The Competition Bureau's Enforcement Guidelines as to "Product of Canada" and "Made in Canada" Claims (the "Guidelines") came into effect as of July 1, 2010 . The Guidelines apply to all goods sold in Canada, including those that are imported. The Guidelines, like their predecessors, are designed to assist in evaluating compliance with misleading advertising prohibitions as applied to the identification of Canadian content requirements in the Competition Act, the Consumer Packaging and Labelling Act, and the Textile Labelling Act.
In the predecessor version to the Guidelines, The Bureau expressed the view that "Made in Canada" claims could be made as long as the product met a 51% threshold of Canadian content, and had its last substantial transformation in Canada.
Despite no changes in legislation or jurisprudence the current Guidelines set higher thresholds, and draw a distinction between "Made in Canada" and "Product of Canada" claims. For a good to qualify as a "Product of Canada", the Guidelines take the position that the last substantial transformation must have occurred in Canada and at least 98% of the total direct costs of producing or manufacturing the good must have incurred in Canada.
For a good to qualify as being "Made in Canada", the Guidelines provide that the last substantial transformation must have occurred in Canada, and at least 51% of the total direct costs of producing or manufacturing the good must have been incurred in Canada. In addition, the representation must be accompanied by an appropriate qualifying statement such as "Made in Canada with imported parts" or "Made in Canada with domestic and imported parts". This could also include more specific information such as "Made in Canada with 60% Canadian content and 40% imported content". The Guidelines go on to advise that use of specific terms that reflect the limited production, manufacturing, or other activity that took place in Canada would be most appropriate (for example, "Assembled in Canada with foreign parts" or "Designed in Canada").
Terms such as "produced in Canada" or "manufactured in Canada'" are likely to be considered synonymous with "Made in Canada" and should also, according to the Guidelines, comply with the above "Made in Canada" requirements. Sellers must also be cautious of implicit declarations (such as logos, pictures or symbols) that could be considered to give the same general impression to the public that a product is "Made in Canada" as an explicit declaration.
By contrast with the approach in the Guidelines, under the United States' "Made in USA" rules, total domestic versus foreign costs are analyzed on a case-by-case basis, according to the Federal Trade Commission's guide Complying with the Made in USA Standard, which expressly states that there is not a fixed point for all products at which they become "all or virtually all" made in the United States; the nature of the product, consumer expectations, how far removed the finished product is from the foreign content and the proportion of domestic costs are all taken into account.
The hard and fast quantitative thresholds contained in the new Guidelines are not prescribed by legislation or regulation. They are not the result of court decisions. They simply represent the Bureau's view of the issue. Furthermore, some aspects are impractical. For instance, having to state in advertising materials such things as "Made in Canada with domestic and imported parts" may be problematic for many companies. It is simply too long a claim to be concisely articulated.
Additionally, it would appear that the transition from 51% to 98% was without significant public support. The House of Commons Standing Committee on Agriculture and Agri-Food, after receiving extensive representations, recommended only an increase to an 85% threshold, in their June 2008 report on "Product of Canada", in order to achieve the appropriate level of transparency and accuracy in these claims for food products.
There are obviously peculiarities inherent in rigid "Made in Canada" rules. Consider the case of jam, sausages and pickles. The fruit, pork and cucumbers, the essential ingredients, can all be locally grown in Canada. But the requirement for sugar, salt and spices, in transforming the essential ingredients into their finished product may require qualifying statements such as "made with imported sugar". It would be difficult to argue that consumers, who take pride in Canada made or produced goods, would think that the incidental addition of such ingredients not available in Canada would rob the finished product of its "Canadian-ness". Such producers and manufacturers, who cannot take advantage of the beneficial "Product of Canada"/"Made in Canada" claims, are negatively affected. Consumers are affected, because they are deprived of knowing that certain goods are essentially made in Canada, yet do not qualify for technical reasons.
The Guidelines take a very narrow, and mathematical, view of what is Product of Canada/Made in Canada. Much more so than the U.S. equivalent. They do so without the legislative, regulatory, jurisprudential or stakeholder support. They suggest clarifications which are impractical. The difficulty, however, is that if advertisers do not accede to the Bureau's view they run a serious risk of prosecution or civil challenge – with fines up to $10 million. With such serious consequences, it is submitted that the Bureau's Guidelines should reflect a more flexible approach – consistent with the legislation and jurisprudence.
The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.
© Copyright 2013 McMillan LLP
