Many Lorex kits sold at Costco stores have a prominent "US" distribution address but no "Made In China" markings, which violates US law. Dahua, Lorex's owner, admitted the "error" saying they are working to rectify it but not explaining how this happened.

In this report, IPVM examines the Lorex kits sold at Costco with no country of origin label, how this packaging deceives consumers, and Dahua's acknowledgment of the "error."

IPVM also includes expert commentary from 3 trade attorneys on the legal issues involved.

While 3 of 5 "national" Lorex retailers recently dropped the Dahua-owned division, Costco has stood by Dahua.

[Update 11/8/21] Lorex has now labeled the kits at issue with a sticker stating that DVRs and cameras are made "in China and/or Vietnam."

Costco Lorex Packaging Only Provides USA Distribution Address

One type of Lorex kit sold physically in Costco warehouses only lists a US distribution address on the packaging and fails to provide a country-of-origin marking (i.e., "Made in China"). IPVM checked various boxes of this product at 2 separate Costcos in New Jersey and confirmed that none of those products were properly labeled with a country of origin marking.

The kit at issue is Lorex's 4K Ultra HD 8-Channel System with 6 4K Active Deterrence Cameras, which retails for $399.99.

The packaging states that the product is distributed by Lorex, listing a Maryland, USA address:

However, this packaging lacks a country of origin label, which tells consumers where the product was actually made:

The kit is packaged in 3 smaller boxes inside these unlabeled larger boxes. Those component boxes do state that components are all "Made in China." However, it is, by law (19 CFR 134 described in detail below), not enough to only label the components with the country of origin. The outermost box must be clearly labeled as well.

Lack of Country of Origin Labeling Abnormal

Lorex kits are imported products that are manufactured in China. Therefore, it is abnormal that a Lorex kit would be missing a country of origin label because customs regulations in the US require that all imported products must clearly be labeled with their country of origin.

For example, a Lorex kit sold physically in Best Buy stores clearly states that the product is "Made in China." Note that Best Buy is discontinuing its relationship with Lorex. This image was taken before Best Buy made the announcement.

Lorex also sells a more expensive camera kit ($799.99) at Costco. However, this kit has both a country of origin label (Made in China) and the Lorex US distribution address.

Compare the $799.99 Lorex kit at Costco, which is correctly labeled, to the $399.99 incorrectly labeled kit:

Deceiving to Consumers

The lack of "Made in China" labeling is clearly deceiving to consumers, who may see the Maryland address on the outside of the Lorex kit and assume that the products are American-made. Further, Lorex does not disclose anywhere on its packaging that it is a wholly-owned subsidiary of Dahua.

Dahua Says "Error"

Dahua USA Technology, speaking on behalf of Lorex, told IPVM that it made an "error" when IPVM brought this concern to the company's attention:

Thank you for bringing this to our attention. This label was left off in error. We are working to rectify this as quickly as possible.

IPVM followed up with Dahua asking for more details on the plan to rectify the mistake, including what will happen to the current unlabeled inventory sitting in Costco stores and whether consumers who previously bought unlabeled Lorex kits will be contacted.

IPVM has not yet received a response from Dahua. If and when we receive a response, we will update this report accordingly.

Costco "No Comment"

Costco's Michael Gaitanis responded to IPVM saying it has "no comment at this time" when IPVM reached out with concerns about the lack of proper labeling on the Lorex kits.

After Dahua admitted that the label was "left off in error," IPVM contacted Costco again, inquiring about what will happen to the inventory being sold right now in Costco warehouses as Dahua is "working to rectify this as quickly as possible."

IPVM has not yet received a response from Costco. If and when we receive a response, we will update this report accordingly.

Lorex Affixes "Made in China and/or Vietnam" Stickers

As of November 8, 2021, the kits at issue now have country of origin stickers on the outside of the box. However, the sticker explains that the DVRs and cameras in the kits could be "made in China and/or Vietnam." All accessories are made in China, and the sticker states "main component labels state the specific country of origin." IPVM checked 5 different boxes of the same product at a Costco warehouse location and confirmed all of those boxes were labeled with the same sticker, shown below:

On November 5, 2021, IPVM noticed that the kit was "out of stock" on Costco's website and posted this as an update in the comments. However, as of November 8, the kit is back in stock online.

According to import records, ~90% of what Lorex imports is from Dahua (i.e., China) but starting in July 2021, Lorex began to import from "Kangyin Electronics" in Vietnam.

IPVM has reached out to both Lorex/Dahua and Costco for comment on this new label. We will update this report if and when we receive a response.

