This week, we take a look at a recent Trump administration executive order on “Made in America” labeling and its potential impact on fashion brands.
On March 13, the White House issued a little-discussed executive order related to the use of “Made in America” labels on products.
The order doesn’t actually change any existing policy. Instead, it’s more of a declaration of priority, instructing all relevant government agencies, chiefly the Federal Trade Commission, to more closely scrutinize any product claiming to be made in the U.S. That will likely include harsher fines and more frequent enforcement for violators.
Brands and experts that Glossy spoke to about the executive order agreed that its vague wording made it hard to know how to respond. Many noted that there are already strict rules about what can be labeled as being “Made in America.”
“The current ‘Made in America’ framework is both strict in principle and ambiguous in practice,” said Simardev Gulati, CEO of the U.S.-based synthetic luxury fibers company Everbloom, which manufactures in the U.S. and Italy. “The FTC standard requires that ‘all or virtually all’ of a product be made in the U.S., but in modern supply chains, especially in textiles, that’s rarely how production actually works.”
Many brands that already manufacture in the U.S. weren’t even aware that the executive order had been issued. Alexandra O’Neil, the designer of the New York City-based womenswear brand Markarian, said that she welcomes further scrutiny, especially if it helps distinguish brands like hers from brands that perform only a small final part of their manufacturing in the U.S. and claim to be made in America.
“A lot of companies make almost everything overseas, ship it to the U.S. and then close one final seam and say it’s ‘Made in the U.S.,'” O’Neil said. “Right now, I don’t know how much of it is really enforced.”
Markarian sources much of its fabrics from Italy and then produces all of its materials in the Garment District of New York City, aside from a few pieces of beadwork, which are assembled in India and then imported.
Meredith Stoecklein, the founder and designer of another NYC fashion brand, Lein, expressed doubts about what exactly the executive order would mean for her business. Lein also imports fabrics from Europe, mainly Italy and France, while the clothes are cut, sewn and assembled in New York City. Stoecklein said her first reaction to hearing about the order was that most fashion brands are likely already in compliance.
“It’s industry standard to note where your materials come from,” Stoecklein said. “It feels a bit like [the administration is] claiming credit for something that was already in place.”
One of the most notable aspects of the order is a suggestion that digital marketplaces, like Amazon, which carry products from third-party sellers, could be held liable for misrepresentations from those sellers. Marketplaces have often been shielded from wrongdoing by the fact that they don’t directly verify every item sold on their site, but the order suggests the FTC could rethink how those violations are treated.
“Looking ahead, I don’t expect the regulatory environment to loosen,” said Mark Burstein, svp for the Americas at the supply chain management company Inspectorio. “Instead, enforcement [of consumer labeling laws] has grown more formal and active in recent years, and the overall trend points toward continued scrutiny, clearer guidance and stricter enforcement, rather than material changes to the standard.”
One of the biggest questions designers have about the order is whether it would affect brands that import their fabrics but make their clothes domestically, which includes both Markarian and Lein. While some fabrics, such as cotton, are available in the U.S., many materials, such as silk or lace, have no domestic sources.
“If you could only say ‘Made in America’ if every one of your materials also was sourced from the U.S., pretty much nobody could use the label,” O’Neil said. “No one can do anything perfectly, and if companies are making an effort to make things here, that should be supported.”
Burstain said qualified language could be a solution, which both Markarian and Lein already employ.
“Because apparel supply chains are highly globalized and often rely on imported textiles, most brands cannot meet this threshold and instead use qualified claims such as ‘Made in USA with imported materials’ or ‘Cut and sewn in USA,’” he said.
The exact line of when a product becomes “Made in America” is murky. The FTC’s own guidance currently states that whether imported materials can be used in a product labeled “Made in America” depends on “how much of the product’s cost the raw materials make up and how far removed from the finished product they are.”
The FTC uses the example of a gold ring using imported gold. The raw gold is an integral component of the product and is only one step away from the consumer. By contrast, imported petroluem used to make plastic which in turn becomes a button on an American-made shirt wouldn’t count.
“Raw materials like cotton aren’t exclusively sourced from the U.S., and the U.S. doesn’t have processing infrastructure for tasks like fabric production to occur in the states from start to finish,” said Sam Vise, founder of the retail analytics company Optimum Retailing. “By creating stricter regulations, even fewer retailers will hit the threshold to maintain a ‘Made in America’ status as they scale through new product lines or storefronts.”
The stricter enforcement of product labeling is part of the Trump administration’s larger stated goal of bringing more manufacturing back to the U.S. But as far as fashion is concerned, there has been little progress. Apparel and textiles are two of the fastest-declining manufacturing categories in the U.S., according to Deloitte.
Consumer demand for American-made goods seems to be fleeting. According to data from e-commerce analytics firm SmartScout, searches for American-made goods increased by as much as 220% year-over-year last spring. But by the end of the year, search volume had reverted to pre-election levels.
There have been efforts to invest more in New York’s garment manufacturing capabilities. In January, the CFDA and Ralph Lauren announced two new grant programs aimed at bringing more investment to New York’s Garment District. But some designers still feel the pressure.
“It’s a small community of craftsmen here in New York City,” Stoecklein said. “And it’s getting smaller. Factories are shrinking their spaces because they can’t afford the rent in Manhattan. There was talk a few years ago about moving New York’s garment manufacturing to Brooklyn just to afford the rent.”
Manufacturing stats
- 98,000 U.S. manufacturing jobs have been lost in the last 12 months, according to the National Association of Manufacturers.
- 98% of manufacturing companies in the U.S. have fewer than 200 employees, according to Census Bureau data.
- 114 garment industry businesses in Manhattan could be displaced in the next year due to rising rent, according to New York City’s Department of City Planning.
News to know
- Swatch Group CEO Nick Hayek said that the war in Iran has already begun to have an impact on the business. Between 5- 10% of the company’s sales come from the Middle East.
- Macy’s similarly reported lowered guidance. Despite progress on its strategy of revamping its stores, tariffs and rising gas prices are likely to affect the company’s earnings in the coming months.
- Alexander McQueen announced layoffs affecting a significant chunk of its workforce. Fifty-four out of 181 employees are being let go as part of new Kering CEO Luca de Meo’s restructuring plans.
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