabric but denser. The two pockets aren’t pocket bags but are instead a single piece of fabric folded over itself—a cheaper design. The pants have an elastic waistband, a bar tack at each pocket to help prevent ripping, a T-shirt-style hem, and serged stitching that’s reinforced at seams to prevent unraveling. Sewing at the crotch and hem is neat, but hanging threads as long as 4 inches could snag.

Bottom line. “The fabric is nice, but the pants seem pricey for what they are,” our expert said.

Woolrich Vintage Throw, $129

On one side, this blanket (made in Woolrich, Pa.) is 84 percent wool and 16 percent nylon; on the other, it’s nubby polyester and acrylic sherpa fleece. The fleece side is a stretchy double knit with a fuzzy texture to counterbalance the roughness of the wool on the flip side. It has an old-fashioned look, and the big, loopy chain stitch around the edge adds to the hand-sewn feeling, though it’s made by machine, as is the rest of the blanket. If the edge were to wear out, the chain stitch would unravel, but it’s purely decorative, so the blanket would stay intact. The sides are actually held together with a conventional serged seam that’s concealed from view.

Bottom line. “It’s a classic,” our expert said. “Good fabric choices and construction details mean it’s something you’ll have for a very long time.”

Car Wars: Comparing Pedigrees

Most vehicles are multinational, even those with iconic American nameplates, and many imports are surprisingly red, white, and blue. Case in point: The Chevrolet Spark (below left) and Toyota Sienna (below right). Only 10 percent of the Chevy’s parts are American or Canadian; more than 75 percent (including the engine) are from Korea, where the vehicle is assembled, and the automatic transmission is made in Japan. By contrast, 75 percent of the Sienna (including its engine) is American. It’s assembled in Indiana.

We know those facts because the American Automobile Labeling Act requires passenger vehicles, pickup trucks, SUVs, and vans to bear labels specifying the value of their U.S. and Canadian parts (as a percentage of the total value of all car parts), the country of assembly, and the country of origin of the engine and transmission. That information is typically on the vehicle’s window sticker.

Some of Our Latest Articles:

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