Labeling Products with Multiple Country of Origins Examined

Labeling products as a "product of country A and/or B" is unusual, although Customs and Border Patrol (CBP) has made exceptions in the past.

In 1992, Logitech submitted a request for a country of origin ruling because the company wanted to "place multiple or alternative country of origin markings on the cartons." The specific phrases Logitech wanted to use included: "Made in one of the following countries: Taiwan, Ireland, China or Japan"; or "Made in one or more of the following countries: Taiwan, Ireland, China, Japan or U.S.A.".

CBP ruled that Logitech's labeling of the outermost carton, which does not specify exactly which country the product comes from but rather gives a list of possible countries, was allowed so long as the product itself was specifically labeled with the exact country of origin and the carton was unsealed for the consumer to open, so the consumer can inspect the product:

In another case, Customs ruled that an importer of automobile parts may mark the packaging "Contents Imported, See Article for Country of Origin". HQ 734491 (April 13, 1992). The same will be required here. Logitech, Inc., will have to mark the cartons not only with the possible countries of origin, but also with the instruction to inspect the item itself for the actual country of origin. In order to qualify for this type of marking, the carton must be unsealed allowing the purchaser to inspect the product prior to purchase. The marking on the product must meet the general Customs marking requirements of 19 U.S.C. 1304 and 19 CFR Part 134. [emphasis added]

However, CBP noted that generally, it is against policy to mark articles as a "Product of Country A or Country B.":

Generally, Customs policy is that absent other circumstances, it is not acceptable for purposes of 19 U.S.C. 1304 to mark an article with the legend "Product of ____ or ____".

Kit Labeling Examined

However, the Logitech ruling is not completely analogous to Lorex's situation at hand because the Logitech products were not kitted. A 1993 CBP ruling involving a first aid kit that included mainly items from Canada but also a Hong Kong-made compass and US-made whistle is instructive.

The CBP ruled that the first aid kit must be labeled "Components Made in Canada, Compass Made in Hong Kong" because the compass "in terms of both value and function we [CBP] do not consider the compass to be an insignificant component." The compass accounted for ~13.7% of the total kit cost. CBP ruled that as long as the components and compass are clearly labeled with the exact country of origin on the outside of the box, then the individual items do not need to be marked.

CBP Rulings Applied to New Lorex Label

IPVM cannot know how CBP would rule on Lorex's new label, as it seems to include elements applicable to both the 1992 Logitech and 1993 first aid kit rulings.

However, Lorex's $399.99 kits, while now labeled, are sealed with tape on the top and bottom, which makes it difficult for consumers to open the kit in the warehouse to check each labeled component to figure out where the components were made.

Country of Origin Labeling Laws Examined

Proper Country of Original labeling is explicitly governed by federal law, specifically Section 304 of the Tariff Act of 1930 (19 U.S.C. 1304). Part 134 of the Code of Federal Regulations (19 CFR § 134) implements the country of origin marking requirements and the exceptions of 19 U.S.C. 1304.

Therefore, this "error" is not only ethically deceiving but could have legal repercussions.

19 CFR § 134.11 states that country of origin markings are required for any article of "foreign origin imported into the United States":

Unless excepted by law, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), requires that every article of foreign origin (or its container) imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit, in such manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article, at the time of importation into the Customs territory of the United States. Containers of articles excepted from marking shall be marked with the name of the country of origin of the article unless the container is also excepted from marking.

There are some exceptions in which imported products need not be marked with their country of origin. However, those exceptions are limited to crude substances or products that physically cannot be marked.

19 CFR § 134.22(c) goes further to regulate containers or holders bearing a US address:

Containers or holders of imported merchandise bearing the name and address of an importer, distributor, or other person or company in the United States shall be marked in close proximity to the U.S. address to indicate clearly the country of origin of the contents with a marking such as “Contents made in France” or “Contents Product of Spain.”

Typically, products are not released from customs until they are marked in accordance with the regulations above. It is not clear how these kits were released from customs to Costco warehouses to be sold.

Expert Commentary from Trade Attorneys

IPVM received comments from 3 trade attorneys about Lorex's labeling at Costco. All attorneys cited the same federal regulations which state the country of origin marking must be clear to the "ultimate purchaser" in the United States, agreeing that in this case, the ultimate purchaser is the Costco customer and not Costco itself.

John Peterson from Neville Peterson LLP commented to IPVM:

You requested a comment regarding certain Lorex cameras being sold in Costco which do not feature a country of origin marking indicating that they are made in China. You indicated that the package in which the cameras are sold features only the name of a Maryland distributor.

