The trend of outsourcing to overseas suppliers and contractors may be losing some of its luster. Many businesses are returning to U.S. manufacturers — also known as reshoring — to obtain goods faster and at lower costs than foreign suppliers can offer. What’s more, “Made in the U.S.A.” tags can win over domestic customers who want to feel good about their purchases.

Complying with FTC Rules

In order to claim a product is “Made in the U.S.A.,” you must comply with strict regulations set forth by the Federal Trade Commission (FTC). These rules require that final assembly take place on U.S. soil and the majority of total manufacturing costs be spent on U.S. parts and processing. Complex labeling standards may also apply if an American flag or map is used on packaging to imply the country of origin.

A company can make a qualified claim when a product is made in several countries. For example, it may specify the percentage of a product’s domestic content or label a product as “Assembled in the U.S.A.” instead.

Compliance with these rules is essential. False claims are likely to attract an FTC investigation, which could lead to enforcement actions and negative publicity. Violators also may need to modify packaging to comply with the FTC regulations, which can be costly.

Touting the Benefits

The “Made in the U.S.A.” resurgence is a welcome boon to domestic manufacturing. You can prepare by investing staff, inventory and equipment to meet increasing demand for domestic-made products. But first, you may need to remind your customers about the benefits of using domestic manufacturers, including:

  • Cheaper, more reliable shipping. The United States offers lower labor, natural gas and electricity costs than some other developed countries in Europe and Asia, including the United Kingdom, Germany, France and Japan. Tariffs and high shipping costs can also make overseas production cost-prohibitive. Volatile foreign political environments may also prevent products from shipping on time, leading to production delays.
  • Fewer business risks. Intellectual property theft and devaluation of the U.S. dollar are just some of the risks companies face when they outsource production to other countries. Additionally, important instructions — such as product specifications or shipping terms — may be lost in translation when communicating with foreign suppliers.
  • Safer products. News stories about contaminated plastic and pet food products from China have led to recalls, illnesses and even deaths. Products made under the scrutiny of the U.S. Food and Drug Administration and Departments of Commerce and Agriculture are typically held to higher quality standards than many foreign-made products. Safer materials and products give customers peace of mind that they’re not exposing end-users to unsafe products — and themselves to liability claims.
  • Environmental concerns. The U.S. Environmental Protection Agency also requires manufacturers to adhere to strict environmental standards that limit emissions and pollutants. Other countries, including China and India, are making huge carbon footprints today that will harm the environment for many years. Although these countries have recently shifted their focus toward more eco-friendly operations, U.S. businesses may begin to see higher outsourcing costs as a result.
  • Humanitarian aspects. People feel patriotic when they support the U.S. economy and create jobs for American workers. They also want to know that factory workers aren’t subjected to unsafe conditions, low wages or other forms of exploitation that the U.S. Department of Labor and domestic labor unions protect against.

Whether you sell to businesses or consumers, you might consider implementing a marketing campaign that positions your products as American-made. This may include new advertising programs and repackaging with the “Made in the U.S.A.” label.

Preparing for a Comeback

As manufacturers and distributors budget for 2017, they should consider whether the reshoring trend will attract more business, both domestically and abroad. Proactive businesses will position themselves as all-American and have extra capacity to meet increasing customer demand for U.S. manufactured products.

For more insight and advisory on how to prepare your business to bring back manufacturing domestically, contact our manufacturing CPAs today.