Shinola, the Detroit-based maker of classic watches, bicycles, and leather goods, has been dealt a blow by a U.S. regulatory body in connection with its “American made” goods. After launching an investigation earlier this year, the Federal Trade Commission (“FTC”), the government agency that that is tasked with promoting consumer protection, and eliminating and preventing anticompetitive business practices, has held that Shinola “overstated the extent to which certain Shinola-branded products […] are ‘made’ or ‘built’ in the United States,” and as a result, the company must alter its advertising materials and some of the claims depicted on its products.
The Detroit-based company, which first opened up shop in 2011, has gained steam among consumers largely due to its “dedication to producing American built products,” but came under fire for its “Where American is made” slogan and its watches, the latter of which bear a “built in Detroit” designation. At heart of the issue is the rather rigorous labeling standards that are enforced by the FTC and U.S. Customs and Border Protection and which require that “general, textile and apparel products sold in the United States must be labeled with the following information: the fiber content, the country of origin, the manufacturer or dealer identity, and the care instructions.”
In particular, in order for a garment or accessory to be permitted to bear a "Made in the USA" label, the products must originate in the United States or be only “one step removed” in the supply chain. According to FTC standards, "Made in USA" means that "all or virtually all" of the product has been made in America. That is, all significant parts, processing and labor that go into the product must be of U.S. origin. Products should not contain any — or only negligible — foreign content.
Enter Shinola. According to the FTC’s investigation, despite Shinola’s “American built” claims, “all materials [the company] uses to make certain watches were imported, some belts contained 70 percent imported materials and overseas steal is used in certain bicycle parts.” While founder Tom Kartsotis says no deception was intended in connection with its promotional and marketing materials, the company will still drop the “Where American is Made” slogan that is prominent in an array of its advertising materials. It will also redesign the statement on the face of its watches to add, “Swiss and Imported Parts” below “Built in Detroit.”
The presence of non-domestic components in Shinola’s watches, in particular, should come as little surprise, as the company is, after all, partially owned by Ronda AG, a Swiss-based manufacturer of quartz movements for watches. Shinola seems to have been led astray, as while Swiss parts make up its timepieces, the watches themselves (and the company’s other products) are assembled entirely in Detroit. That, however, is not enough to satisfy the FTC’s “Made in the USA” standard.
According to a statement from Kartsotis, which the company issued on the heels of the FTC’s ruling:
Shinola is and has been a leader in bringing as much of the manufacturing process back to the US as it can possibly achieve. But as you can imagine, many of the components and raw materials are simply not available in the US, and because of that we are unable to meet the almost unattainable “Made In USA” standards created by the government. We found it confusing that a car, for example, isn’t held to the same standard as a watch.
The inconsistency of the policies and laws, as well as the subjective nature of some of the process, renders it difficult to navigate as a U.S. company and compete against other companies, U.S. or foreign, who benefit from the overall lower costs in off shore production. Until a change in policy clarifies for the consumer what it truly means to be Made in the USA, Shinola will always strive to do as much as it can in America with the benefit of an American workforce. We would like to assure our customers that our high quality products will continue to be as American as possible while remaining a competitive alternative to products that are not supporting the same level of investment back into the U.S.