Assuming the cameras are in fact Chinese-made, Section 304(a) of the Tariff Act of 1930 requires that the cameras or their package be marked, permanently, legibly and in a conspicuous place to show the English name of the product's country of origin. The marking must be sufficiently permanent that it reaches the "ultimate purchaser" in the United States -- in this case, Costco's customers.

The Customs regulations also require that where a product or its package contains a geographic reference to a place other than the country of origin, which might confuse a purchaser, the name of the country of origin must appear "in close proximity to" that geographic reference and in comparably-sized lettering.

If imported goods are re-packed after entry, the new packaging must contain proper markings.

The purpose of the country of origin marking law is to inform the consumer of the place where the good is made, lest that influence his/her purchasing decision.

Imported goods not properly marked can be excluded from entry into the United States; that obviously didn't happen here. The importer can be charged a 10% marking duty on the improperly marked goods. Generally, once the goods have been released from Customs custody for 30 days, there isn't much Customs can do to get them back; it can only impose the 10% tariff, if time permits.

False marking is also a violation of the Lanham Act, and competitors could sue Lorex to block the distribution and sale of the cameras which have gotten past Customs. [Obtaining damages for the lack of marking would be much more difficult].

George Tuttle III of the Law Offices of George R. Tuttle, A.P.C. emphasized that the outermost container which reaches the ultimate purchaser (i.e. Costco customers) must be marked with the product's country of origin. Further, if a US address is present on the container, there should be a clear country of origin marking in "close proximity" to the US address:

134.22(a) of the Customs Regulations provide that the “outermost container or holder in which the article ordinarily reaches the ultimate purchaser shall be marked to indicate the country of origin of the article whether or not the article is marked to indicate its country of origin.”

Subsection (c) of 134.22 provides that if the containers or holders of imported merchandise bear the name and address of an importer, distributor, or other person or company in the United States, then the containers shall be marked in close proximity to the U.S. address to indicate clearly the country of origin of the contents with a marking such as, i.e., “Contents made in France” or “Contents Product of Spain.”

The “ultimate purchaser” is generally the last person in the United States who will receive the article in the form in which it was imported. If an article is to be sold at retail in its imported form, the purchaser at retail is the “ultimate purchaser.”

Good and containers that are not properly marked at the time of importation can be excluded from entry, or if entered, subject to a demand for redelivery back to customs custody. Failure to return the items can result in the assessment of liquidated damages. Improperly marked goods and containers can also be subject to a marking penalty of 10 percent of the ad valorem value of the goods. In extreme cases US Customs and Border Protection can issue penalties to any person who directs, or assists financially or otherwise, in the unlawful conduct under 19 USC 1595a(b).

Jennifer Diaz from Diaz Trade Law told IPVM:

Country of origin rules are extremely specific and found in 19 C.F.R. 134.11, which states:

Unless excepted by law, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), requires that every article of foreign origin (or its container) imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit, in such manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article, at the time of importation into the Customs territory of the United States. Containers of articles excepted from marking shall be marked with the name of the country of origin of the article unless the container is also excepted from marking.

The definitions found in 19 C.F.R. 134.1 define an“ultimate purchaser” generally as the last person in the United States who will receive the article in the form in which it was imported.

Realistically, when a shopper goes to Costco, the shopper is the “ultimate purchaser,” not Costco, and has a right to know the country of origin of the goods.

There are MANY exceptions to country of origin marking, all listed in 19 C.F.R. 134.32, but, my opinion is, unless the cameras were actually made in the USA (which surprisingly is regulated by the Federal Trade Commission, not U.S. Customs), you’d be hard pressed to find an exception that would entail no marking whatsoever. It is much more typical that a company would take advantage of this exception “when the container of an article reasonably indicates the article’s origin; that is, the marked container reaches the ultimate purchaser unopened”and mark the container – i.e., the box in which the camera is sold, to meet the marking requirement. When a product is NOT marked properly, customers and competitors can report this to CBP via the e-Allegations portal here: e-Allegations Program | U.S. Customs and Border Protection.

Custom Printed Costco Lorex Boxes

Dahua prints custom Lorex boxes for Costco, even including Costco's own brand and phone number (as shown adjacently). As such, it is not clear to IPVM why Costco decided to include its own brand, the large "distributed" in USA demarcation but not to print the Country of Origin on the box, as legally is required. Neither Costco nor Dahua explained why they took this approach.