I’ll be honest up front, this post is a bit of a rant brought on by the recent purchase of a dishwasher proudly emblazoned with Made in America. That being said as always we will have some actionable information in it for those who care. So today’s topic, where are things made? Does made in America really mean anything?
My Background and How It Relates to the Question of Where Things are Made
So before we start a bit of background. In my current role, I run large scale Mergers and Acquisition Integrations Projects for my employer. In essence, I am the lead in-house consultant for all integrations into our existing SAP systems. There is a bit of a twist to this though. I am not in IT. I have no software engineering responsibilities, despite my background. No my focus is more on the processes and how to adjust both systems and processes to work within our existing company framework.
Sound rather broad? Well it is, I end up touching almost every business process within the company outside of R&D. Finance, Marketing, Sales, Manufacturing, Logistics, even Customs. Now I have teams of experts in each area to help me, as obviously one person is not an expert in everything. But I am expected to have a broad range of understanding of all areas, more so than all but a few people in the company.
Add to one more layer, I did this same type of work as one of the functional experts ten years ago. At one point I was one of the people responsible for Logistics expertise. (See I told you I’ve had multiple career paths). So shipping and warehousing are in my wheelhouse.
What does this have to do with Made in America, or where things are claimed to be made? Well, frankly it means I know very well the regulations on making country of origin claims. The reality is, those regulations and criteria are not what you expect.
The Ideal Of Made in America
So first, let us discuss what people picture when they hear something is made somewhere. They picture all the labor hours being applied to an item by someone in that country. They think of all the jobs, the economic stimulus, ect. They see my new dishwasher made in Kentucky and think of all the American jobs it brought. But is that really the case? Well, not necessarily.
Every Country Has Their Own Definition of Country Or Origin
Before we go any further it is important to understand below is written from the perspective of American Regulations and World trade organization standards. Each country implements their own country of origin regulations, and as such every country may be different to some degree. Still, this is close for most Westernized Countries.
Sourcing Versus Manufacturing?
You see the real determination of a country of origin is much murkier than the labor was in country X. Most items are made up of parts manufactured all over the world. So how do you label that Toyota built-in India from parts sourced from Mexico, Japan, China, and a half dozen other countries? Is it made in the US or made somewhere else?
Tariff Codes and The Technical Definition of Made In
Legally, that Toyota is made in the US. Why? The law in the US for items sourced from parts manufactured all over the world stipulates that the last process of manufacturing that changes the item in a significant manner defines the country of origin. More technically it is usually the country of the last change of the tariff code identifying the type of part.
Assembling from Foreign Parts Can Make Something Made Somewhere
So the actually placing together of the parts defines the origin in the case of that Toyota, regardless of whether any of the sub-parts are actually manufactured here. (A note, I’m choosing Toyota only because we recently bought one. This is not meant in any way to slight the brand as the same holds true for any car brand including the domestics).
Now the above doesn’t sound like a big deal. So what? Toyota does considerable combination to build a truck or car. Well, yes they do. But let’s look at a more simplistic example.
Is Screwing In a Circuit Board a Change In Country of Origin?
How about a computer or electronic item. You can do all the manufacturing of the boards, soldering, and production outside the country. The act of screwing the motherboard into the box and attaching the ancillary boards is sufficient to change the character of the item and make it made in the USA. In theory, you could have a cast of thousands producing the sub-parts abroad. Yet to actually categorize something as made in the USA needs only a handful of people overseeing one robot.
Made In America is a Marketing Ploy
My point? I’m all for supporting America’s manufacturing base. I like to help my community and bring jobs locally. But… If you want to be realistic about it simply buying what is labeled as made in your own country is probably not going to cut it.
Percent Sourced Estimates and Country of Origin Claims
Now, there are some twists here. Some manufacturers denote where their parts are sourced from, though that is not required in all industries. You’ll see it as parts sourced from X% Country As parts. My Mazda and Toyota both do a good job of this. Still, again the same concerns exist about the origins of these sub-parts, but your likelihood of accuracy is increased.
The Profits From The Activity May Go Somewhere Else Entirely
Usually, the actual profits from the companies activities go to the country where the Intellectual Property is Owned. This is usually tied to either tax havens or the companies headquarters. So a company could manufacture, source, and even sell in one country but collect profit in another. A clear example is domestic American car manufacturers. Very few of their cars are sourced or manufactured here. A good portion of their cars are not even sold here. And yet the profit comes here.
That same process often happens in reverse as well. If you recall this is why I believe buying international investments is so important. A note, the destination of those profits may also not always be clear in the age of subsidiaries. IE that profit might actually be held in a country other than the headquarters location, usually a tax haven. When you hear people talking about corporate repatriation of profit and tax breaks they usually mean bringing that profit back to the company headquarters country.
Wholy Manufactured and Sourced Country of Origin Claims
Finally, you have items listed as wholly originated in a given country. Just as it sounds all levels of production for these are supposed to be from that country. These are the only items, at least in the US, that you can truly hope to understand the sourcing.
I Don’t Buy Based On Country Of Origin
My point? I’m all for supporting local businesses and companies. If you are like me, then just be wary blindly buying based on your local country or origin products. Who knows where that item may actually be from. For the above reasons, I don’t buy based on country of origin. Our new dishwasher? I bought it because it had a good review, was well priced, and had a decent warranty. Country of Origin was never a consideration.
Do you buy specific items based on country of origin?